Is an MBA useful in tech?

Let me preface this by stating that this post relates to SMB (small and medium-sized #business – including startups) and not at all in the Enterprise, as those are two completely different beasts.  In Enterprise, to be an #executive, you almost in all likelihood do require an #MBA or some other extremely special (or illusive) training (such as a PhD) to be considered, or more likely – have the network – which often means having been in a business school.

TL;DR: Opportunity Cost, It’s Replicable, & Negative Signal.

Startups and SMBs

If you are targeting an early-stage tech company, I would generally advise against an MBA. The value of the MBA depends on who you are, what you want, what other options you have, what you give up, and where you are in career and the more important rest of your life, like relationships, having children, etc.

The value and prestige of the MBA has declined, especially if your aim is to work for a #startup.  There are a multitude of reasons why this is true (for me and many of my peers), so let’s see if they resonate.

1. Lack of early-stage tech opportunities: The later stage the company, the more robust their MBA recruiting program is. Google, Facebook, and Amazon are now some of the largest B-school recruiters in America. There are far fewer dedicated MBA opportunities at earlier stage companies.
2. Opportunity Cost: There is a massive opportunity cost to MBA. This can be exacerbated if you have to take out loans. Do not underestimate this and proceed with extreme caution before saddling yourself with financial obligations that cripple your options.
3. Negative Signal: Counter-intuitively, an MBA can be a negative signal to startups. Some believe an MBA confers an air of know-it-all to its holders. Others believe that the entire MBA curriculum on creating corporate value is antithetical to the startup world. If you have an MBA, you’ll have to defeat these two objections.
4. Substitutability: Thanks to the internet, business schools are no longer the gatekeepers of the the raw knowledge that you need to succeed in “Business.” Such info is available on the web for free or very little cost.

There are of course some good reasons you would want to go to business school:

1. You’ll learn (some) useful stuff: I do not hold an MBA, and struggled to learn all the financial, accounting and bookkeeping terms and ideas – I had no financial background whatsoever. I didn’t know the difference between “debt” & “equity”, and I had never taken an accounting class.
   Through an MBA curriculum, you would have learned these skills thoroughly.
   Without a doubt, they have been valuable tools in my arsenal for running an early-stage business. However, this is really only half a reason because: The question is not “was there value in acquiring these skills?” but rather, “were they worth the opportunity costs outlined above, and could you have learned them without the MBA”?
2. Network: Depending on where you go to school, this can be very valuable. If you want to go into tech afterwards, make your list of target schools, and find alums from them doing tech-related things that interest you. They’ll have the best and most candid insight of anyone. I’ve seen many people create a powerful network — completely from scratch and without an MBA.

What they teach you in MBA school is pretty much irrelevant to early stage companies. There are just no courses on how to find and develop ideas that the market wants, how to raise funds, how to handle investors, how to sell anything, how to achieve revenues, and so on.

Startups by their nature are trying to do something new. How do you teach that? You really can’t. You learn by doing, and even them, most people fail.

The second reason is that I find few people who chase an MBA aren’t actually interested in the roller coaster world of startups — they generally prefer a solid dependable salary, and a bit of prestige of being with a leading corporation or consulting firm. This personality type is not well suited to being an entrepreneur.

In talking to salty old investors, the ones who’ve been investing for decades, I’ve learned that if the founder is a PhD, a lawyer, a professor or an MBA, you run the other way. They say that none of these people have a clue how to manage a startup, and either they walk away from the opportunity, or if they do make an investment, they severely discount the value of the company. I find in general their observations are correct.

I’ve learned that if the founder is a PhD, a lawyer, a professor or an MBA, you run the other way.

Early-stage vs years of experience

Individuals who have 15-plus years of work experience usually derive less value from an MBA because they’ve already learned a lot about business through practical on-the-job experience. At some point after 15 years, the value of practical experience outweighs the value of book learning in an academic environment. A full-time MBA is most beneficial for those early in their career who want to transition into a completely different field, like finance or strategy consulting.

Experience is far more valuable than another piece of paper.

Hiring MBAs in tech

As a startup founder myself, I strongly believe that the type of skills you’re expected to gain through an MBA (sales, marketing, strategy, leadership) remain critically important to the tech and startup industry. In fact, these skills may be more important than ever. I’m not saying that the MBA is good for every entrepreneur or any specific entrepreneur or you, specifically. It is crucial that before you embark on a the long and arduous journey of more schooling you think about:

• Can you afford to do it?
• Do you have the time?
• Are you in a position to take advantage of it?
• Are you already full speed in a career you love or looking to pivot?
• …

The value and prestige of an Entrepreneurship MBA, specifically, is not as clearly in decline. With the increasing prestige and awareness of entrepreneurship in general over the last 20 years (the Internet years, not by coincidence), programs like the Babson one, well known for its concentration on entrepreneurship, are bucking the trend. And graduates of entrepreneurship MBA programs do sometimes come out of business school with mindset, skills, and experience that are useful in the world of startups and high-tech and growth companies from the outset.

I have myself, as have several people I know, learned and are learning far more from leading startups than what we would have learned if we’d jumped off that track and gotten an MBA instead. So of course that tarnishes the value and prestige of the MBA.

1. There’s no doubt that times have changed, and that the relative value of an MBA degree in 1981 is less than it is now. MBAs are much more common these days than they were then and it doesn’t take an MBA degree to understand supply and demand.
2. MBAs need ripening before they get their full value. Some would say that it would be a good investment to buy fresh new recent MBAs for what they’re worth and sell them for what they think they’re worth. I’ve been an employer for 30+ years now and I like my MBAs much better when it’s their second or third job out of school, or a few years after school.
3. I believe the MBA degree these days is a lot more valuable from one of the top schools – Stanford, Harvard, Wharton, Northwestern, Babson (for entrepreneurs) and the like – than from second or third tier. The supply and demand factor has heightened the perceived difference.

Conclusion

Business schools are evolving (or trying to) in a way that will work with tomorrow’s economic reality. There are very many programs for tech, science and entrepreneurs in business school that did not exist when I was looking into possibly getting an MBA. They will continue to try to innovate, as they should, to make sure they stay relevant, especially as we move more and more away from the steady stream of jobs that existed for MBA grads to a world that is going to have to be much more entrepreneurial on the whole.

In tech itself, the MBA can prove itself useful, but more often than not it is a catalyst to help you move out of IT. If you ARE NOT interested in moving away from IT-centric disciplines, I would suggest doing a simple cost benefit analysis.  An MBA can be expensive, so if you are paying for it yourself, you will need to decide whether or not the MBA will give you a jump in an IT organization.  If you are a software developer now, will you be promoted to a systems manager once you are finished?  If you are a data scientist now, will you be promoted to a science manager or better? If you spend two years of lost salary (opportunity cost) and possibly $80,000 on tuition and books, will these new titles give you the career strength you are looking for to make it a fiscally responsible move?

Personally, I think you would need a bigger jump within an IT organization to rationalize the large business school expenses.  A few of my classmates that returned to IT after business school ended up working for Deloitte or someone similar. These firms offer some post-MBA roles that involve systems integration and general consulting. I believe these jobs were competitive as far as salary went, and having it on their resume advanced their careers for sure.