Why Working at a Startup is Better Than Getting an MBA

Paddy Padmanabhan

August 4, 2018 · 4 minutes read

Uncategorized

What kind of “degree” are you working on ?

At a certain point in my career, I spent nine months working in an undercapitalized tech startup business trying to build a widget and acquire paying customers.  I had to forego a lot of immediate financial rewards (such as a monthly salary) for deferred gratification: to go do something I enjoyed, and build something that would make a difference. It didn’t work and I decided to move on.

So was it all a waste of time—a lost year that I will never get back?

The answer is clearly a NO. What I gave up in earnings through a steady salary, I more than made up for it given the experience I had: working with limited resources, building a platform, winning the first few clients (even though they didn’t pay much), pitching investors (unsuccessfully), having theological debates with the co-founder (won some-lost some), and eventually deciding to go back to a corporate job.

So: nine months of learning about business, foregoing a steady salary, and moving on to a corporate job. What does that sound like? You guessed it: an MBA.

I do have an MBA – the formal kind, where everyone sits in classrooms and discusses case studies about buggy whips and transportation; where “learning” means being at the receiving end of an outdated 20th century pedagogical tool (classroom lectures); and where graduating is the objective. That, and getting a coveted McKinsey consultant job.

The degree I earned working at my startup was unique: it was a one-of-a-kind, custom-built program that I alone could experience.  How many of you think of your startup experiences this way?

A lot of entrepreneurs go straight from school to a startup. Others give up a job to pursue their dreams. Some become very successful at what they set out to do, others don’t.  Regardless, they earn a post-graduate degree, especially if they apply themselves sincerely to building the business. Here are some courses you attend (whether you know it or not) as a “university” student in a startup:

  • Finance: A successful business earns more than it spends. Nothing else matters.
  • Economics:  There is opportunity cost for everything. Your friend from grad school drives a fancy new car and just took his girlfriend on a Caribbean cruise. Your former colleague got promoted to VP and just took an Italian vacation with his wife and 3 kids. You are eating Ramen noodles and testing bugs in code late at night.
  • Marketing: Making people want what you have. It’s hard to get people to care, sadly—even the ones you manage to reach with your message.
  • Sales: Converting mild interest to a signed contract to use your product. In the unlikely event that you do get someone to agree to use your product, try convincing them to pay you for your product.  Oh, and your sales rep quit after 2 weeks, so you’re the company’s bag-carrying rep for the foreseeable future.
  • Supply chain management: Staffing and resourcing your project. You need product out on the street in six weeks, and your only Python expert just quit to launch her own startup.

I could go on.

The point is that working on your own startup is nothing short of a compressed MBA from a top-tier university (there are a lot of questions about what a top-tier MBA—or any other degree from a top-tier university—is really worth today, but that’s a whole different discussion). It requires (painful) financial sacrifice, long hours, project management, discipline, and all the other things that MBA students generally go through. I picked an MBA as the example degree, but it could be anything – like a Ph.D. in some subject that’s at the core of what your offering is about.

Graduation Day comes around when:

1.) A customer agrees to pay a fair price for your product.

2.) A VC decides to back you with an $ 8M round.

3.) An established company will hire you despite (or more likely because of) your startup experience, even if it was a failure. There’s no telling when, or even if, you will graduate.

I got into a startup after many years of corporate experience and gave up a well-paying job, title, and perks, because I wanted to CREATE something really badly. My personal business model, in hindsight, was wrong as it turns out. I had no business going all-or-nothing on the startup.  I moved on, got a well-paying job (which turned out to be just as entrepreneurial in nature as my startup), only this time it was well-funded. I know that without the scar tissue I gathered during my nine-month startup venture, I would not have gotten the job I eventually did. My new employers respected what I had gone through, and gave me the job for that more than anything else.

My story is about my own personal university degree—my special, one-of-a-kind MBA. I wouldn’t be able to find a comparable one anywhere in the world, for any amount of money. It was priceless (though it left me nearly penniless).

So, what kind of “degree” are you working on?

10 Comments

  1. Nice. Kick-ass article…as a serial entrepreneur, in business since junior High School; now 40 tears old, and who
    never went to college for a degree (though I have taught summer school
    and University day classes). I often wonder what ‘honorary’ degree my
    years of entrepreneurial experience would be worth. Many of my ventures
    have been successful -and many flops as well, I enjoy the ‘start-up’
    because once it is ‘rolling’ it’s like a job; that is when I decide to
    get out of it and/or sell it. But, I have many partners and team
    members who have MBA’a and PHD/Doctorates, but no experience -or vision
    and lack the creativity needed to succeed in business. Can’t learn that
    in school…Thanks brother Paddy!

  2. Well, I agree with most of what you said, but my agreement stops with your suggestion that the startup experience in itself is more valuable than (or could be used by others as an equally viable alternative to) than the skills and perspective gained in a traditional MBA program. I would argue that you were well prepared for the “failures” you experienced at the startup company, at least in part, from your experience earning your MBA. In my opinion, the most value of any MBA program is the new way of thinking about the world around you. Without this, you may not have landed at the startup, or at very least, your experience would have been totally different. Understanding your position after reading your article, it sounds like *both* experiences really made the difference.

    • You are correct. The formal MBA provided me a perspective of business in a structured environment, and I have benefited from it greatly, not least from the network of contacts I built at B-School and in later years. The issue today is complicated by the increasingly out of touch MBA programs in a fast-paced world, and by entrepreneurs failing more often than not due to a lack of experience. In my view, the issue is not certain, either way. Thank you for your comments.

  3. Why are the two mutually exclusive? I have a Kellogg MBA and have worked for fortune 50 companies and 2 start-ups. You can gain valuable experience (and a great network) in getting an MBA, working for a large company, as well as a start-up. I think one should try to have as many different experiences as possible and draw lessons from them all.

  4. Misleading headline. Not all startups are the same. There needs to be more focus on which type of startup to join, and the growth cycle. Also, it depends on what your role is in the company. If you’re not the co-founder nor on the launching team and are a business person, it’s a difficult value proposition. Also, there should be more discussion on
    the financial upside (and every entrepreneur should look at a dilution table, or project the upside if bootstrapped). There’s opportunity cost in everything you do. The more your market value, the higher the opportunity cost. The risk-reward level is not the same at all startups, nor for all people. Also, most entrepreneurs that I’ve met give up more than a year. One year is not enough time.

    • You are right, of course. As I say in my piece, this is my story, my experience. This cannot be a template for generalization. There are some other details in my story that I haven’t gone into, but the points you have raised apply.

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