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When Matt Maloney was a student at the University of Chicago’s Booth School of Business, he did not have to wait until he had completed his MBA before putting theories learnt in the classroom into effect.
Originally a computer programmer, Mr Maloney had started GrubHub – a website listing local restaurants that offer food delivery and takeaway orders – before he started at Booth, but quickly realised he needed some training in business fundamentals.
With his fledgling business in mind, Mr Maloney devoted his entire MBA to working out how to make GrubHub grow. “I’d get out of the marketing lecture and immediately sit down with my business partner and say ‘let’s give this a try’,” he recalls.
He cites as an example how he learnt that marketing to people who had used his service before was much more effective than trying to get new customers.
“The idea of prioritising marketing spending based on return on investment was intuitive, but Booth taught me to measure it,” Mr Maloney says. “Booth showed me I could use the same quantitative tools I’d learnt in computer science and apply them to the more ambiguous problems of marketing.”
It worked. GrubHub now has 180 employees and is looking for another 20. The company has raised more than $84m in funding in the past year – $50m of it recently, which it used to buy Dotmenu, a New York-based rival that will make it the US’s biggest restaurant-listing website, with more than 250,000 listings in more than 50 cities.
Mr Maloney’s story indicates how Booth has established itself as a centre of entrepreneurship: 65 companies started by the school’s MBAs in the past 15 years have collectively raised about $230m in funding and created roughly 1,000 jobs. That is impressive when one considers that each year only about 1,000 US companies receive their first venture funding.
Booth’s commitment to the subject is evidenced by the Polsky Center for Entrepreneurship, presided over by Steven Kaplan, the business school’s professor of entrepreneurship and finance. Entrepreneurship was designated as a concentration in itself in 1999. These days it has become the school’s second most popular concentration after finance.
Prof Kaplan gives the credit for originally focusing on entrepreneurship to Robert Hamada, the school’s dean in the 1990s. Prof Hamada approached Prof Kaplan in 1997 and asked him to create an entrepreneurship programme. Prof Kaplan, then a newly tenured professor who had joined the school nine years before, had just begun to teach a course in entrepreneurial finance and private equity.
With the internet boom, lots of business schools had the same idea, but Chicago was able to maintain interest among students and staff.
“With the dotcom era there was a lot of interest, but it didn’t go away, as it did in a lot of schools,” Prof Kaplan says. “A lot of schools thought it was all about dotcoms and when they [went] bust, they stopped teaching it. Whereas we were always about entrepreneurship, so there was a bit of a dip but not much.”
A big reason why the interest has been sustained at Booth is the New Venture Challenge, a rigorous competition run as a course within the MBA in which teams of students present their business plans to entrepreneurs and investors.
The winners receive a cash prize raised by Booth – currently $75,000. Since the competition began in 1997 the school has doled out $750,000 in prize money. Just as importantly, the school works hard to give teams the real-world business contacts they need to raise funding and get mentors, using its networks of alumni and friends to see who can help.
“A lot of students come here to do entrepreneurship because when they look around at what other schools do, this place has a lot going on and our New Venture Challenge teams raise real money and get funded,” says Prof Kaplan. “It’s been hugely successful.”
In its first year, the New Venture Challenge had 12-15 teams – each of which typically had three members. The competition now attracts between 80 and 100 initial business plans a year from current students and the school allows the most promising 25 to 30 teams to enter.
Teams must have at least one current Booth student member but can include students from other departments at the university or from outside. About a quarter of participants in the New Venture Challenge are non-Booth students.
The course runs in the spring and students have 12 weeks to get things done. The pressure begins as soon as the teams first present their ideas in April. “We bring in entrepreneurs and investors to beat them up,” Prof Kaplan laughs. “They get a lot of very constructive criticism. They take that, they revise their plans, present again in May and get beaten up again, but at a different level. Then the best 8-10 teams present in the finals at the end of May.”
Mr Maloney, who was one of the joint winners in 2006, says the experience was invaluable. “Beforehand, we had a good idea but found it hard to communicate it to other people. By the end of it, I’d not only learnt how to make a great pitch but I also had all these great introductions to people who helped us raise money.”
Prof Kaplan says the contest is a healthy complement to the serious academic reputation for which the University of Chicago is known: “If you want to come here to do entrepreneurship, you get the classroom kind of learning . . . and the experiential stuff that’s very differentiated.”
Entrepreneurship is also increasingly appearing in more conventional, taught courses. For example, Eric Lefkofsky and Brad Keywell, the co-founders of Groupon, taught a course for the first time last year on building internet ventures.
Sunil Kumar, Booth’s dean, says the flexible curriculum also underlines why entrepreneurs are attracted to the school. “That aligns philosophically with people who want to start their own business. It chimes with their independence.”
Prof Kaplan smiles at the age-old question of whether entrepreneurship can be taught. “I can’t teach people to be creative and have ideas. That’s innate,” he says. “What you can do is create an environment where that’s encouraged. The other thing is you can say: ‘when you have an idea, I can tell you how to evaluate that idea, whether it’s likely to succeed or not, and make suggestions to help increase the likelihood that it will succeed’.”