As high-tech successes such as Uber and Airbnb have emerged over the past decade alongside vast numbers of other new ventures, they are beginning to lure business schools’ brightest students.
MBAs are increasingly spurning internships at blue-chip firms in favour of start-up companies that are hoping to shake-up traditional industries. This summer, hundreds from top schools including Harvard and Stanford GSB ditched corporate placements at the likes of McKinsey, Google, and Goldman Sachs for little-known enterprises.
“There is no question that the rate of MBA students seeking internships in start-ups is increasing,” says Ted Zoller, director for the Centre for Entrepreneurial Studies at UNC Kenan-Flagler Business School. “Students seek a dynamic, fast-paced and cutting-edge business experience, and entrepreneurial ventures clearly fit the bill.”
At Harvard, 600 out of 900 MBAs this summer worked at a start-up, estimates Kristen Fitzpatrick, managing director for careers. For Babson College, about one-third of the MBA class interned at start-ups.
This represents a sea change from the summer internship route that has long propelled MBAs to full-time jobs at the likes JPMorgan Chase, Barclays, or BCG. It also illustrates their increasing confidence in the global economy and jobs market.
But most of all, it highlights the shifting attitudes to careers on the part of the “millennial” generation — market jargon those aged between 18 and 33, an estimated two billion of the global workforce.
Lara Berkowitz, executive director for the Career Centre at London Business School, says MBAs are attracted to start-ups because they offer the opportunity for more impact and responsibility compared with large corporations.
Nimble start-ups also provide access to senior management, she says, as well as the chance to network.
About 7% of LBS’ MBAs this summer worked at start-ups — in industries including fintech, renewables and e-commerce — many taking advantage of London’s start-up hotspots.
Yet according to insiders, business schools are squabbling over how exactly to define a “start-up”. “A few years ago Amazon and Google were considered start-ups,” laughs one.
Nonetheless the allure of start-ups, many awash with venture capital and geared for growth, is temping graduates everywhere.
Marcus Beaudry is an MBA student at IESE Business School in Barcelona. He has worked across the oil and gas sector including for Mammoet, a leading North American industrial company. This summer however, he interned at AM Technology, an environmental start-up based in the City of London whose flagship product is Airlite, an air purifying paint.
“I enjoy the flexibility and variety of work that normally comes with start-ups,” he says.
With so many so-called “unicorns”— ventures that have achieved $1 billion valuations — start-ups offer the prospect of potential long-term success. Atomico, the London-based venture capital group, says 182 tech businesses alone have hit $1 billion valuations since 2003.
Vincent Ponzo, director of the Eugene Lang Entrepreneurship Centre at Columbia Business School, says that start-ups offer lateral movement and greater responsibility as they grow.
“Although some will undoubtedly become ‘unicorpses’, others will survive to become the industry leaders of tomorrow, taking the MBAs with them,” he says.
While PowerPoint drudgery, and weekend and evening hours have characterized corporate internships, start-ups can be equally challenging to work for.
“New ventures stretch MBAs in ways they are not tested in established firms,” says Kenan-Flagler’s Ted. They test all facets of MBA training — such as marketing, sales, operations, finance and strategy — often requiring people to work multiple roles simultaneously.
Start-ups also come with risk — the vast majority will fail. And MBA students, which can pay upwards of a hundred thousand dollars for a top program, will have to settle with comparatively meagre salaries to those on offer at big firms.
“The pay was insulting,” says IESE’s Marcus, “especially considering consulting-like hours were expected.”
Yet Sidnee Peck, director of the Centre for Entrepreneurship at W. P. Carey School of Business, argues that pay is only part of the puzzle. “The ability to work closely with the CEO or have a more flexible schedule may outweigh the desire to have a six-figure income,” she says.
There has in the past been pushback from start-ups to hire MBAs, which are seen by many entrepreneurs as too rigid in outlook. “The source of resistance is most readily found in early-tech ventures in the ICT and digital space, where the currency is your ability to code,” says Kenan-Flagler’s Ted.
But there are signs that the demand for MBAs is rising.
Start-ups have shown the strongest increase in recruiting by company type for three consecutive years, according to figures from MBA CSEA, the consortium of graduate management career services. At Wharton School, start-up job postings have surged by 270 to reach 400 over a year.
Minnal Dhingra is the chief marketing officer for AdmitHour, an online start-up that she co-founded last year with Akkshay Chugh, a student at INSEAD. The business has hired MBA students from Harvard and LBS to help with its online marketing, and two INSEAD students currently work part-time for the company.
“It’s mutually beneficial,” she says; MBAs bring significant work experience to the company, while the students profit from the freedom to implement strategy.
With smaller budgets, start-ups rely on different recruiting tactics to those of large businesses. Virtual meetings are common.
“The on-campus hiring process is typically not the ideal fit for start-up companies,” says Mathias Machado, associate director for careers at Tuck School of Business. “Most will hire during spring, closer to graduation, or the actual start date of the job opportunity.”
Caroline Daniels, senior lecturer in entrepreneurship at Babson College, says that cultural fit is also more important to small businesses.
“They’re looking for someone who can hit the ground running,” she says. “Liking the people who are around you really counts.”
The trend for MBAs to intern at fledgling enterprises is changing the way career services departments operate. Wharton for example, has created marketing material to sell the benefits of an MBA to start-ups, while Harvard has organized opportunities for students to travel to Silicon Valley.
While MBAs are showing a greater willingness to work at smaller firms and for less pay, it seems it is merely a cameo — the vast majority will still end up established companies.
But there is no doubt that the start-up revolution has come to business schools.
“Students want to be on the cutting-edge,” says Kenan-Flagler’s Ted. “Start-ups by definition pioneer new market and business models.”