Balancing Your Business School Coursework and a Startup Company

Law School ImagesThe number of business school students launching ventures during school is seeing tremendous growth. According to Garth Saloner, outgoing Dean of Stanford University’s Graduate School of Business, at least 16% of the GSB Class of 2015 began a startup company – that percentage was in the single digits less than a decade ago.

While this occurrence is predicted to see steady growth in the coming years, it may actually be a Trojan horse when the long-term effects are factored into the equation. Saloner encourages MBA grads to consider the long game when it comes to their education, and to take caution when forming a startup while still in school.

With the revolution brought about by cloud-based software, founding a startup is easier today than it has ever been. Entrepreneur courses designed to facilitate this process are available at many schools even to non-business majors, and there are also many startup summer camps and incubators available for student entrepreneurs to take advantage of. Additionally, the first nine months of 2015 saw $98.4 billion get invested in venture capital-backed companies – an 11% jump over the amount for the full year of 2014. All of these factors have come together to create an environment favorable for students to take the leap and begin their own startup. Unfortunately, there are more dangers than what readily meets the eye.

Even though the facts and figures make startup creation incredibly tempting, there are potential downfalls to consider before getting started. While students will typically have the rest of their life to take advantage of all that startups may have to offer, there is only one chance to make the most of their time in school. Neglecting studies will usually result in lost opportunities.

Time spent distracted from coursework may end up quite costly, since the average tuition at public and private non-profit universities is approximately $70,000 per year. That figure, coupled with the fact that most first ventures will inevitably fail, can spell out financial disaster for the immediate years after graduation.

While there are many unfavorable side effects to consider, it is still possible for students to launch a startup during their business school years. When faced with a conflict of interest, students should ask themselves which action they will learn the most from. Startup activities should be thoughtfully scheduled around existing coursework obligations.

Business students may be able to make the startup process less cumbersome by taking on a partner or outsourcing certain aspects. Most schools now offer tools specifically to help student entrepreneurs – these resources should be fully taken advantage of by students who are considering a career in entrepreneurship or even thinking of working for a startup. Realistic goals should be set to ensure that valuable studies and experiences are not neglected.

While there are people like Steve Jobs, Bill Gates and Mark Zuckerburg, who dropped out of college after founding startups in their dorm rooms, not everybody will see the same amount of good fortune. By prioritizing education over immediate wealth, business students will receive a better education overall and gain more control over their future.

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Chad Troutwine in Today's Wall Street Journal on the Value of an MBA for Entrepreneurs

Business School AdmissionsToday on the “Hire Education” blog on the Wall Street Journal, Veritas Prep co-founder and CEO Chad Troutwine questioned the conventional wisdom that business school is no place for aspiring entrepreneurs. Some would-be entrepreneurs see business school as an unnecessary (and costly) pit stop on their way to to startup success, while others actually think that sitting in a classroom and dissecting case studies could actually hurt them in their quest to start a successful company.

Is this true? Could two years in the classroom effectively neuter the world’s next Bill Gates or Steve Jobs?

Not so. While it’s true that the most successful entrepreneurs contain drive and ambition that can’t be picked up in an eight-week business course, those important traits are only modestly useful if one doesn’t supplement them with the harder business skills needed to navigate a startup’s delicate early years. Managing cash flow, securing investors, identifying target markets to profitably go after… These are the things that even the most ambitious entrepreneur needs to be able to do at some level.

While business schools were slow to embrace the teaching of skills that can benefit entrepreneurs and their early-stage startups, that started to change in the 1990s (partly driven by the tech and dot-com booms). Nowadays its common to find a second-year MBA student whose time is spent almost exclusively in entrepreneurship-related classes, business plan competitions, and pro bono consulting work for local startups. Some of those students even stick around after they graduate, taking advantage of the school’s business incubator and related resources.

And, while you’re sketching out your business plan, your future leadership team might draw heavily from the people sitting around you in the business school classroom. According to Chad’s article:

Graduate business schools offer an unrivaled professional network. Top M.B.A. programs admit between 200 and 900 students each year. Members of the same class, particular those in the same smaller cohort, develop a close bond, one that can last for a career. M.B.A. graduates are privy to the shared experiences of an extraordinary group of professionals. A typical class includes former investment bankers and future venture capitalists (your source of capital), marketers (your brand guru), accountants (your CFO), management consultants (your chief strategist) and other types of industry insiders. Most business schools are also part of a larger university network, further expanding your business relationships. Alumni connections can also provide a source of evangelists for your product or service.

Entrepreneurship will always be a tough game. It’s not for everyone. But, by arming yourself with the skills and connections that come with an MBA, you will only increase your likelihood of success.

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Considering Starting a Business? Now May Be the Best Time!

Believe it or not, a recession, when loans are hard to come by and customers are less likely to spend, may actually be the best time to start a business. According to a blog post on the City University of New York’s web site, a recession often directly and indirectly creates a set of circumstances in which it’s easier to get a small business off the ground.

First, a soft economy will often spur local and state officials to eliminate or reduce red tape in an effort to stimulate growth and get back some lost tax dollars. The result can mean getting a license just days or weeks after applying, rather than months. Second, vendors and suppliers, who are often struggling to maintain their own businesses, often are much more willing to accommodate an entrepreneur with lower prices or better service. Need something delivered to your new storefront today? No problem… The supplier’s truck is empty and available whenever you need it. And anyone who has seen all of the “For Lease” signs posted all over the U.S. shouldn’t be surprised to hear that commercials rents are quickly dropping in most markets.

According to data published by Columbia University’s Entrepreneurship Center, the number of small businesses that shut down actually declines during a recession, in part because of the factors mentioned above. And, as a recession drags on, the number of business started each year tends to grow, perhaps as an early sign of a pending turnaround.

If you’re interested in starting a business, should you dive right in, or perhaps earn an MBA first and then try your hand at entrepreneurship? That largely depends on your own personal situation and how much experience you have, but one thing is clear: Don’t worry too much about timing the market, since even a recession may be a great time to start a business.