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Record Number Of US Grads Shun MBA Jobs To Become Entrepreneurs

A record number of US MBAs have shunned traditional MBA Jobs in favor of startups. Entrepreneurial ventures are on the rise. Hear from real MBA entrepreneurs on the benefits of going it alone!

Fri Nov 15 2013

A new record has been set for MBA graduates creating start-ups at a US-based business school, reflecting a growing trend in the MBA Jobs world and an increase in entrepreneurial ventures.

As many as 18 per cent of MBA graduates from last year’s cohort at Stanford shunned traditional career paths to become entrepreneurs, up 13 per cent from the cohort of 2012. In the early nineties, that figure was at just 5 per cent.

The numbers are disclosed in Stanford’s recently published employment report for the Class of 2013 and while the number may not seem that significant, the increase reflects a growing trend on both sides of the Atlantic.

Up to 523,410 new businesses will register in the UK in 2013, a 40,000 increase on last year, according to StartUpBritian, a Government-backed organization. By January, 80,000 more new businesses will have been created in Britain than in 2011. The Association of MBAs 2010 Career Survey shows that 26 per cent of British MBA graduates have started their own company.

Access MBA reported that 45 per cent of INSEAD Business School alumni have become entrepreneurs "at a certain point" after graduation.

While 77 per cent of the Stanford class had job offers by graduation, less people entered the consulting function - one of the most popular MBA careers.

More and more businesses schools are offering greater support for entrepreneurial MBAs. Tuck School of Business at Dartmouth recently introduced a 50 per cent compensation pay package for those working in start-ups after graduation. Coupled with an Entrepreneurship Initiative, it is easy to see why 50 per cent of Tuck’s cohort last year took entrepreneurship classes.

UK-based MBA programs, such as Cass Business School at City University in London, have start-up centres and incubators to get the ball rolling.

Employment remains a key concern for MBAs approaching graduation. Although investing thousands to attend a top b-school and taking up to two years out of industry, many still take the risk to start-up their own ventures instead of joining companies.

At top MBA programs, salaries expected to increase exponentially after graduation. Georgetown MSB's MBA program reported a 107 per cent salary increase last year, while Nanyang Business School in Asia saw graduates earn a 129 per cent salary increase. At London Business School, the UK’s top b-school in the MBA Rankings, salaries jumped up 134 per cent.

But many MBAs will see the potential salary increase in entrepreneurial ventures as limitless. Andrea Frino, who left a top consulting job with top firm KPMG, says running your own startup gives you the freedom to pursue the projects you want to - which is a strong motivating factor.

After rising through the ranks at IBM and then KPMG, Andrea now runs his own consulting firm and thinks taking the risk was worth it. “I enjoyed working for big companies; I’ve learned all my skills thanks to IBM and KPMG and maybe one day I will change my mind,” he said.

“But for now, it frees up my desire to express myself. When you’re an entrepreneur, you can mould the world around you. But when you work for an organisation, you have to learnt to live in the world you are given.”

For Andrea, after studying an MBA at Imperial College Business School, he had the skills to take on his own venture. While BusinessBecause reported this week that many MBAs see b-school as essential to starting up an entrepreneurial venture, many others argue it is not necessary.

Andrea is one of a rising number of b-school graduates that have taken a huge risk. He thinks becoming an entrepreneur is worth it. “People start to worry, but the challenge is not to allow yourself to be negative or fearful,” he said. “Each of us has a dream; a desire to express what your talent is. The first challenge is to overcome the fear and tell yourself that you will make it.”

Although HEC Paris sees 90 per cent of its MBAs in employment within three months after graduation, Lavaniya Das found it tough to find a job during the financial crisis of 2008 after graduating from SAE Melbourne. She founded her own film production company and has been an entrepreneur since she was 21. She joined the HEC Paris MBA program this year with the aim of helping her startup grow.

“When I finished school and could not find regular work in something I wanted to do, I decided it was time to start my own company. And why not?” she said. The biggest challenge facing her entrepreneurial venture was finance, a common put-off for many MBAs. “The biggest challenges were financial,” Lavaniya said.

“I made it a point not to borrow any money, so whatever I earned I put back into the company, for upgraded equipment and stuff like that. It was tough because I didn’t know where to start. But I used the money raised to build up the company and by year two, I was earning a wage for myself.”

Entrepreneurship may not be the dominant career path in the MBA Jobs world, and many still turn to private equity and consulting firms after graduation.

But one thing is clear from this data: More MBAs are shunning traditional career paths after graduation. Entrepreneurship is on the rise.