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A Response to Chamath Palihapitiya

On February 9th, Chamath Palihapitiya, founder of the venture capital company Social + Capital Partnership, told Harvard Business School students that their elite MBA degree would stand in the way of venture capital funding. In his keynote address at a conference put on by HBS’s venture capital and private equity club, Palihapitiya delivered several memorable quotes, including:

  • “It’s really unfair to you guys, but I think you’re discriminated against now.”
  • “I would bet a large amount of money that the overwhelming majority of us would not look favorably on a company started by one of you.”

Chamath Palihapitiya

He also stated that there are really three major industries HBS graduates would be “capable” of founding companies within, because they are “not actually totally technologically led”. These include healthcare, education and financial services.

These assertions are disappointing in their simplicity. I have dedicated my career to helping students obtain a great MBA education, and I would not do so if I did not believe it was valuable for a wide variety of career paths, from “traditional” finance options to the technological entrepreneurship that Mr. Palihapitiya focuses on. An elite MBA education offers practical tools for starting and managing a business, effective leadership and management strategies, and an invaluable global network of smart, driven peers who could one day make fantastic business partners. Of course, it would be ridiculous to say that an MBA degree is the only path to startup success. But it is just as ridiculous to say that it is merely a roadblock.

Let’s take a look at the numbers. One Forbes writer has informed us that MBA graduates founded or co-founded 12 of the 39 companies in Aileen Lee’s “Unicorn Club” of billion-dollar U.S.-based tech startups founded since 2003. Forbes dismisses this figure as “just 28%”, but I would argue that founding close to 1/3 of America’s billion-dollar tech startups is a pretty remarkable achievement. And, the numbers only get better when you expand the definition of success beyond rare billion-dollar startups.

In November 2013, Poets and Quants listed the Top 100 MBA Startups of the past five years, based on the amount of venture capital funding captured by a particular startup. Despite Mr. Palihapitiya assertion that venture capital funding is generally biased against MBA-led startups, every company on Poets and Quants’s list raised a minimum of $1.6 million in funding. 61 of the 100 raised $5 million or more, and more than 1/3 raised over $10 million. Of the companies listed, Harvard had the most entries with 34, followed by Stanford with 32 and MIT Sloan with 11. A sampling of more well-known successes includes:

  • Wildfire, a social media marketing company started by an HBS/Stanford GSB husband and wife duo and later bought up by Google (received $450 million in funding)
  • Viki, a video streaming service started by two Stanford graduates (received $200 million in funding)
  • Rent the Runway, a fashion e-commerce business started by two HBS graduates (received $54.4 million in funding)
  • Birchbox, a beauty subscription service started by two HBS graduates (received $11.9 million in funding)

None of these four limit themselves to the finance, healthcare and education industries, and all center on ecommerce and technological development- spaces that Mr. Palihapitiya seemed to think unsuitable for MBAs. I certainly respect his success as a venture capitalist, and I am not surprised by his claims that there is a bias against MBA entrepreneurs. I would hope, though, that every entrepreneur- MBA or not- would be judged not by their alma mater, but by the quality of their idea and their business plan. The numbers that we have just gone through prove that MBA students can and have developed wildly successful startups. As top programs continue to grow their entrepreneurial resources, I believe that such successes will become more common, and I hope assertions like those made by Mr. Palihapitiya will become superfluous.

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