More than a third of the MBA graduates at Stanford, MIT and Babson College started companies within three years of their commencement, according to a new study of entrepreneurship byThe Financial Times. The survey research shows that 36% of the MBAs in the Class of 2013 at both Stanford and MIT have done startups, far higher than the 18% and 9.5%, respectively, of graduates who launched companies by graduation.
It’s even a bigger phenomenon at Babson College’s Olin Graduate School of Business where a whopping 52% of the MBAs have started companies within three years of graduation, compared with only 15% at commencement. That makes Olin grads the most entrepreneurial students in the world, according to the study, though 55% of them say they earn their primary income from other jobs.
At one school after another, the rates of entrepreneurship within the three-year window are three to four times what they are at graduation, suggesting that MBAs are clearly smitten with the idea of doing their own thing. At the University of Pennsylvania’s Wharton School of Business, for example, one in four grads in the Class of 2013 have started their own companies. That 25% level of entrepreneurship compares with 7.4% at graduation. At Harvard Business School, 22% of the MBA graduates have started companies, versus 7.0% while still in school.
18 OF THE TOP 25 SCHOOLS TURNING OUT ENTREPRENEURS WERE OUTSIDE THE U.S.
The British newspaper got the data from its annual survey of MBA alumni used for its global MBA ranking published in January (see INSEAD Repeats As No. 1 In 2017 FT Ranking). The FT sliced the data to come up with an entrepreneurship ranking that puts Stanford’s Graduate School of Business in first place, followed by MIT Sloan, the University of Cambridge’s Judge School of Business, and UC-Berkeley’s Haas School of Business in the top five.
Far more compelling than the ranking of the top 50 schools, however, is the underlying data that shows a significant number of MBA graduates quitting their jobs within three years to launch startups. Some of the highest percentages of MBA founders, moreover, come from schools outside the U.S. After Babson, for example, the University of Strathclyde Business School in the United Kingdom is second, with a 44% entrepreneurship rate, followed by Ipade Business School in Mexico, with 43% of MBAs starting a company within three years.
In fact, six of the top ten schools are international while 18 of the top 25 are outside the U.S. The study found that British MBA graduates are the most entrepreneurial, with 35% launching their own startups, followed by MBAs from Mexico (34%). Some 11%t and 13% of graduates from Japan and South Korea, respectively, have done start-ups. A quarter of entrepreneurs set up their companies overseas. A third of these are located in the U.S., the most popular destination. The study found, however, n relative terms, the Britain has the most international scene with nearly half of British start-ups set up by foreign entrepreneurs.
MANY MBAS ARE DOING STARTUP MOONLIGHTING
Those findings confirm many employment reports from leading business schools showing that rates of entrepreneurship–even at graduation–tend to be higher for international students than domestic MBAs. At Stanford, for example, 27% of the MBA graduates in 2013 were in the category as those having “non-permanent work authorization,” while only 14% had “permanent work authorization,” a designation that domestic students would fall under.
Many of the graduates who say they’ve started a company are often doing startup moonlighting, but there are exceptions. At Stanford, for example, 76% of the grads say they are getting most or all of their income from their businesses. Some 64% of grads at MIT Sloan and Dartmouth Tuck also rely on their startups for their primary income. Among Harvard MBAs, it’s 43%, while among Wharton MBAs, the number is 45%.
Often, that is a strategy to use the MBA to land a high-paying job to bring down student debt, while still pursuing a dream to start a company. Renata Aráuz-DeStefano, who graduated from Wharton in May, is a good example. She launched an African-print apparel company, Mwayi, in her second year at Wharton but just started a job as an investment banking associate at Bank of America Merrill Lynch. She recruited another MBA to be chief operating officer of the startup so she can focus most of her energy on her i-banking job.
MANY MBA GRADS PUT OFF STARTUP DREAMS TO PAY DOWN DEBT
Similarly, many entrepreneurial-minded graduates prefer to work off their student debt until making the leap to a startup. Gil Addo, who graduated from Harvard Business School, in 2011, put in two years as a consultant at Putnam Associates in the pharma/biotech sector before becoming in 2013 a co-founder of RubiconMD, an online service that connects providers to same-day insights from medical specialists. One major reason for the delay: Addo graduated with $100,000 in student debt.
Most of the MBA entrepreneurs find themselves in this position and many still appear, unlike Addo, willing to give up on that high-paying post-MBA job to completely devote themselves to a startup. In fact, fewer than half of the MBA founders from Columbia, Yale, Chicago Booth, Northwestern Kellogg, London Business School, and IE Business School say they rely on their companies as the primary source of income. Of the 50 schools for which data is provided in the study, only a majority of MBAs from 13 schools say they derive most of their incomes from their startups.
At the University of Strathclyde, where the rate of entrepreneurship was second only to Stanford, just 13% of the grads counted on their startup income as the primary source of earnings, the lowest percentage in the entire sample. At the University of North Carolina’s Kenan-Flager Business School, only 23% of the MBA entrepreneurs fell into this category, while at the University of Virginia’s Darden School of Business, only 27% relied on their companies as the major source of income, the two lowest percentages among the U.S. schools on the list.
(See following page for table of entrepreneurship rates by school and percentage who rely on their startups for their primary source of income)