MBA vs Startup – Which is a better choice?

Summary: A selection of industry leaders answer the question – Should I do an MBA, or should I start a business?

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Photo courtesy of JustVodka@Flickr

Every once in a while I get the notion into my head that I’d like to do an MBA. I have a stack of GMAT study guides that I skim through, firing dusty synapses in the long-forgotten test-taking portions of my brain. I read through the theories, the course content lists, the testimonials from happy-looking people in suits and wonder if it’s really something for me. I left large companies for startups years ago and even in the toughest times have rarely looked back with regret. Is an MBA really something I want to devote my energy, money, and sanity to?

Then there’s the alternative: could I gain similar or better experience by jumping straight in and just starting something? An MBA is going to run upwards of €10,000 per year, what if I could take that money and start a software business, or try to take a product idea to market? One question remains – considering I have a list of potentially good ideas and the desire to work for myself “at some point” why haven’t I done it already? I’ve taken halfway-steps towards this sort of freedom by investing in a few Irish startups, but I still wonder why I haven’t fully immersed myself.

So which of these two paths is a recipe for success? I reckoned I could do worse than asking smart, experienced people that I admire what they thought, so I drafted an email and thought of some smart people who have inspired me recently.  Here’s the list (In alphabetical order…):

  • David Heinemeier Hansson

    Creator of Ruby on Rails, and partner at 37signals. One of the most outspoken programmers you’re likely to find.

    It really depends on what you want to do. If you’re thinking about doing it on your own, I think an MBA is probably a waste of time. But if you want to work in a big corporation, then I’m sure that’ll look good on the resume. Only you will know whether you have that fire in the belly to chart your own waters. It’ll require more of you, but will probably be a lot more rewarding.

    Also, you don’t have to spend that much money starting a new business these days. You could try the “My Own Business” for a year and see if there was any traction. If not, you can always fall back on the MBA backup plan.

    Good luck.

  • Sean Gallagher

    CEO of smarthomes, panel investor on the Irish series of Dragon’s Den, and MBA graduate.

    The first question must be – why do you want to do either?

    An MBA is great for developing and enhancing your overall knowlegde of business and in my opinion hugely beneficial to most of us. If you have technical background then learning about finance, accounting or strategy can be really helpful.

    If you are thinking of starting a business then having an MBA might well help you in the longer term to grow the business.

    Sometimes people feel that education can kill your desire to be self employed by highlighting too many risks when often it is about having massive self-belief and belief in your idea and just jumping in (with some homework done first I might add).

    My view is why not do both? In essence the business will benefit if you have a broader understanding of the principles and your studies will benefit from having some real life experiences on which to hang your new learning.

    Life is more then having and getting it is really about being and becoming. The real question is;
    What, or more importantly, who do you want to be or become and will either or both help you get there?

  • Josh Kaufman

    Creator of the “Personal MBA“.

    If you’re ultimately interested in doing your own thing / starting your own business, self-education and moving forward with your small business idea is your best bet. The only advantage MBAs provide is a bigger hiring network within ~3 years of graduation, so if you’re not looking to take advantage of that, the time and opportunity costs of MBA programs are way too high.

  • Guy Kawasaki

    CEO of Alltop, managing director of Garage Technology Ventures, and author of “The Art of the Start”, “Rules for Revolutionaries, and “Reality Check”.. Guy is an MBA graduate from UCLA.

    This depends on what you want to do. If it’s to work for a established company, maybe the MBA is better. If you want to be an entrepreneur, be an entrepreneur.

    Guy also included some great resources on Alltop:

  • Pat Lynch

    Acting CEO of YouGetItback, finance director of Compliance and Risks Ltd,  and MBA graduate. Pat has founded successful businesses such as Microtech Cleanroom Services and TICN (The investment club network).

    Depending on your focus, this could be a very easy question to answer. An MBA won’t necessarially make you money.

  • Pat Phelan

    CEO and founder of Cubic Telecom and “Telecoms disruptor”. A serial entrepreneur in the telecoms arena.

    It’s all about ambition. I would suggest that an MBA leads to an office and a start-up leads (eventually) to freedom.

  • Penelope Trunk

    Writer of expert career advice, and founder of three startups; most recently BrazenCareerist, a web service to help companies find candidates.

    You can only evaluate the MBA when you evaluate what you will do with it when you’re done, and whether you needed the MBA to do that in the first place. Usually the answer is no to an MBA.

    You can only evaluate doing the startup by evaluating the chance that it will meet your goals.
    You don’t tell me about the startup or about your goals for doing a startup, bu you probalby know both and that’s what you should think about.

    My instinct tells me keep your day job; try the startup at night until you get enough revenue to be profitable and then quit day job. Forget the MBA.

  • Bob Walsh

    Business consultant and author of Micro-ISV: From Vision to Reality and several excellent ebooks, and moderator of Joel Spolsky‘s “Business of Software” forum.

    Definitely doing a startup. Here’s why: Business Schools are repositories of knowledge about what has worked in the past. If your life’s ambition is to manage a LOB (line of business) for a large company an MBA is relevant. But if you want to not spend your life working for someone else, that means starting your own business(es). Also, over the next few years it’s a safe bet that disruption and change are going to be the order of the day in the business world.

    For existing businesses, this this is not good news. For startups, it’s opportunity time! Between the growing role startups play in society, the economy these past few years and major economic disruptions ongoing, there’s never been a better time to start a business.

  • Paul Walsh

    CEO of Segala, Chair of the British Interactive Media Association, an advisor and mentor to several companies, and a partner in one of my favourite restaurants, Jaipur.

    The fact you’re asking the question leads me to believe that you haven’t recognised a real problem that people need resolved and you have the answer. So, in short, study for an MBA whilst you continue to earn money in full time employment.

    It doesn’t take much to start a company if you do it whilst working for someone and getting others to help build a site in return for a contra deal.   In my personal opinion, qualifications are over-rated.
    I’d never hire someone based on a qualification – unless I was looking for someone to build me a semantic web based application and they had a degree in computer science *and* knew what the semantic web was AND were able to build it. That said, a good friend of mine is getting a lot out of his MBA. Hope that helps.

Thanks to all who responded, these are some fantastic answers that have given me a lot to think about. But what do you think?

10 thoughts on “MBA vs Startup – Which is a better choice?

  1. I too have often taught about doing MBA. I guess after 5 years running my own company straight out of college I recon a little bit of MBA style teaching before you jump in is good. I think only a small percentage of what is taught in the course applies or helps if your ultimate goal is to run your own company.

    So like most decisions in business it’s about Return On Investment(time more so than money.) I don’t think there is a return on investment if you want to have your own company.

    If you want to work high up in a Multi-national, then that’s a different story.

  2. Can you work for yourself? I plan to start a business in the next 5 years, and the way I’m going to do it is by being a freelancer first, doing my own thing, and then building out from that. That minimizes risk and allows me to allocate time to an idea.

    Most entrepreneurs do fail their way to success, so if that’s true at all, then why not get your first failure under your belt, and then do an MBA. :)

  3. I used to run an Internet advertising startup back in Ireland and the 1990’s it was fun I learned a lot and we did very whilst also working on very interesting, creative and exciting things. After that business group exited I went to university and got an MBA. I entered the work place again and now run a new online gaming start up in the UK. Online gaming is as cutting edge, creative and challenging a global business as you can have.

    I can personally say that the level and quality of management, strategic thinking and planning I can achieve after the MBA is an order of magnitude higher than I could without the MBA.

    It is my belief that anyone that thinks the intense, condensed and complete knowledge of the entire spectrum of modern management learning thought on a modern MBA can’t help not only in start-ups but in every other scale, facet and level of business doesn’t know what the MBA has to offer.

  4. Thanks for the comments guys.

    @Kevin – I’ve worked for myself in the past, and went back to working with smaller startups. I think it was probably that working two jobs didn’t leave much time for working on my own ideas.

    @Alan – I agree. My question was at least partly rhetorical, I can definitely see the value in an MBA. I definitely wouldn’t dismiss it out of hand.

  5. I’ve done both and I recommend doing both. Being an entrepreneur will teach you hardships that an MBA won’t. Getting an MBA will teach you things that you’ll learn the hard way as an entrepreneur.

    One way to look at this is that being an entrepreneur gets you off the ground. But if you want your enterprise to work effectively for a long time, you should get an MBA. Does that makes sense?

    DC: Great point Wiley, thank you.

  6. Go to Babson, it is the best of both worlds. Ranked #1 in Entrepreneurship for the past 16 years, above Harvard and Stanford. Being around a group of peers that are all hungry and working on their own startups was the best thing for me. That said, if you can find that atmosphere and network without having to shell out a ton of money or any money at all, do it.

  7. Good entry David. As one of those who chose to do the mba and now pursuing launching a business, i would have to be biased and say the MBA is a great option – if you are looking for certain things. I chose the MBA for a number of reasons – network, expand knowledge in specific fields, etc – and have to say that the knowledge you take on board is fulfilling and provides great insight, the network can certainly open doors. However, if you are looking to do the MBA just for the sake of adding more zero’s to the end of your salary, then I’d say it’s not the place for you. The cost/benefit analysis is very personal on this issue, no matter what articles and leaders will tell you. End of the day it boils down to you pursuing what you find most fulfilling. One final point though, at a school like mine, IE Business School, they have put a lot of resources into their entrepreneurship department and studies, so in that sense you might not have to choose between the two options – why have 1 when you can have all!

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