August 1, 2011
A lot of undergraduate students ask me whether they should pursue an MBA or a technical PhD as a foundation of their entrepreneurial career. I have pursued both at some point, and frequently meet (and invest in) entrepreneurs with both degrees. Each has advantages but overall I’d recommend a PhD for most tech entrepreneurs. Here is why:
Education: Both degrees will teach you something. The MBA focuses on case studies and financial concepts (e.g. accounting). A PhD emphasises independent systematic research and domain knowledge (e.g. electronics). The latter is simply more valuable for a tech entrepreneur. Steve Blank is right that most of the great entrepreneurs were Scientists and Engineers, not MBAs.
Moreover, a well-trained technical PhD will have no problem at all picking up financial concepts on the side if needed. The reverse doesn’t work at all. I came into my MBA program (Drexel, Technology Management) with an Science Bachelor (UBC H.B.Sc. Physics). There was *nothing* in any of my courses that wasn’t trivial with good skills in math, excel and Wikipedia. I have since then found this to be true for *all* aspects of “business” other than the informal aspects like Sales which cannot be taught in school anyhow. Building a business is hard, but the fundamentals, literally, aren’t rocket science.
Certification: Much of the value of an MBA is condensed in the piece of paper. Don’t laugh – this is a very real effect in a lot of domains. My wife (B.Eng., MBA) has a very successful corporate management career (Proctor & Gamble, Nortel, McKinsey & Co). Her MBA definitely contributed to that career progression. But the MBA certificate is a lot less relevant for entrepreneurs. It doesn’t matter at all for proven operators (i.e. those with successful exists in the past). Newcomers will be technical co-founders with a PhD or business co-founders with an MBA. A dozen of the latter will fight over one of the former at any networking event. That should be a hint about the relative value.
Relationships: This is where MBAs shine. You will meet lots of other bright people who can become your support network in your future career. A PhD is just too isolationist in nature to be useful in this area. Ironically, the best way to overcome this shortcoming of a PhD program is to become a student entrepreneur. Very few career options require more interaction with diverse stakeholders. So being a good entrepreneur while studying will effectively force you into more relationships than an MBA ever would. That said, in a fair comparison, the MBA will still be much more valuable in this category.
Financial Impact: Unlike a corporate career, the earning power of an entrepreneur is defined entirely by the quality of your work and not your pedigree. Neither degree has an advantage in this regard. But the PhD dominates on the other side of the financial equation: cost. PhD tuition fees are generally much lower than in the MBA program of the same university. In fact, many universities offer scholarships to anybody who makes it into their graduate program. MBA schools are profit businesses so this difference isn’t going away. A PhD can also have a long term impact on the financials of your start-up. It gives you access to several types of academic grants, allows you to co-supervise graduate students (a great way to get smart engineers into your team while they are still at school), and makes it massively either to get technical tax credits for your business.
Alignment with Entrepreneurship: This is the ultimate argument in my mind. You can do your PhD while building a tech start-up. It’s incredibly hard to do the same with an MBA. A technical founder should be able to leverage at least half of her start-up work for the PhD (and vice versa). The MBA program offers no such leverage at all. That’s the difference between success and failure for your start-up.
I am seeing this playing out at TandemLaunch right now (and saw it over and over before). We have a PhD student interested in a technical leadership role for a new portfolio company. This will combine nicely with her PhD work; any paper or patent that she writes at the company will be directly “credited” to her PhD; there are scholarships designed specifically to fund her work on the boundary of academia and entrepreneurship; and the overall alignment will be strong enough that her PhD won’t take any longer despite contributing to a company “on the side” (mine got shorter). Universities *want* her to have impact in the real world.
Her comparison was just accepted into an “elite” business school. No scholarships for him, just 5 times more tuition. No encouragement for his entrepreneurial career either; no way to get any consideration for the fact that he has already build a successful marketing business and might not need “Introduction to Marketing”. He won’t even be able to use his company work as a case study or homework assignment. Zero alignment or leverage. Encouraging real world impact? Not so much…