

Why MBAs fail at Entrepreneurship - smanek
http://stuwall.tumblr.com/post/489661696/why-mbas-fail-at-entrepreneurship

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SamAtt
Are there a lot of people who think getting an expensive MBA degree is worth
something in the startup world? I'd never heard anything but the opposite
until reading this article and now I'm wondering if there's some segment of
the population that I've just never heard from.

~~~
smanek
Hi Sam,

I'm the technical co-founder of <http://postabon.com> (the crazy guy who wrote
the entire thing in Lisp ;-)).

Based on my experience over the last 6 months, I think most MBAs start out
thinking that they'll be fine at doing a startup with no domain expertise, and
can just 'throw money' at that problem. This is true whether the domain is
manufacturing, fashion, tech, etc. However, after they've been at it for N
months and have nothing done, the smart ones realize the error of their ways
;-)

Business savvy (just like technical skill) is a necessary (but not sufficient)
requirement for being a successful entrepreneur. Having co-founders with
disparate skill sets helps you cover all your bases.

I think just as many engineers think they can build something cool (with no
thought to marketing, capital, strategy, etc), and build a start-up.

~~~
wisty
If you go to _any_ engineer-focus start-up discussion site (JOS, RiR, Erik
Sink, HN, PG, bothsidesofthetable .. you name it) that's _exactly_ what they
don't hear.

If anything, engineers are under-confidant about business things. They seem to
think that selling stuff takes at least a 3 year degree (or equivalent
experience) just like writing a program.

------
pg
Man do I regret not funding these guys.

~~~
9oliYQjP
Ever considered setting aside say 5% of your funding allocation for wildcard
acceptances? Every company that gets rejected from YC could go into a lottery
and depending on the absolute size of that 5%, a number of companies could
make it in _solely_ because their names were drawn from a hat.

Because the odds are so low that a rejected contender will win a wildcard
spot, it removes any unconscious scoring bias you might implement. In other
words, I was thinking of the scenario in which you might only make some of the
rejects eligible for a wildcard spot based on a scoresheet. You might
unconsciously bias your scoring to make some rejects eligible and others not.
The beauty of the wildcard is that it's totally random.

EDIT: Another thought. Wildcard entries would set a nice benchmark for merit-
based entrants to YC to compete against. They would have more to prove because
they've been written off. I'd be curious how this would affect the larger
group dynamics of the programme.

~~~
pg
There are two phases of acceptance, the application and interviews. The first
phase is where most mistakes occur, because written applications are so much
lower bandwidth than face to face conversations. So if we were going to insert
randomness, we should randomly invite people to interviews, not randomly fund
them. But the trouble with _that_ is that, unlike funding, interview slots are
constrained. There is a physical limit to the number of interviews we can do.
So to invite someone randomly we'd have to not invite someone who was (as far
as we could tell) more deserving, and we are very reluctant to do that.

~~~
mmt
_The first phase is where most mistakes occur_

Even if this were true, which I wouldn't argue against, it doesn't mean that
it's where the mistakes of the highest aggregate value occur.

For example, what percentage of first phase rejections try again, as compared
with second phase rejections?

 _But the trouble with that is that, unlike funding, interview slots are
constrained._

You could apply the usual interview scaling technique of adding another phase
(e.g. shorter pre-screen with a single interviewer) or delegating. This has
the obvious disadvantages, which is, arguably, one of the major reasons big
company hiring processes are so unreliable.

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ojbyrne
"MBAs idealize jobs and ideas that used to offer outstanding returns. Private
Equity and Hedge Funds offered outstanding salaries to HBS students from 06-08
and thus attracted “top” HBS students. As more talented students pursued these
options it became conventional wisdom that everyone should be doing the same."

From an article _today_
([http://money.cnn.com/2010/04/01/markets/hedge_fund_manager_p...](http://money.cnn.com/2010/04/01/markets/hedge_fund_manager_pay/index.htm)):
"After plunging during the financial crisis, the income of top hedge fund
managers surged in 2009 to a record high as financial markets recovered from
historic lows, according to a new survey published Thursday.

Altogether, the 25 top-earning hedge fund managers made a record $25.3 billion
last year, according to rankings in AR: Absolute Return+Alpha, a magazine
dedicated to the hedge fund industry.

The highest paid manager on the list was David Tepper of Appaloosa Management,
who made $4 billion last year on investments in the financial sector."

David Tepper isn't just an MBA, he has a business school named after him:
<http://web.tepper.cmu.edu/tepper/about.aspx>

I think he'd get a good laugh out of this article.

~~~
vaksel
precisely...there is so much money in finance, that the "1 million dollar
exit" that a lot of entrepreneurs would salivate over is peanuts to them

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bendtheblock
_Entrepreneurship is the truest form of meritocracy_

Great point - I worked for a big company before I had a startup, where they
claimed to have a culture of meritocracy. The trouble is that large
organisations are too standardized to ever be truly meritocratic. People are
generally banded based on perceived ability, but there must be such variation
between those in each band, meaning you are rewarding people of varying
abilities the same. This type of system is slow and fails to take in to
account outliers.

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sown
So I'm curious about this scenario:

How do you feel about an engineer, maybe with good ideas, maybe not, who gets
an MBA? Would they be useful in a startup or anywhere else for that matter?

~~~
hga
Bingo, just what I was about to make a post on.

There's a _fantastic_ difference between someone who goes straight from an
undergraduate degree to an MBA vs. someone who gets some number of years of
experience in the real word and then goes back for an MBA to learn how to do
it better.

Sort of like how the very best lawyer I ever worked with had started as an
embedded engineer (in some California nuclear power plant there's a Z-80 of
his monitoring valve wear). While he could certainly do the work, he just
didn't find it to his taste, so he became a patent lawyer (in the long term,
he first also discovered that being an associate in a big law firm was
seriously negative fun).

So e.g. when we had to weaken an external cryptosystem of ours to make the
export guys happy, he knew _exactly_ what I was doing when I explained the
context and said "we zero these bits of the key"; together we wrote the
application (which was accepted). And he taught me a _lot_ about the law (this
was the company that went kaboom in a cery bad and big way and we spent a lot
of time in the local law library to get our back wages etc, etc, settled).

So I'd view the one with real world experience who then got an MBA or became a
lawyer favorably (and probably tend to run away from the one without :-).

------
minouye
It totally depends on what industry/vertical you are trying to take on. For
web apps, yes an MBA is not vital since you can bootstrap w/out funding (as
the author alluded to). However, I'd argue that the connections you get with
an MBA can be worth their weight in gold.

Case in point: Gilt. Don't tell me that these MBA's are failing
(<http://www.gilt.com/company#team>). I'd happily trade shoes with them :-)

~~~
smanek
You know Alexis and Alexandria (the two HBS MBAs who are ostensibly behind
Gilt) had almost nothing to do with the company's conception - right?

The real founders are Kevin Ryan and Dwight Merriman (the founders of
DoubleClick). They created and funded Alley Corp with their Google money,
which runs a whole bunch of really great startups (like 10Gen, the company
behind MongoDB). The story about Alexis and Alexandria dreaming up the idea in
business school is just for PR purposes ...

~~~
lenley
wow, that's definitely interesting... after reading the bios of both on Gilt,
you can definitely notice the nuance of the language.

<http://en.wikipedia.org/wiki/Kevin_P._Ryan>

"Gilt Groupe is an online retailer based in the United States. Founded in
2007, Gilt Groupe stages online 'flash' sales, offering women's, men's and
children's designer apparel and accessories, designer home goods and high-end
travel destinations at discounted prices in a limited time sale format,
typically 36 to 48 hours.

Kevin Ryan founded Gilt Groupe in 2007. Gilt first launched women's clothing
and accessories in November 2007, men's in April 2008, Gilt Groupe Japan in
February 2009, Gilt Fuse in August 2009 and a travel site named Jetsetter in
September 2009. Gilt Groupe is based in New York, NY with warehouses in
Brooklyn, NY and Andover, MA.

Gilt Groupe has raised a total of $48 million to date; its investors include
Matrix Partners and General Atlantic Partners. [edit] " .. thx for the heads
up.

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ig1
Just a comment on the final point. Most investment bankers don't hate their
jobs, most love their jobs. If you hate the job and are just in it for the
money you'll burn out and drop out pretty quickly. Investment Banking is
pretty much dominated by people who love doing what they do, probably more so
than the vast majority of other industries.

~~~
giffc
I can only go on personal and anecdotal experience, but having known a lot of
investment bankers, I cannot agree with this at all. After a few years, the
folks who truly love it are a definite minority. But many get snared by
money/lifestyle. I see the same in management consulting where I get told over
and over "I'm just here until I figure out what I really want to do"

~~~
yosho
agreed, living in NYC, i know many ibankers and very few of them actually
enjoy what they do. They're pretty much glorified excel junkies.

~~~
vaksel
There is a big difference in ibanking between analysts, associates, and the
guys who are at the higher levels.

The bottom pole hates their lives, because they tend to work a lot. And are
the glorified excel junkies as you put it. On the upper level, you don't do
the busy work, and you spend your time going around the world doing deals.

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inboulder
I was just investigating postabon, I zoomed out to the whole US and only found
a few dozen postings. They really need to work on their network effects,
probably by spending large amounts of $ on contests and marketing.

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brown9-2
How is it that this link points to a "parked" domain site after just seven
days?

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inboulder
Nice try mr MBA

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rjett
How does/will postabon make money?

~~~
kalid
Getting in front of consumers looking for deals (i.e. ways to spend their
money) must be a good thing -- consider it a "real world" slickdeals.

Just a few ideas:

Sponsored listings

Analytics

Commission on deals

Subscribers (early access to the best deals, or subscriber-only deals)

