The rise of the MBA entrepreneur

When Chika Ekeji enrolled in the MIT Sloan School of Business’ full-time MBA program, he was ambivalent about actually finishing his degree. What he was really in school for, he’d decided, was a chance to found his own company.

MIT Sloan Fellows participate in a simulated stock market during classes at the Massachusetts Institute of Technology Sloan School of Management in Cambridge, Massachusetts July 23, 2009. Young investors may accept the argument that those who begin investing when stocks are cheap end up with more retirement money, but after the turmoil of the past year, some find it hard to put their money in the market. Picture taken July 23, 2009. To match feature YOUTH-INVESTORS/ REUTERS/Brian Snyder

“I used to joke that I was on the dropout path,” says Mr. Ekeji, who while at Sloan helped develop mobile-phone technology that diagnoses impaired vision and an app that helps researchers find field workers in low-income countries. “As soon as I got the right idea, the right team, I was gone.”

That’s a remarkable attitude for a student at a top-ranked business school, where costs can exceed $85,000 a year. Most MBAs seek steady, jobs in finance or consulting where they can quickly recover their cash and start building wealth. Nevertheless, Mr. Ekeji is part of a rare but growing breed of student: the MBA-entrepreneur who shrugs off anti-MBA snobbery from the entrepreneur community.

According to a survey of administrators, career-services advisors and published reports from top-tier MBA programs, roughly 5% of full-time 2011 business school students founded their own companies right after graduation, with notable jumps at places like Wharton, Stanford and MIT-Sloan. That’s up from around 3% in 2010, and those figures don’t count MBAs who join startups as early employees or found companies in the months following graduation.

Top programs are rallying to establish ways to attract MBA-entrepreneurs, says Rhett Weiss, a veteran entrepreneur who heads up the Entrepreneurship and Innovation Institute at Cornell University’s Johnson School of Management. “Maybe we’re all drinking the same Kool-Aid, but it’s good for us and good for our stakeholders if we understand entrepreneurship and how to promote,” he says.

At Wharton, “We’ve definitely seen an increase” in interest in entrepreneurship, says Maria Halpern, Director of Student Engagement for the school’s career management services. Nowadays, dedicated entrepreneur initiatives are common among top programs, a reflection of increasing need among MBA students.

Even with added institutional support, turning an MBA into a startup means ignoring a common piece of advice offered by many MBA programs‘ career-services departments: Get a high-paying job and postpone the entrepreneurial dream until your loans are paid off.

“Quite frankly, we do encourage students in general to learn on someone else’s nickel before taking the plunge,” says Janet Strimaitis, managing director of the Arthur M. Blank Center for Entrepreneurship at Babson College.

That advice, says Omar Seyal, a 2011 Wharton graduate and founder of near-field communications startup Tagstand, runs “against pretty much everything I would think.”

“That advice is traditional,” says Mr. Ekeji. “And perhaps pragmatic in a way. But I actually believe that if the only thing keeping you from starting a company is paying off your student loans, then you should start your company.” Many students have already sacrificed two years’ salary and taken on debt to complete their programs, so why not just take that one more risk?

If career advisors sometimes act like concerned parents who try to be encouraging, established entrepreneurs can be like sarcastic older siblings. There’s a belief among some outspoken entrepreneurs that an MBA is a waste of time and money, and business-school students are sometimes the butt of jokes on startup blogs and discussion forums.

Brian Spaly, a founder and CEO of Trunk Club, a men’s apparel company, and 2007 Stanford MBA graduate, understands the skepticism. At a company’s early stages, he says, “There’s really only room for a couple people in the company that don’t know what they’re doing. And that’s generally the MBA.” There’s a reason so many MBAs become consultants; they’re well-rounded. What startups really need, says Mr. Spaly, is functional expertise. “Most MBAs aren’t known for that.”

In Silicon Valley, says Mr. Seyal, the entrepreneurial community harbors something of a cultural antipathy toward MBAs. “There’s a little bit of thumbing your nose at them, and I think that’s probably for the worst. … I don’t particularly think there are good reasons why people are looked down upon with an MBA here.”

Mr. Ekeji also disagrees with anti-MBA startup sentiment. The degree is not a waste of time, he says. Entrepreneurs can make things happen while they’re still in school: “With all due respect, you can cut class.”

In contrast with their reception among career advisors and other entrepreneurs, MBA-entrepreneurs say they enjoy tremendous support from their classmates, many of whom want to start their own companies but aren’t quite ready.

While she was at Harvard, Katia Beauchamp’s classmates would come over to her apartment to help pack boxes for her beauty-supply subscription service, Birchbox, which she co-founded with classmate Hayley Barna. They were disappointed, she says, when the company had to exclude them from beta testing to get outside perspectives on what customers would actually need.

“A lot of people don’t pursue a startup right away,” says Mr. Spaly. Five years out of school, he says, “A lot of my classmates are saying, ‘Now I’m ready to do something more entrepreneurial.’”

Economic trends of course influence the paths of MBS students, says Joaquin Villarreal, manager of the Entrepreneurship Initiative at the Tuck School of Business. “You get your 2000 dot-com bubble, everyone wants to be an entrepreneur,” says Villarreal. “That bursts and everyone wants to be a banker.”

“I also think it’s generational,” say Ms. Halpern. It’s worth noting that the millennial generation, known for an overblown sense of self-worth and propensity to dream big, has recently become old enough to be MBA-eligible.

In any case, the entrepreneur MBA students still like to take risks. Davis Smith, a Wharton graduate and cofounder of Brazilian e-commerce site, says that when he told his entrepreneur peers he and his partner were heading to business school, “Overwhelmingly people just didn’t understand it. They thought we were crazy. As an entrepreneur you’re used to that kind of reaction.”