Business schools are getting a lot of attention as catalysts for startups. But as more business schools jump on the startup bandwagon, some are questioning their validity as a training ground for next generation entrepreneurs.
In boardrooms and admissions offices across the nation, there’s a lot of buzz about the relationship between business schools and startup businesses. If you believe the hype, business schools have become incubators for innovative startups, cranking out entrepreneurs that are all-but-guaranteed to convert their ideas into fast-growth business concepts.
Entrepreneurs from Business Schools
But is there any truth behind the buzz? How much influence are business schools really having on individuals interested in starting a company?
Entrepreneurship Among Business School Alumni
A 2014 Alumni Perspectives study from the Graduate Management Admission Council (GMAC) showed that 45 percent of alumni entrepreneurs who graduated from 2010-2013 launched startups after graduation–a significant increase from the 7 percent of alumni entrepreneurs who graduated before 1990.
However, some media outlets have reported that this figure is deceiving, since many of these alumni entrepreneurs also work for someone else. Although 45 percent of business school grads immediately start companies, just 5 percent of business school alumni are self-employed.
In fact, Quartz reports that the total number of young people who are launching startups is actually declining, with 3.6% of households headed by people under 30 owning stakes in companies–down from 6.1% in 2010 and 10.6% in 1989.
In reality, successful startups in tech and other sectors are typically started by experienced businesspeople. The average age of individuals who start fast-growth companies is 40, which is well beyond the age most people graduate from business school.
The Value of Business Experience
In addition to improving the odds of success for entrepreneurs, business experience is playing a greater role in employment. A recent London School of Marketing report found that employers prefer work experience when selecting individuals for higher ranking jobs.
However, the same study revealed employers’ belief that it can be difficult for employees to progress in their careers without an MBA. So, while experience appears to be the most important factor, employers also consider business education to be a valuable asset.
And that may be why business schools haven’t historically produced large numbers of entrepreneurs. Startups are much riskier than traditional employment opportunities. Given rising tuition costs and other financial factors, many alumni simply can’t justify rolling the dice on a startup–regardless of their personal desires.