Do entrepreneurs need an MBA?

Before Tristram and Rebecca Mayhew decided to quit their corporate roles and launch Go Ape, their treetop adventure parks business with 48 sites in the US and UK, they seriously considered getting an MBA. But separately, and for different reasons, they rejected the idea.

Mr Mayhew got as far as attending an MBA open day at Cranfield School of Management on the recommendation of his then MP Archie Norman, a former chairman of supermarket chain Asda. However, the visit proved a turn-off.

“I quite liked Cranfield, but I was dispirited by the other people considering the course, all of whom seemed to be doing so because they were bored with their jobs,” Mr Mayhew says. Instead he went to work for GE Capital, which in turn made him realise he was not cut out for corporate jobs: “It was the incentive I needed to go into business with Becs.”

For Ms Mayhew, a former advertising manager at Gruner + Jahr, a publisher, and fundraising manager for Marie Curie Cancer Care, the problem with an MBA was logistical: full-time study would be too much of a distraction when she wanted to start a company. “I just never quite worked out where I would find the time,” she says.

Business schools have invested heavily in the concept of an MBA as a route out of the rat race and into entrepreneurship. But the evidence that such an education makes people better business owners is patchy.

There are advocates. Donna Kelley, professor of entrepreneurship at Babson College, a business school in Massachusetts, was among a group of US and South Korean academics that assessed South Korean ventures after the Asian financial crisis and found the relatedness of education and experience to the business helped to predict survival.

“A critical component of entrepreneurship education needs to focus on growth and sustaining the business, and on survival during a crisis,” Prof Kelley says. “At Babson, we do teach students about managing in the growth phase and managing during hard times. We have a number of examples of Babson alumni entrepreneurs who have pivoted their businesses to adapt and survive during Covid.”

One of those is Joel Holland. Already an entrepreneur when he started as an undergraduate on Babson’s business management degree, he says he might not have continued as one if it had not been for the financial skills and support he received from his tutors.

Mr Holland’s venture, Storyblocks — which he has since sold — was a subscription-based media clips service that grew out of a library of video footage he recorded. As a high school student he interviewed famous business people and celebrities, including Steve Forbes and Arnold Schwarzenegger, to get their tips on building a career.

“I didn’t know whether I wanted to be a journalist or to run a business, so I ended up doing these video interviews, asking these people what it was like to do their jobs,” Mr Holland says. “I would edit them and distribute them online for others to watch . . . That was what gave me the germ of the idea for Storyblocks.”

Mr Holland chose to take his degree at Babson because of the business school’s reputation for teaching entrepreneurial skills — ranked number one for entrepreneurship in the business school list created by US News & World Report.

“A lot of the professors were adjuncts, who had experiences from running businesses themselves, so you didn’t feel you were learning from academics so much as mentors,” he adds. But most important was being around like-minded entrepreneurs. “It was a community of people who wanted to build businesses.”

At the start of his degree studies Mr Holland was still not convinced he was destined to be an entrepreneur, so he set a target that if Storyblocks could generate $100,000 in annual profit by the time he reached graduation in 2008 he would continue to run the business full time. A year after graduation, Storyblocks’ annual profit reached $1m. This summer Mr Holland sold the business to private equity group Great Hill Partners for an undisclosed sum, having raised $18.5m from investors previously.

He now focuses on a business he acquired a couple of years ago, called Harvest Hosts, a membership network for recreational vehicle owners looking for interesting places to holiday.

The Global Entrepreneurship Monitor, a research body set up to assess start-up ecosystems, published a report into the impact of Covid-19 on new ventures in September and highlighted access to formal education as a key indicator of success in building robust companies.

Mark Hart, professor of small business and entrepreneurship at Aston Business School and a co-author of the GEM report, says: “There still seems to be a widespread perception that entrepreneurial skills are innate and can’t be taught. That view is outdated and disproved by the numerous small business owners we work with, who go on to see higher growth and job creation.”

However, he adds that you do not have to go to business school to acquire these skills. “There is very little formal evaluation of a robust nature that points to the effectiveness of business schools in delivering on the improved performance agenda,” he says. What does make a difference, adds Prof Hart, is learning from people who have created or invested in companies, rather than pure academics.

He highlights a 2017 study of entrepreneurship education among 12 business schools in France, Spain and the UK, which found significantly different approaches to teaching the subject. The most successful were those that involved investors in the process, made the teaching highly practical and connected students with mentors that could coach them over the long term.

Four years after co-founding Go Ape in 2002, Mr Mayhew returned to Cranfield’s business school, this time with his wife. And instead of starting an MBA, they joined the Business Growth Programme, a specialist course for entrepreneurs. They claim the experience was the making of Go Ape.

“The beauty of the BGP is that you had a business yourself as your very own case study,” Ms Mayhew says.

Although Mr Holland is convinced his degree from Babson made him a better entrepreneur, he does not believe people can become entrepreneurs, let alone more resilient ones, by merely attending business school.

“Does Babson make students better entrepreneurs or do more entrepreneurs simply get attracted to Babson? I think it is a little bit of both,” he says.