The Relevance of an MBA in Startups
Part one of a two-part series.
Hello there,
How are you doing?
I wish you peaceful times and hope you go onto accomplish all that you aspire to (as you can see, I am averse to wishing anyone a Happy New Year - don’t want to jinx it).
Without further ado, let us dive straight into this piece that Abhay Jani (Growth Manager at FrontRow) and I spent a month on. It started with this tweet of Abhay’s and since then, we got speaking to dozens of folks. Those who have MBAs’, those who don’t, those who aspire to, academicians and experts - finally culminating with roughly 2500 words for a two-part series.
We explore 1) the relevance of an MBA in startups 2) the new age MBA and different models of learning. We are open to your feedback, do tell us what you think.
Hope you enjoy reading - we certainly enjoyed writing!
An MBA (Master of Business Administration) is perhaps the only generalist business management degree that has grown in aspiration even after 100 years of its existence. According to the All India Council for Technical Education (AICTE) in 2018-19, the total intake for an MBA program in India was 3,72,579 students and India sees a rise in the number of MBA applicants across the world.
The MBA remains attractive and aspirational for the following reasons (derived after multiple conversations with MBA holders, aspirants and academicians).
Landing leadership roles in corporates and startups
Wanting to create and run successful businesses
Having an exclusive network that increases/ improves access
‘Being selected’ or standing out
Of late though, the relevance (in terms of cost and time) of an MBA is being questioned as much of what it imparts (or does not) is derived real-time by either Starting up or working at a Startup or by pursuing new-age MBA formats. It is only natural, then, for us to question if pursuing an MBA is really equivalent to starting up/ working at a startup (part 1) and look into the new-MBA formats (part 2 of this piece).
First, let us understand the MBA better:
In the early 1900s, companies were looking for a scientific approach to management. To meet this need the Harvard Business School established the first MBA program in 1908. Eighty students enrolled in the first year, taught by 15 faculty members. In India, the first MBA was founded by XLRI in 1949 and the first IIM (Calcutta) was founded in 1961.
At the time, the concept of a formalised business program wasn’t looked upon as being on the same level as earning an advanced degree in disciplines like law and medicine. But over the years, the appeal of learning about the science of management spread and the number of MBA students steadily increased over the globe.
As the MBA gained worldwide acceptance and the Industrial Era reached its peak, something changed. Technology made its presence felt and the internet and business on the internet boomed. The world expanded and people started working on ideas that were brand new and had no legacy like large corporates or the MBA itself.
The conundrum begins here.
“An MBA is best designed to produce great middle managers,” said Aditya Kulkarni, Founder, Stoa School and an IIM-Bangalore and Bits Pilani alumnus. Kulkarni believes that an MBA offers a path towards prosperity and in many cases it helps graduates overcome their confusion of ‘what to pursue next’. Though, it is just a means to an end.
He knows more founders who came out of his BITS Pilani network than his MBA network. As per a Traxcn study, since 2015 (to 2018/19) the IITs and BITS have produced 1066 startups and the IIMs (A,B and C) have about 900 startups.
After founding two companies and successfully exiting both and entering into his third venture which is a cohort-based learning model, Kulkarni (wearing his Founder’s hat) believes that the lack of a Management degree does not hold one back if one spends the same two years working multiple roles at a start-up.
At the same time, as Founder of Stoa, a community-learning based MBA model, he is bullish about the number of students who want to learn ‘business’ in India and at Stoa he believes that the team helps one develop a ‘business brain’ through a community based learning experience. As Seth Godin, Founder of Akimbo, home of the altMBA recently wrote: for most students the elite MBA is about the prize at the end and not the learning or the experience.
MBAs are for signalling, not so much learning.
MBAs are all about getting better jobs, building a network and gaining exposure to important business concepts (strategy, operations, marketing and finance). “If the choice is to become an entrepreneur, an MBA may not teach you much, as entrepreneurship is about experiments and exploration,” says serial entrepreneur Snehanshu Gandhi, Co-Founder of Kaagaz Scanner and two other startups since his IIT-Mumbai days. He has also worked in boutique management consultancies and has pursued an MBA from Indian School of Business (ISB), Hyderabad.
Gandhi believes that if one is an early team member in a start-up and is involved in multiple roles, one's experience can be equivalent to an MBA. However, saturation does seep in and here is where an MBA can help one understand certain concepts better and then deep-dive into the ones one is most interested in.
His advice to aspirants is simple, ‘if you are looking for a job and your end goal is to stay in attractive roles, then having an MBA is helpful, as it has exponential signalling benefits. Of course, the MBA brand matters here.’ Looking back to when he pursued an MBA, he summarises, ‘MBA is not so much about learning, as it is about signalling.’
How much does the brand matter?
Deepanshu Kaushik, an MBA student at FMS Delhi, believes that the true value add of an MBA is the classroom discussion of case studies that cannot be replicated by any other model. He is pursuing an MBA immediately after his Engineering and after an internship at Flipkart, where he worked with MBA students from across Tier 1 institutions, he observed that ‘skill-wise we are more or less the same. Once you remove the brilliance of the tag, there is not much of a difference.’
Through experiences of his seniors, he has seen that an MBA can give one an edge in consulting roles or specialised roles like Sales, Marketing (in startups), where one can be hired at x+1 designations (compared to Under Graduates). For the rest (example: generalist or non-consultancy-based roles), once one has been hired, one is pretty much on her own and has to figure out her own journey within the organisation.
The question here is, how many aspire for consultancy roles or other similar institutions versus joining new age technology ventures.
Though, there is a huge unmet need for an MBA.
While we associate the word MBA with an IIM or a premier ‘brand’, that is not always the case. For any Tier II or III aspirant, an MBA is a postgraduate degree that is a passport to a corporate job. The salary does not matter as much as the fact that one is employed with a bank, a financial institution, a corporate or a large startup. The top 100 Universities produce only 30,000 MBAs each year, not everyone can make it to this coveted list!
“An MBA can be extremely subjective and in Tier II and III cities it is the only way to beat competition and land a job that can help pay the bills,” said Ashish Munjal, Co-Founder and CEO of Sunstone Eduversity, a unique Pay After Placement MBA program targeted to students who seek to acquire skills, not just an MBA degree.
Munjal states an interesting point, “Current MBAs lack segmentation, they teach the same curriculum (strategy, finance etc) to 3,00,000+ students, whereas this curriculum is only relevant to the top tier. The rest (90%), do not land jobs in strategy. They have to be taught real-world skills for jobs in logistics, warehousing, digital marketing or banks. At Sunstone, we are filling in this gap and ensure our students get placed.”
How should aspirants assess if they want to pursue an MBA?
According to Meeta Sengupta, Founder, Centre for Education Strategy, “MBA gives you the toolkits and makes it easy for people to identify your training and therefore decision making attributes.”
However, what you make of your MBA if left to you, your choices and life circumstances.
Summing up what experts have told us:
The use case of an MBA in a startup varies. There are different kinds of roles in a startup (Growth stage upwards). Operations, Sales, Growth, Marketing, Product and so on. Operations and Sales do require an MBA, however, if you are part of the CEO’s office then the MBA is not required. It is the profile of one's role that matters most.
The stage of the hiring startup matters as well - joining an early stage startup is a financial risk for someone with a premium MBA. Early stage startups do not necessarily hire from B-Schools as well (due to the gap in salary expectations and affordability); more Unicorns do. Of late though, more startups are hiring beyond the IITs and IIM as this report states.
If one wants to take up key roles in startups (Growth stage upwards) or corporates, an MBA after 2-3 years’ work experience is more valuable because it enhances classroom discussions (from a learning perspective). Real work translates to better learning and placement. Some companies do have bars on people they hire even at B-School. For foreign MBAs, 3-4 years of work experience matters and in India at least 2-3 years.
If one wants to startup or find a Co-Founder, one has to look beyond the MBA. Everyone we spoke to unanimously agreed that the MBA doesn't teach one resilience and entrepreneurship. The MBA teaches mental models to deal with ambiguity. If one is well able to deal with the ambiguity of life, an MBA may not be necessary.
To conclude, while B-Schools teach sophisticated models, sophisticated models are evolving to teach one survival. So, while the former makes one fit in the latter makes one stand out.
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This is a two part series, co-authored by Nisha Ramchandani, Manager - Outreach At Axilor Ventures & Writer, Future of Work and Abhay Jani, Growth Manager at FrontRow.
In the second part, we will cover ideas around the new-age MBA.
An abridged version of this article was out on Moneycontrol.com: MBA or hands-on experience—what works better in a startup?