Inside Harvard Business School’s Startup Machine
Harvard Business School has been described as the “West Point of Capitalism.” Such a moniker conveys a sense of establishment and tradition, of Fortune 500 juggernauts and company men. Reality is, capitalism is based on creation and reinvention, identifying needs and building markets. In this tradition, HBS has been a pioneer.
The roster of Harvard Business School entrepreneurs is long and legendary: Michael Bloomberg, Steve Schwarzman, Scott Cook, and Salman Khan among them. In 1947, HBS launched its first entrepreneurship course – “Management of New Enterprises” – for veterans looking to become their own boss after being shackled by military rules and hierarchies. From there on, startup courses at HBS were consistently oversubscribed. In the 1980s, the school developed an entrepreneurship curriculum, providing serious research credibility to the fledgling discipline.
Now, HBS ranks among the top graduate entrepreneurial programs in the world. The stats don’t lie. School alumni founded 42 of the Top 100 MBA startups of the past five years based on funding. According to Tom Eisenmann, the faculty co-chair of HBS’ Rock Center for Entrepreneurship, entrepreneurship ranks near finance as the top concentration at the school. In the Class of 2015, 9% of students joined a startup (defined as an organization that is three years or younger), with graduates making a $120,000 median to start. The class included 84 founders, with 55% of them finding a co-founder at HBS. Furthermore, 37% of the class’ entrepreneurs were entering the tech space, with another 30% starting up in financial services. Oh – and over a third of the students are part of the school’s Entrepreneurship Club.
So what’s behind the success and popularity of HBS’ entrepreneurship program? Recently, Poets&Quants sat down with Eisenmann and Jodi Gernon, the director of the school’s Rock Center. During the conversation, it was clear that students enjoyed several benefits beyond the Harvard brand.
STUDENTS AND ALUMNI CLOSELY TIED TOGETHER
For one, the program enables students to develop entrepreneurial experience while tapping into the school’s vaunted alumni network. At the school’s New Venture Competition – which draws over 100 student teams – HBS recruits 140 judges who rank among the “cream of the crop in the venture capital community,” says Gernon. This exposure offers HBS students two unique advantages. To start, students are introduced to potential investors who get a first-hand look at the quality of their work. “While [the judges are] not investing in the students right then-and-there,” Gernon notes, “they’ve established a relationship that students can take beyond school.” At the same time, students gain valuable and personalized insights into their ventures. “They actually come away with detailed feedback on how they can make their idea work more effectively,” Gernon adds.
HBS also continues to support their entrepreneurial-minded alumni long after graduation. Two years ago, for example, the school launched its Rock 100 program, which brings together company founders in a “safe,” “private,” and “intimate” setting with like-minded people to discuss the unique issues facing them.
Eisenmann concedes that a “large, large fraction of venture capitalists are HBS alums,” giving Harvard grads a better shot of having their pitches read by potential investors. However, the bigger story is the deep synergy between HBS alumni and students that aces as a force multiplier for both parties. “Success breeds success,” Eisenmann adds. “We’ve had years and years of Harvard MBAs launching businesses… [You can] bring them back to campus and they’ve only been out six years. Students can look at those alums and say, ‘Wow! They did it while they were here. We can do it too.’ A lot of HBS students will end up interning in these startups run by recent grads. It just makes it that much easier to keep things going.”
CASE METHODS PREPS STUDENTS TO GROW THE BUSINESS AFTER THE LAUNCH
Eisenmann and Gernon both credit the case method for the school’s wave of entrepreneurial success. To Gernon, cases prepare students for the longer game that requires far more planning and strategy. “It’s easy to start a company,” Gernon argues. “It’s harder to take it and grow it – and do it in a way where it can build market value. The case study and the classes teach them how to manage, not just how to start.”
Equally, Eisenmann adds, cases also train students how to look at all sides of the equation. “The case method really does train students to think through an industry holistically and understand business models and to take them apart and put them back together.” As a result, he views many HBS startups as disruptors. “There’s a theme if you look across the startups that our students and alums while they were here have launched over the last 5-10 years. If you look at Rent the Runway – taking a $1000 party dress and figuring out a way for you to rent it for $150… Birchbox – the makeup, beauty and wellness samples on a subscription basis in a box… There is a cleverness and a vision to these businesses. They see an opportunity, they understand an industry, and they do something new and different and powerful with the business model.”
Of course, HBS’s high expectations and heavy workloads don’t go away just because someone takes the entrepreneurial track. “We see a lot of students fall out of the entrepreneurial program because they realize how intense and difficult it is to start a company,” Gernon points out. We don’t lighten up their load or anything just because they’re starting a company. If anything, they have even more to do. So I think it gives people a real taste of what it’s going to be like post-HBS.”
What are the keys to entrepreneurial success? Why is an MBA a worthwhile investment for entrepreneurial success? Has student interest in entrepreneurship peaked? Find out the answers to these questions – and many more – in our in-depth interview with Eisenmann and Gernon.