Why More MBAs Are ‘Sticking It To The Man’

Ni Xu (left) and Kunal Rai, both former Apple employees and current Harvard Business School full-time MBA candidates elected to work on their startup, AluluClub, full-time this summer. Photo by Nathan Allen

Ni Xu (left) and Kunal Rai, both former Apple employees and current Harvard Business School full-time MBA candidates, elected to work on their startup, AluluClub, full-time this summer. Photo by Nathan Allen

For generations of MBAs, the summer has been a time to intern with a world-class company paying world-class money. McKinsey, Goldman, and Google are at the top of many resume-boosting opportunities that pay students median monthly salaries of more than $10,000 a month. A ten-week stint could easily help to offset $25,000 of tuition expense.

But an increasing number of MBA students have essentially decided, in the words of one professor of entrepreneurship, to “stick it to the man.” This past summer, more students than ever spurned traditional summer internships to pursue their own startup dreams, sometimes with the funding and encouragement of their business schools.

Meet two of them: Ni Xu and Kunal Rai, a pair of MBA classmates at Harvard Business School. Instead of working in some modern office tower for a world-class company, the pair spent their summer inside a converted brick duplex in Oakland, California. Parked outside the building is a 2001 Ford Expedition with about 209,000 miles on the odometer. Inside, a narrow, steep staircase leads to a flowing room with hardwood floors, scattered bikes, a few Macbooks, and some cases of craft beer. Ni Xu and Kunal Rai pace between the living area and what appears to have once been a dining room. No longer. Now it’s crammed with marketing materials for their startup, AluluClub.

“In my mind, this is the best way I could’ve spent my time in business school,” says Rai, 30, a former global supply chain manager at Apple. “Trying to start a company, you have to be all in, otherwise it doesn’t work out.”

There’s no doubt Rai and Xu, also a former Apple employee, are all in. AluluClub is a marketplace and delivery service for microbreweries and beer snobs or just people dabbling in microbrews. When the two moved cross-country from Cambridge to Oakland, they purchased the Ford Expedition — dubbed the Beer Wagon — for $2,000 to personally do pickups and deliveries of the microbrewed suds, and to ferry them around on brewery visits. So far, Xu and Rai have bootstrapped and fronted nearly all the cost to launch the platform themselves.

‘STICKING IT TO THE MAN’ FOR THE SUMMER

Dave Mawhinney, executive director of the Swartz Center for Entrepreneurship at Carnegie Mellon University, calls the sort of enterprise Xu and Rai are engaged in “Sticking it to The Man” for the summer. And he says he has seen more MBAs from Carnegie Mellon’s Tepper School of Business sticking it to The Man than ever before. To be sure, Tepper’s not unique.

“Certainly in the aggregate, (the number of) MBAs participating in startups and new ventures is going up,” concurs Karl Ulrich, vice dean of entrepreneurship and innovation at the University of Pennsylvania’s Wharton School of Business. Some 11% of Wharton’s graduating full-time MBA class of 2013 spent the summer between their first and second year either at an early-stage venture or working on their own. This summer, that number has climbed to more than 16%.

Many elite B-schools like Wharton, Harvard Business School, Stanford’s Graduate School of Business, Columbia Business School, and most recently New York University’s Stern School of Business have funds or organized programs for MBAs wanting to spend the summer working on their own ventures or at early-stage startups. Steeped in ample anecdotal evidence, those programs are beginning to track numbers to back the influx. Wharton’s Venture Award, which is open to all University of Pennsylvania students and awards $10,000 to students spending the summer working on their own ventures, has seen applications jump from 23 in 2012 to 48 this summer.

INFLUX OF INTEREST ACROSS SCHOOLS

Meanwhile, Harvard’s Rock Summer Fellowship program has seen MBAs launching ventures jump from 18 in the summer of 2011 to 52 this summer — largely thanks to boosted funds, points out Tom Eisenmann, faculty co-chair of Harvard’s Rock Center for Entrepreneurship. The 52 Harvard MBAs working on their own ventures this summer represent 6% of the class of 2017. For comparative purposes, 6% of Harvard’s class of 2016 took internships in investment banking, 8% spent the summer in general management positions, and 15% were in marketing summer positions. And as Eisenmann notes, the 52 are not representative of all Harvard MBAs working on their own ventures during the summer — those are just the ones who were awarded funds by the school to do so.

After publication of this article, NYU Stern announced on August 24 a new Venture Fellows Program thanks to a $1 million gift from alumnus David Ko, a former executive at Yahoo! and Zynga and current president of Rally Health. Starting this fall, full-time MBAs will be able to apply for a $10,000 stipend, workspace, mentorship, and a Silicon Valley immersion week in lieu of a traditional internship. NYU Stern joins Wharton and Harvard to provide an entrepreneurship-specific fellowship for MBAs between their first and second years.

At Stanford’s Graduate School of Business, entrepreneurial summer interest has remained fairly flat over the past five years. Last summer, 47 full-time MBAs participated in the Entrepreneurial Summer Internship Program, which only provides a living stipend for some students working at early-stage startups, compared to 40 students in the summer of 2011. “Most students find this experience very helpful in thinking about whether they’d like to start their own venture at some point, to join an early stage company, or to work at a firm that’s further along in it’s growth trajectory,” Deb Whitman, director of the Stanford Center for Entrepreneurial Studies explained in an email exchange with Poets&Quants.

Stanford’s year-round Venture Studio program supports student entrepreneurs with co-working space, advising sessions, and additional resources, Whitman says. “Like entrepreneurs (around) the world, they make trade-offs by working evenings and weekends during their internship or choosing to focus their time on their startup idea instead of taking a summer internship,” Whitman says of why Stanford does not fund students working on their own ventures.

While Columbia Business School’s Summer Startup Track also doesn’t provide funding, it does provide a school-sanctioned opportunity for MBAs to work on their own ventures for the normal internship summer. Applications have climbed from 11 in 2010 — the program’s first year — to 36 this summer. Columbia’s rise, though, could have to do with the school’s strategic decision to include students working on ventures while doing traditional startups.

“We’re seeing the trend of more MBAs doubling down where they are getting the operational experience by day in a traditional internship. And then taking that operational and industry experience and taking it to their startup at nights and weekends,” says Vince Ponzo, senior director of the Lang Entrepreneurship Center at Columbia Business School. “They are almost leveraging their MBA and summer internship experience by 2x.”

  • Frank

    I stand corrected. The 85% is of graduates for whom the school has information of which students seeking entrepreneurial ventures would be a subset. And, yes, reducing the denominator would lead to an improved ranking. Thank you for the clarification.

  • Several schools, including Stanford’s Graduate School of Business, already fall below the threshold you cite. Last year, only 71% of the graduating class at Stanford actually sought employment. Some 16% of the class started their own companies, while 10% were sponsored by their employers. Truth is, the fewer graduates a school has to place, the higher the placement rate is likely to be, a circumstance that would help its U.S. News ranking.

  • Thanks for the insights, Frank. To be clear, Dave’s 80-20 rule was a “hunch” he has being close to the world of MBA entrepreneurs and what his “gut has been telling him.” That being said, he was also speaking about the entire lifetime of an MBA — not necessarily right after graduation. The type of “starters” or entrepreneurs he was speaking about could get a traditional job for a few years or decades post-MBA and then start something later. Sorry if that wasn’t explicit in the article.

    To my knowledge, no school has reported more than 15% of a class starting their own ventures, although Harvard and Stanford have been inching close in recent years. I’m not familiar with the fine print of the 15% rule you reference, but I’m not sure starting a venture fits into that 15%. While they are technically not seeking employment, I’m not sure they fit that category. Most schools break it out into an entrepreneurship or “starting own venture” category on employment reports. Of course, there are always ways to “fudge” employment numbers as well (check out what’s happening with lower tier law schools right now).

  • Frank

    Unfortunately, if the 80-20 rule, as quoted in the article, holds and this trend continues, some of the best MBA Programs will no longer be in compliance with MBA CSEA standards, which mandate that 85% of an MBA graduating class must be “seeking employment.” A student starting his or her own business is considered as “not seeking.” Will it be the case that the Harvards, Stanfords, Whartons of the world will no longer be eligible for ranking? After all, the major rankings periodicals adopt MBA CSEA standards for their instruments. And, even if the students who pursued entrepreneurial ventures during their summer months should decide that they are better suited initially for a more traditional post-MBA job, what is the likelihood of employment in such a role at graduation or within the three months after? If this trend continues, then the Programs identified in this article will certainly see an adverse effect on their US News and World Report ranking, which allocates 35% of its MBA ranking methodology to placement results. Either that or US News and World Report will finally wake up and recognize that placing such significance of where a student finds him or herself immediately after completion of an MBA demonstrates the periodical’s ignorance about what the real value of an MBA actually is. Of course, that would require US News & World Report actually giving the ranking instrument some real thought and investing some real resources in its execution. But, if it starts measuring Harvard, Stanford, and Wharton anywhere outside of the top five, it will probably have no choice.

  • Rajendra

    Without any prejudice, the option for some will be to join such interns and in the process learn how a new business could be differently built.

  • Stuartddd

    If MBAs are that committed to the start-up path, we can call the “top”: it passed some months ago. MBA’s are probably more lagging than leading indicators. Odds are heavily in favor of these kinds of students begging to be accepted to McKinsey/etc. within the next year or two. Funding is harder, weak business models are looking ever weaker, and many firms that were thought to be successful are starting to struggle….. That’s the real story. Sure, there will be the hard-core that are real entrepreneurs at heart, but most of them don’t go to business school. The ones that do will carry on and it won’t matter that things have turned southward. But for most? Done with entrepreneurial dreams.