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Those aspiring to be the next Mark Zuckerberg or Bill Gates would be better off sticking to their studies instead of following the example of the entrepreneurial elite and dropping out of college, according to data on MBA graduate founders.
A Financial Times survey of the world’s top 100 business schools for this year’s MBA rankings found 22 per cent of the 7,800 students interviewed had launched a start-up since graduation and 84 per cent of those were still operating three years later.
This is a significantly better survival rate than among start-ups in general, even for those created in countries with the most developed entrepreneurial support infrastructures, in terms of investors, mentoring support and state assistance.
In the US, for instance, barely 60 per cent of new businesses make it to their third birthday, according to the government’s Bureau of Labor Statistics.
Four out of the top five MBA courses for start-ups are based in the US, and these boast even better success rates than the average for the 100 business schools covered by the FT’s rankings.
Top of the class was California’s Stanford Graduate School of Business, where those who started companies after graduation in 2011 earned on average $190,506 three years later compared with $170,433 for those who did not.
These founders were no doubt helped by Stanford’s campus being located minutes from some of the world’s most successful tech start-ups and the venture capital firms that finance them.
Among Stanford’s entrepreneurial alumnae is Shely Aronov, who launched San Francisco-based Yamba Hummus, a premium “authentic Israeli” hummus brand, a year after completing her MBA.
“Stanford knew I should be an entrepreneur before I did,” she said. “It was the encouragement I got during my MBA that drove me to found my company and I’m the happiest I’ve ever been in a job.”
The FT’s research challenges the received wisdom that the price of starting a business is inevitably a drop in income as the founders economise to ensure that they can put the maximum amount of their resources into the new venture.
Number of 7,800 business students interviewed that had launched a start-up since graduation and 84% of those were still operating three years later
Responses to the FT’s survey found that the average annual income among the fledgling business school entrepreneurs was slightly higher than their peers at $134,000, compared with $132,000 across the entire sample of MBA graduates.
Just 5 per cent of those who founded companies reported an annual salary of zero three years after graduation. However, even this may be an overstatement of the financial risk facing founders because this percentage includes those who chose not to reveal their income level in their survey response.
Despite the success of MBA graduates choosing to start up on their own, entrepreneurship remains a minority pursuit in the world of business education.
Of those respondents to the FT’s survey who had started a business either during their studies or after completing the course, 42 per cent said it was their main source of income three years after graduation.