Not all MBAs suck at startups. Learn how to spot Durant MBAs.

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Not all MBAs suck at startups. Learn how to spot Durant MBAs.

I've been meaning to write this post for awhile--since I originally started this blog actually. When I originally warned startups to beware of MBAs, it was not to say all MBAs are bad for startups, but that one should be careful when working with one in an early stage startup. To be clear, most are bad for early stage startups, but certainly not all.

This post is about learning which MBAs get it and which ones suck. Any why.

Why All The Hating?

It has become hip to bash MBAs. Some of my favorite rants have been from Mark Suster, Stu Wall, and DHH. My overarching take on this discussion is that MBAs are more useful post-product-market fit and less helpful (or outright bad) pre-product market fit. When a company is in the exploration phase, all the skills of an MBA are backwards. MBAs are sophisticated thinkers that can create high quality business plans. But in the pre-product market phase of a company, the entrepreneur's job is to find the repeatable business model, wherever it may be hiding. At this stage, iteration trumps planning. Speed trumps quality. Perseverance trumps intelligence. Passion trumps sophistication.

Because of the structure and curriculum of business schools, MBAs are better trained for the later stages, when the goal is optimizing value, not finding it. My favorite analogy comes from a commenter on Hacker News:

"I like to think of this topic using an automotive racing analogy: Fortune 500 companies are the formula 1 cars. They need a great big team to perform efficiently, and minor tweaks applied correctly can yield significant results. The MBAs are the specialists who work the electronics and the advanced controls for the race cars. A team working on a formula 1 car could find a way to increase down force by 5%, or they could install a GPS system to analyze turns and scrape 1/100s of seconds off of lap times, and that edge could help them win.

Startups are cars with a very different purpose. They are project cars, and they have 1 purpose: to go. Forget GPS systems and down force. These cars need tires and a working steering wheel. It would be a mistake to think about installing spoilers on a car that doesn't have all 4 tires, just as it would be a mistake to worry about ideal liquidity ratios in a startup. Entrepreneurs are the mechanics who decide to take on these 'project cars'. Eventually, as the car project develops and grows, specialists (MBAs) can be brought on to find the minor, yet precise changes that will improve the car's results."

Of course, this is not by accident. Business schools teach what the vast majority of its students need: specialist skills in large-scale optimization. Entrepreneurship, it turns out, is a very different beast that requires a very different academic approach.

Business School is not Entrepreneurship School: Sloan vs. Durant

Steve Blank has been advocating for the Durant School of Entrepreneurship.

Billy Durant founded GM, was fired, founded Chevrolet, was fired, regained control of GM, and was fired again. He was a true start up founder, but very few have ever heard of him.

It was Alfred Sloan that later became CEO of GM, grew the company, invented cost accounting, and effectively founded the modern corporation. He was an accountant and MIT named their business school after him.

Business schools teach Sloan-style business fundamentals. It's not a bad thing--it's just not relevant for pre-revenue, pre-product market fit companies. During the iteration and customer discovery phase, companies need founders versed in the Durant School of Entrepreneurship.

Learn how to spot the Durant MBAs

When hiring or picking co-founders or doing investment due diligence, you're searching for data that predicts success. The list below is a collection of possible data points that can indicate whether someone gets it--whether they have a bit of Durant in them.

1. Previous Founder Experience

The best entrepreneurship school is doing start-ups. Nothing replaces the education gained when your product fails, when you struggle to make payroll, when you raise money and become accountable to investors, when you build and sell products people want, when you reach profitability, and when you go bankrupt. All these experiences provide perspective that make formal education more valuable by providing a unique lens to judge the relevance of each lesson.

Perhaps, more importantly, anyone with previous founder experience, that wants to stay in startups is proving through their actions that they have real entrepreneurial determination. As Paul Graham often says, the most important predictor of success is determination.

2. Previous Startup Experience

Size matters. Doing product management for a 100 person startup is not the same as being a first employee, but it is more relevant than coming from a McKinsey. I often tell first year MBAs to spend their summer internship working for the smallest company possible. My first venture back start-up experience was at MocoSpace when it was being run out of an incubator--it was an incredible experience for seeing how startups work.

3. Technical Experience Building Products

It's painful to work with people that have never built anything. Many VC won't invest in non-technical founders. As a non-technical founder myself, I know it's a huge weakness (I did however just code my first video game...). My first startup was building lofts in college. It wasn't super technical, but it forced me to put together an ecommerce website, an engineering process, buy supplies, etc. You don't have to be technical, but it's better. If you're not technical, you still have to have experience building products. As Brad Feld says, great entrepreneurs have a complete and total obsession with the product.

4. Write Something People Read

Y Combinator founders will see the immediate corollary...Paul Graham's overarching advice is that the most important task at first is to build something people want. A blog is a product that people make a decision to read or not read. Anyone that has a well-read blog has at least proven that they can create something that other people find valuable. The same goes for having Twitter followers, a high Hacker News Karma score, etc. For MBAs, putting yourself out there on the internet can be far more powerful than any resume. I love talking to people that email me their Hacker News username, because I can then go learn a lot about them and see quickly how they're perceived in the hacker community.

5. Read the Right Stuff

I have generally found that most successful founders I know have at some point read a ton of blogs and books. Paul Graham calls his essays the startup FAQ. Why would anyone not read them? I've put together a pretty good recommended list. At some point, you need to stop reading and start building--but everyone should have at least read through a good portion of this stuff at one time or another.

6. Hang out with Startup People

My favorite part about living in San Francisco is that it sometimes feels like every person I meet works at a startup. This network of friends provides knowledge transfer, inspiration, collective support, etc. I can't imagine doing a startup without it. It's not just Silicon Valley--If you're in Boston, you should know the guys at betahouse. If you're in Colorado, you should know the Techstars guys. Every city has a startup center, be there. On that note, one of the toughest parts about business school for the would-be founder is that you hang out with consultants and bankers all the time.

7. Become a Domain Expert

As Mark Suster says, domain experience gives entrepreneurs an unfair advantage. My co-founder Evan Konwiser brought incredible domain expertise to FlightCaster. Spend 5 minutes reading his blog, and you'll quickly understand that he understand more about the travel industry than any person you've ever met.

Beware of MBAs that fail all or most of these items--odds are they will doom your startup. And for those aspiring MBA entrepreneurs out there...stop fiddling with your B.S. Powerpoint deck and get started on this list.

HAHAHA This person has clearly never been to an MBA school. If only my peers were sophisticated thinkers. I'd say less than 10% of MBAs are sophisticated thinkers (and by extension great problem solvers) and those 10% are the ones you WANT to hire. The MBAs who can just churn out business plans - forget those.