Why More Startups are Hiring MBAs

The pay can be poor, but the opportunity for impact and growth is enormous

When Dana Kim decamped from the Wharton School campus for her summer internship this year, the MBA candidate did not join the typical banks or consulting firms: she was hired by a craft brewery instead. 

Two Robbers brews hard seltzer, a gluten-free, low-calorie beer alternative that is packaged in arty, cartooned cans. “It’s very cool, it’s young, it’s different,” says Kim. 

The Philadelphia-based company is not a traditional MBA recruiter: it has only a handful of employees. But Kim preferred the broader responsibilities rather than a blue-chip business, where she says people are often pigeonholed. 

This meant her impact on the success of the company was significant, and with scant employees there was ample room for growth, though there was less support too. 

“My role was initially very scrappy, getting out and knocking on the doors of restaurants and bars that were cool enough to fit our brand,” says Kim, who previously worked for global market research company Kelton. “But I was also shadowing the founders and helping them in any way I could, with marketing, sales and strategy.” 

[See the Top 10 MBA Programs for Entrepreneurs]

Two Robbers was co-founded by Vivek Nayar, who put his Wharton MBA on pause to launch the business. Kim met him while writing a profile on Two Robbers for a Wharton newsletter. 

Insight into the running of a startup is another perk, she says. “I worked in a room beside the co-founders, seeing their vision for the company. It was aspirational and motivational — in a way big companies don’t always allow.” 

An increasing number of MBAs are embracing startups

Her preference for a scrappy startup over a stable corporation is emblematic of a wider trend. In the past several years MBA students have embraced startups like never before — both because they wish to generate significant impact but also because startups increasingly recognize the value of an MBA. 

“We've observed a trend, away from traditional MBA recruiting industries like consulting and investment banking towards technology firms, both large and small,” says Sarah Rumbaugh, CEO of Relish, which builds recruiting software for graduate level employers. 

Large tech companies like Amazon and Microsoft are now the largest recruiters of MBAs by volume, and this has driven startup hiring, she says. “Big Tech has provided proof of concept to smaller firms who have noticed the value of MBA hiring and followed suit.”  

MBA graduates can be extremely valuable to startups

The Graduate management Admission Council’s latest MBA recruitment survey found that 62 percent of startups planned to hire MBAs this year, up from 45 percent in 2018. 

Jean Ann Schulte, director of recruiting and employer relations at MIT Sloan School of Management, says that startup founders are hunting for MBA hires so as to attract funding and scale their business. 

“MBAs offer the skillsets to ensure the fundamentals are sound, such as finance,” she says. “They provide reassurance that a strong management team, with deep professional networks, backs the founders’ pitch deck.” 

This marks a shift from mistrusting to embracing MBAs. Some prominent entrepreneurs argue that business schools are too theoretical in their teaching. One renowned example is PayPal co-founder Peter Thiel, who once quipped: “Never hire an MBA; they will ruin your company.” 

Schulte says: “Not all MBAs are equally well-suited to work in a startup. Ideally, they can speak the technical language of the founders’ vision.”  

Sean Sullivan, an MIT Sloan MBA candidate, says that startups might need to be convinced that an MBA can add value. “It’s not obvious that the skillsets, frameworks and case studies in the classroom will translate to a dynamic and practical young company,” he says. 

Sullivan spent 10 weeks this summer working in fund strategy for Shift Capital, a social impact real estate developer in Philadelphia. The company has 30 people on the payroll and has raised more than $40m in equity. Sullivan wanted to make an impact on the company’s future and see his ideas implemented quickly. 

“By demonstrating that I’d done my research on the company, and could get up to speed quickly, I avoided a lot of the early hesitation that sometimes comes when a startup is considering an MBA,” says Sullivan.

‘Just in time’ hiring

Timing is also important to being hired by a startup. Early stage companies do not have established, structured recruitment processes for MBA candidates like banks and consulting firms do, with campus visits and multiple interviews. 

“Startups usually do ‘just in time’ hiring and typically don’t know what types of internships, projects or jobs they will have until spring,” says Doug Massa, a corporate relationship manager at UC Berkeley’s Haas School of Business in California. 

This is in contrast to the bigger consulting and financial services firms, who tend to have reliable hiring cycles throughout the year.

MBA students may have to be plucky and innovative to get their foot in the door at startups. 

Sullivan’s story is a case in point. He first heard about Shift online. Conducting research on LinkedIn, he noticed that one of Shift’s staff went to his undergraduate school. Sullivan guessed her email address using Shift’s domain name, and got a response.  

“She offered to pass my resume onto Shift’s CEO,” he says, adding that he met the boss for a face-to-face interview and received an internship offer a week later.

Matthew Grande, a principal at Shift, says the MBA was a factor in hiring Sullivan. “We needed somebody who had analytical capabilities and could be autonomous. We threw Sean into situations where he was setting agendas.” 

Several of Shift’s employees have MBAs, including the CEO Brian Murray, a Yale School of Management alumnus. 

Startups: big risk but bigger potential rewards

But the downside for many MBAs is the relatively poor pay, and there’s no guarantee of a full-time job offer for interns. Sullivan was earning $145,000 annually in his previous consulting job, whereas Shift paid him $2,000 for the internship. “I chose to prioritize the company and the experience over the pay,” he says. 

He also received a $5,000 stipend through the MIT Sloan Social Impact Fellowship to help cover living expenses. Many business schools offer such awards, so as to encourage MBAs to pursue work that is relatively low paid. This makes MBAs even more attractive to cash-strapped startups, says Relish’s Rumbaugh, a UVA Darden School of Business alumnus. 

The Wharton School, for instance, has its Startup Internship Awards, worth between $500 and $2,500 generally. In return, students are asked to write reports about their experience, to inspire others to take a risk. Most startups fail, but MBAs may see this as less risky than establishing their own enterprise. 

“We have a large number of students who want to eventually start their own company. Working at a startup allows them to do this with eyes wide open,” says Massa at Berkeley Haas. 

Many MBAs are willing to forgo current compensation for a stake in future rewards — stock options are commonplace. 

“There’s a romantic ideal in startups: I may make less money, but if this works out the opportunity for making much more money in the future is exciting,” says Kim, who wants to work with startups on graduation next year in operations, or as an external investor. 

She adds: “Ask yourself what’s more important: the dollars flying into your bank account or the impact and potential for growth?” 

Comments


Related Business Schools

Philadelphia, Pennsylvania 51 Followers 162 Discussions
Cambridge, Massachusetts 40 Followers 157 Discussions
Berkeley, California 78 Followers 108 Discussions

MBA News

Sep 13, 2019

Johns Hopkins Carey Redesigns MBA Program; Receives STEM Designation for its MS in Marketing

Sep 13, 2019

More MBA News

More MBA Articles

Employer Funding for MBAs: Myth or Reality?

Sep 17, 2019

New data show that a substantial number of MBA candidates are being paid by their employers to pursue a pricey graduate business education, but are there strings attached?

MBAs in Retail Management: Adapting to the E-commerce Revolution

Aug 30, 2019

The advent of online retail has kicked off a jobs boom at companies like Amazon in the US and Alibaba in China. How are business schools responding?

Why Business Schools are Melding Medical and Management Science

Aug 21, 2019

More doctors and medical students pursuing MBAs, so as to complement their clinical training and broaden their career options in a fast-changing industry

More Articles

Related Top 10 Lists

More Top 10 Lists