Post-MBA Start-up Dreams Deferred

I attended Yale School of Management because I am passionate about change, particularly through entrepreneurship. Throughout my MBA experience, I was quite pleased to be surrounded by many other aspiring world changers. Many of us had well thought-out plans on how we would use our education and experience to launch ventures to address important problems for business and society. Some of us created business plans. Some of us even launched businesses. Most of us, however, joined traditional recruiting lines – finance, consulting, etc. – thereby deferring our true post-MBA aspirations of full-time entrepreneurship. Instead of leading change, many of us simply offered more of the same solutions.

During my second year, I explored this issue in greater detail. Through an independent study, I examined the economic incentive structure and overall thought process that prevents willing and able MBAs from making the leap into full-time entrepreneurship upon graduation. Once word spread about the project, over 100 of my classmates participated. Together, we challenged a few popular myths:

Myth #1: Most MBAs are risk averse and therefore choose “safer” career paths.

Attending business school is a risk. Most full-time MBAs pile on student loans and leave steady paychecks, family, friends, etc. – all for a shot at pursuing their dreams. I tested this myth by including a few questions in my study to gauge the general risk appetite of respondents. In each question, I asked the respondent to select between a higher reward option with lower probability of success (i.e., lower expected outcome) and a lower reward option with higher probability of success (i.e., higher expected outcome). Most of them chose the riskier options despite the lower expected outcomes. Why didn’t they have the same risk appetite when choosing jobs upon graduation? We will get to that shortly.

Myth #2: Most MBAs don’t launch full-time ventures upon graduation because they don’t have the experience and / or don’t think they will succeed. 

The study results proved otherwise: 40% of respondents launched (or helped launch) businesses prior to school; 35% of respondents said they’d consider launching ventures after graduation without additional assistance; and 76% of respondents believed they would succeed as entrepreneurs. Additionally, most business schools offer entrepreneurship classes, business plan competitions, mentorship programs, etc. – all designed to foster an experiential environment. If MBAs don’t know how to start businesses, they have more than enough opportunity to learn and test their ideas prior to graduation. Why then didn’t more respondents launch ventures upon graduation? Good question

The Root Cause 

Ultimately, I found that many willing and able potential MBA entrepreneurs choose safer career paths due primarily to risk of not being able to pay student loans. Most MBAs try to make as much money as possible so they can pay off their loans, build a little savings, and then pursue their dreams. In fact, when I introduced programs to alleviate student loan pressure (e.g., scholarships, loan forgiveness, loan deferral), over twice as many respondents said they’d launch full-time ventures upon graduation. Great results, but how do we figure out a wide-scale solution?

Enter Upstart 
I learned about Upstart almost a year after I graduated and joined the workforce. The more I learn about it, the more I believe in its ability to address the true root causes that prevent many MBAs from launching full-time ventures upon graduation. Not only can Upstart help address student loan risk, but it provides flexibility to use the funds as needed and protection if the upstart should earn less than $30,000 a year. Also, in some cases, the backers even mentor the upstarts. I firmly believe that Upstart is an ideal solution and is poised to change the entrepreneurial landscape. Now, MBAs, JDs…actually, anyone can take that great business plan off the shelf and pursue his or her dream today.

Posted by Corey Harrison, Yale School of Management, MBA Class of 2011