Charlie O’Donnell’s recent post for MBAs considering working at startups drew some harsh reactions, but also raised some excellent points.
I wanted to add my own thoughts since I have an MBA and know the startup space from both the perspective of a potential employee and as a founder who makes hiring decisions.
First two key points should be clarified regarding Charlie’s original post and that carry forward to this one. I believe we’re referring to a specific type of MBA and specific type of startup: the MBAs we are discussing are non-technical applying for position at early-stage companies (not past a B round of funding).
Skills vs. Stage: Early-Stage
In the earliest stages of internet startups there isn’t much room for more than 1 or 2 people who are non-technical (read: coding skills). The priorities of the company at this stage are in customer development and determining product market fit via some sort of live, demonstrable product. Whether you’re an MBA or not doesn’t matter – it’s difficult for a non-technical, non-founder to find a situation that lends itself to success at this stage. An employee’s success is measured against what aspect of the business they can advance, relative to the hunk of the burn rate they are eating. It’s tough to find good fits here simply due to the nature of the priorities: building product and iterating.
Skills vs. Stage: Post Early-Stage
The interesting thing is that the paradigm begins to shift once product market fit is found. At this point, the skills an MBA does have (management, strategy, number crunching, big rolodex) all become significantly more important. Managers can better co-exist with makers. When the business has a scalable and repeatable business model in play, things like sales and business development take on new meaning and an MBA has a much better environment to thrive in. It’s much easier to match an MBA’s contribution against a worthwhile salary at this point because the MBA and the startup have reached a mutually beneficial scale.
Compensation.
The difficult thing then becomes when a non-technical MBA decides they’d like to join an early-stage startup. The fit simply isn’t a good one in most cases.
MBA’s can earn good money out of school. While you learn about risk/reward in school, when you’re faced with the prospect of applying the time value of money to your own personal financial situation, it’s a different situation. Coupled with the fact that many MBA’s are in their late 20’s when ramen is looking less and less appealing, justifying the opportunity cost forgone by joining a startup is difficult.
My suggestion would be for MBAs aspiring to work at startups to join part-time, signing an agreement that you would bring them on full-time (and at a competitive salary) once a B-Round is hit. In addition, I’m sure there is a way to tie compensation to non-technical contributions, even in earlier stages. However, the issue is that most non-technical contributions (everything but code!) can likely be handled by the 1 or 2 technical people, without the need for additional overhead. Early-stage “business development” is almost impossible to quantify. And no matter what people say, the ability to model a business can be done by anyone and simply is not a critical skill to an early-stage startup in this day and age. That said, MBAs can add value by learning the new concepts fundamental to the lean startup movement (see below).
Summary.
MBAs should not go into startups expecting to get rich. An MBA can be very valuable to a startup, but usually his or her value is best captured in later stages of the startup life cycle. Due to the unique nature of startup culture getting some experience before jumping off the deep-end is a good idea. Also, there are plenty of skills and activities MBAs can pick-up that are non-technical and increasingly important to startups. Become a jedi in these and you’ll be just fine.
Personal Note.
Overall my MBA has served me very well. If I had to do it over again, I would still get an MBA. The skills I learned were fundamentally different from anything I got from my liberal arts college education. Also, because I worked during school and took full advantage of every opportunity offered to me through the school, I was able to really have the best of all worlds. If you only want to work at a startup, an MBA doesn’t make sense; just go work at one and save yourself some money. However, startups are fickle and most fail, so diversifying your skills sets through an MBA is still a smart move. Education is what you make of it, and IMO an MBA is a worthwhile degree — even in startup land.