The table to the left displays what the founder studied as their undergraduate major, and the type of company that founder went on to build. Nearly half of the total population of exceptional founders studied either economics (25% of founders) or engineering (24%), with computer science coming in third overall in undergraduate majors (12%).
Notably, economics majors produced a similar number of software versus consumer success stories (13% vs. 12% of all companies), while engineering and computer science majors produced more than twice the number of software success stories versus consumer success stories. One question this raises is whether technical skills are better suited toward the scaling of software companies vs. consumer companies, or whether technical founders are just more likely to start more technical companies.
CONSULTING IS THE MOST POPULAR PREVIOUS WORK EXPERIENCE
We also analyzed the previous work experience of the founders to better understand which job roles produce the most successful founders. It was interesting that consultants comprised the highest percentage of the overall group (18% of founders). Venture capitalists have been known to be skeptical of consultants as founders, but the data appears to show the opposite. Engineers comprised the second-highest percentage of the total group of successful founders, with 13% of all founders being former engineers.
It was also compelling to see that founders with marketing backgrounds stood out, in particular in founding consumer companies (9% of all companies and almost 20% of the consumer group alone). The marketing knowledge of go-to-market strategy, brand equity, and how to conduct consumer diligence are likely valuable to scaling a consumer company.
Notably, traditional operational roles didn’t produce nearly as many founders. For example, product management produced 4%, sales produced 4%, and design produced 1%. Former marketers (12%) produced more companies than these three categories combined. Even former venture capitalists produced more than either of these traditional operating roles, suggesting than conventional wisdom around the value of operating experience in these categories may not be entirely accurate.
THE PERFECT AGE TO LAUNCH A TOP VENTURE? 34
Age was an additional characteristic that yielded results that were different than we expected. The young, scrappy, and hungry entrepreneur exists, but the companies in our population had a different profile, with a median age of 34. The table below shows the average age of the entrepreneur at his/her company’s launch, stratified by his/her MBA program and the type of company founded.
While the average U.S. age at graduation for an MBA program is 29, our founders had an average and median age of 34. This may suggest that obtaining additional, tangible work experience after receiving an MBA actually increases the chance of building a successful startup. Alternatively, MBAs may tend to wait longer to build startups, due to being more risk-averse or preferring more traditional roles before launching a new company. At the very least, the data suggests that there is no penalty for MBA founders being patient, gaining more skills, and not rushing into a new endeavor.
‘CHARACTERISTICS’ AND LOCATIONS OF TOP COMPANIES
On average, it took these companies 9.7 years to exit, with a median of 8.2 years. This was not entirely surprising, given the challenges of scaling a company to large scale.
Companies raised a median of 5 funding rounds and an average of $353 million of equity. Most interesting were consumer companies, which raised an average of $607 million of equity before exiting, more than 3x in comparison to the averages of the other two categories. The average consumer exit was the largest of all categories, $3.7 billion.
While it takes a long time and significant capital to build an MBA-founded exit, overall the size of the exit is more than large enough to justify the investment. Median exit was $1.2 billion, and average exit was $3.2 billion. Also, median and average exit values are almost 10x the total equity raised, so returns for funds and limited partners continue to be fruitful overall.
It is also worth noting that of the 91 companies, 67 (74%) exited via a merger and acquisition as opposed to an IPO.
An additional statistic that we found interesting is where these founders headquartered their companies. The commonly held belief is that Silicon Valley is the best geography for startup formation, and while the data validated this assumption, there were a few surprises. See below for a summary chart showing the founders’ MBA program and where they ultimately settled.
California comprised 40% of all companies, while Massachusetts comprised 13% and New York comprised 12%. Altogether, these three locations comprised 65% of the total group, indicating the relatively limited geographic range of companies formed by top MBAs.
Harvard Business School showed interesting statistics. 43% of HBS-founded companies remained on the east coast and were launched in Massachusetts or New York. Of all business schools, HBS was the only one with a meaningful number of exits that had the majority of its companies outside California.
ARE MBAs SUCCESSFUL WHEN THEY PARTNER WITH EACH OTHER?
From the 91 companies that we analyzed, only 18 (20%) had two co-founders with an MBA. It was relatively rare for companies to have multiple MBA founders, and much more common for MBAs to have a co-founder with complementary skills, for example as a CTO, VP Engineering, or COO.
Interestingly, Stanford GSB was the only school with a high percentage (32%) of dual-MBA companies. See below summary characteristics on the total number of companies with two MBAs, and the breakout by business school.
We set out to better understand the profiles of successful MBA founders, and we found several compelling results that could be the subject of further analysis. Future analyses could expand the list of schools and include industries other than technology, such as biotech, pharma, healthcare and retail.
Future analyses could also determine whether companies founded by individuals with international MBAs have different founder/company profiles than their American counterparts, and whether non-tech industries carry unique founder/company characteristics.
In addition to expanding the scope, one could also dive one layer deeper into the MBA programs to better quantify probability of success. Both tangible and intangible traits of the schools could be quantified (e.g., number of MBAs in the class and school’s resources towards entrepreneurship), and one could subsequently generate a scorecard of the school’s performance and therefore the likelihood of it producing a successful founder vs. its competitors.
Statistics on founder undergraduate majors and previous work experiences could also be further analyzed. Which specific employers produce the most founders in the population of successful MBAs, for example? Are there specific undergrad programs that tend to produce a disproportionate number of MBA founders?
Our overall conclusion to this study is that while some of the stereotypical traits of successful MBA founders were proven true, many more were disproven. There were many surprising results, including the fact that consulting produces a high percentage of founders, that top MBA founders start their companies later than expected, and that traditional operational roles don’t appear to produce a high percentage of MBA startups.
For the future entrepreneurs and investors out there, we hope that you found this study impactful and inspiring. Best of luck on your journey.
Jonathan Smith has held various positions in the financial services and entrepreneurship industries. Jonathan was previously an Associate in the Structured Finance group at Goldman Sachs and a Director at a Dallas-based startup, Nickson Living. Jonathan is originally from New Jersey, received his BA from the College of the Holy Cross, and is currently an MBA candidate at Harvard Business School.
Nnamdi Okike is Managing Partner and Co-Founder of 645 Ventures, a Seed to Series A venture capital firm that invests in SaaS, infrastructure software, and consumer technologies, partnering with founders to build growth-stage businesses that reach massive scale. Before co-founding 645, he spent eight years at Insight Venture Partners, where his investments resulted in exit value of over $6 billion. He received his BA from Harvard College, JD from Harvard Law School and MBA from Harvard Business School.