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Business Students Become Founders As Start-Up Growth Gathers Pace

Entrepreneurs were once in a shallow minority at business schools – but corporate managers are flocking to the start-up scene at a rapid pace.

By  Seb Murray

Sun Mar 29 2015

Entrepreneurialism is alive and well in most economies so it should come as no surprise that start-up fever is gripping the world’s best business schools.

But where entrepreneurs were once in a shallow minority, corporate managers are flocking to the start-up scene – technology in particular – at a rapid pace.

This trend has been pronounced in North America at Berkeley Haas and Babson College and even as economic growth becomes more robust, across Europe graduates from international institutions, from INSEAD to London Business School, are piling in.

The question many MBA students are now asking themselves is: should I start-up?

“It's never been so cheap to launch a company, and there are plenty of opportunities to do so,” says Margaux Pelen, executive director of the Entrepreneurship Center at HEC Paris, a leading French business school.

Education is investing heavily in in-house solutions to ease company creation and some are willing to compete with the likes of Khosla Ventures and Andreesen Horowitz, the Silicon Valley venture capital group, to provide funding. Over the past year, University of Cambridge has invested £2.7 million into tech start-ups including ARM, the semiconductor company whose chips power iPhones.

There have been successes. Skybox, a Stanford start-up that provides satellite imagery, was acquired by Google for $500 million last year. Kolltan Pharmaceuticals, the Harvard biotech company, was poised to join the Nasdaq in January but pulled an $86 million IPO. Lending Club, an MBA-founded peer-to-peer lender, floated on the NYSE last Christmas.

It is the combination of low barriers to entry and success stories that produce a “why not me” effect, says Margaux. HEC Paris’ first entrepreneurship barometer, published this week, shows that 25% of its 8,500 graduates are entrepreneurs, up from 9% a decade ago.

Among executive MBA graduates, nearly 45% have started a company – four times the French national average.

Running cash-strapped start-ups is a challenge – but ventures often survive for several years after founders graduate. Pedro Nueno, professor of entrepreneurship at Spain’s IESE Business School, estimates that 80% of IESE students’ ventures were still in business five years after graduation.

The key to success in clusters like Silicon Valley is that everyone is generous with their time and wants to give back, says Hanadi Jabado, director of Accelerate Cambridge, an incubator. She believes these environments are blossoming at business school. “You are only ever one or two connections away from the person you need,” she says.

There is a benefit in the clustering of entrepreneurs around those who have done it before, suggests Nick Badman, chairman of Cass Business School’s Centre for Entrepreneurship.

Like many of its counterparts, Cass provides mentorship from successful entrepreneurs to MBA students. “Our aim is always to provide a package of both funding and support,” Nick says.

Justin Jansen, professor of corporate entrepreneurship at Rotterdam School of Management, says that founders even hold lectures and their companies are used as exemplary case studies.

For start-ups, it often comes down to investment. PitchBook, a venture capital and private equity research firm, estimates that start-ups from the world’s top-10 universities have raised more than $25 billion of funding over the past five years, including Cornell and Duke.

Graduate entrepreneurs who have received financial backing can provide support to students about how to approach investors and raise capital.

James Hickie, entrepreneurship lecturer at Manchester Business School, says: “A personal introduction to a venture capitalist or business angel can be very important.”