Why Stanford is Cautioning MBA Students Against Entrepreneurship?

Stanford University’s Graduate School of Business been an innovation factory for budding business for years now. Recently, when it advised the students to mellow their motivations for startups, suddenly  an intense controversy came into the light. This controversy not only involved the B school and its students, but also those in the business world along with the academicians. The crux of this hot-selling debate is that the Academics at GSB are reportedly cautioning students to concentrate on their respective courses and subsequent degrees, instead of fetching the entrepreneurial arena. So, Why Stanford is Cautioning MBA Students Against Entrepreneurship? Let’s find out.

What is Entrepreneurship Negativity at Stanford About?

There are really interesting arguments as to why this ‘hallowed cradle of business wizards’ is falconing towards a provisional stoppage to their pupil’s startup aspirations. One outshining reason is that students are lagging in their respective course studies and on-campus life. Thus, they while away the midnight oil in dreaming and strategizing for funds and guidance for their future startup ideas.
Some of the faculty members are of the view point that the pursuit of a business idea is a sentimental journey. In most cases, it tends to leave students despondent if at all, their plannings fall flat. Faculty people feel most of the student business-proposals are destined to be blunders before time.

Why Does the Stanford Faculty Think So?

Stanford GSB faculty unitedly is of the perception that Student-turned-Entrepreneurs, fall short in experience to kick-start and successfully run startups initiatives. A majority of students have almost zero work experience. This is because the need of the hour is to focus on themselves and their courses, which provide excellent foundation for fundamental business principles and exposure to the required professionalism and the much-needed practicalities of the marketplace. The faculty believes that they need more to do before they make head into Entrepreneurship. Leah Edwards, owner of the Center for Entrepreneurial Students at Stanford, is of the view that, “the second-year MBA students should intern at existing and established companies before setting forth to launch their own startups”, “even if they are sure” that their initial plans will work, according to an article in WSJ.

Students with bright ideas get appreciation by the venture capitalists (VCs) and are successful in securing funds for their startups, but this consequently makes them accountable to their benefactors. In no time, students find themselves in business full-time, with their MBA studies ignorantly placed on the back foot.

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The MBA Advantage

In addition, “This may not be a good thing even if the startups succeed, because students really need their MBA grounding”, points out the Algerian-born medical entrepreneur Zak Allal in an interview with Forbes. Furthermore, Allal, has successfully opted and completed the Stanford Ignite, a certificate program held by the top GSB faculty members around the globe to catalyse the plans of innovators. Most importantly,he believes that,”the top MBA courses cover a range of industries. Once you graduate from a top business school, you can run a startup after spending three to six months at an incubator, [but] if things grow, they can quickly get out of control. If you don’t have the tools [read MBA], you really need more to lead a company over the long-term.” Allal is of the view that when he was setting to kick-start his very first business, he was  often irritated due to his incomplete understanding in context of the complexities of launching a startup. In addition, he felt new to the nuances and theories of business. He says,“Stanford Ignite was the right place and answer to my needs. It provides the toolbox any non-business person needs to take their venture from an idea stage to a startup stage.”

Directly From the Stanford Faculty

Probably Garth Saloner, GSB’s Departing Dean, hinted on the essential differences between top MBA courses and incubator programs when he proclaimed, “We are not the graduate school of entrepreneurship.” Saloner inspired pupils who are keen on launching their personal firms to seek admission at a business incubator; instead of business school or an MBA course.

But GSB’s “new” orientation is not that new after all. The school initiated to revamp its MBA course in around 2007.  With a task force captained by Saloner, “to create a more global and more engaging experience for students” and unsurprisingly, encouragement for startups wasn’t the central focus of the revised syllabus. The “startup fever” had blinded a minority of students to the intelligence in gaining jobs in good firms at campus recruitment. However, their lack of zeal for these happenings is a grave concern for popular and sought-after companies, in need to fetch the crème-de la crème of the new lot.

Maeve Richard, of Stanford GSB’s Career Center, wishes that the students have a consideration for a stable career after graduation. In addition, he says“We want to make sure they know what’s out there,” she says. However, GSB may find it tough to convince its entrepreneurial motivated students to be patient up till graduation. The school is situated besides a center of VCs in California. Thus, it frequently gains scouts willing to identify budding entrepreneurs and finance their businesses.
It is not surprising that the numbers of GSB’s full-time MBAs who launched their own companies was 16 percent in 2015, as compared with the 9 percent at Harvard Business School, 7 percent at MIT Sloan, 4.4 percent at Pennsylvania’s Wharton, and 3.3 percent at Chicago University’s Booth School.
In addition, Standford GSB was not alone. In fact, other top business schools, including the University of Michigan’s Ross School of Business, are also trying to “thin the herd” of startups by students, in the words of the school dean, Alison Davis-Blake.

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For Those Who Dare!

But some B-schools are enthusiastic about firing the spirit of entrepreneurship in students. Many top institutions, including Harvard Business School, New York University, Oklahoma State University, and Pace University, have introduced new entrepreneur courses and innovation labs.
They believe that supporting a business plan at the right time should be one of their missions. Dartmouth College’s Tuck School of Business has, for example, has often permitted students to suspend their courses to pursue their business dream. Says Rich Lyons, dean of the Haas School of Business at the University of California at Berkeley: “When somebody has passion, an idea, and the timing feels right, we wouldn’t want to dampen that.”

Of course, Stanford, too, would make sure to back a really good concept. What it is wary of is students jumping on the bandwagon without proper preparation, such as completion of their MBA program.
But for some students, startups are the way to go, come what may. They are reluctant to wait for a “better time” to launch their companies. The best time is now.

Stanford’s advice to students to look before they leap may be viewed as somewhat ironical, considering that it has been the incubator of some of the most successful startups, including Instagram, a photo-sharing app bought by Facebook for $1 billion. The school has also had business celebrities, including Intel founder Andy Grove and Cisco’s ex-CEO John Morgridge, as lecturers for years.


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Harvard v/s Stanford and Other Open Questions

Ardent observers want to know whether the amber signal to budding entrepreneurs wouldn’t affect assumptions about the efficacy of top MBA courses. If the courses are so good, why don’t the schools provide seed money to MBA Students’ startups? Some question whether the top MBA courses intend mere expensive delays for the potential entrepreneurs, while others believe that the companies that were launched by B-school or MBA Students have excelled better than others. If the MBA Student’s startups ideas have striven for the past years, how efficiently are they working now?

Last Thoughts. . .

Meanwhile, Harvard seems to have fired it up with arch-rival Stanford in promoting Entrepreneurship. For Harvard,  it is a field that is holding the advantage for over years now. An observatory study initiated by the Pitchbook says that, “the startups by Harvard and Wharton MBA Students raised more venture capital than Stanford MBAs between 2010 and 2015. But if class size is taken as a criterion, there is not much to choose between them.” RememberHarvard long ago had the reputation of an institution that manufactured only white-collared elitists for the business world. It did not have a great rapport for fostered startups, like the one that Stanford proudly boasts for decades now.

Are we probably seeing a reversal of images between these old rivals, with Harvard setting space as the nursery for budding entrepreneurs and Stanford a home-ground for aspiring corporate scions?

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About the Author

Rachit believes in the power of education and has studied from the top institutes of IIIT Allahabad, IIM Calcutta, and Francois Rabelias in France. He has worked as Software Developer with Microsoft and Adobe. Post his MBA, he worked with the world’s # 1 consulting firm, The Boston Consulting Group across multiple geographies US, South-East Asia and Europe.

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