Opinion: Why hiring an MBA- or getting one- isn't a bad thing

by Kia Davis, August 5, 2013



This is an opinion piece written by Kia Davis, who advises startups throughout the Middle East and Africa.

“To value your company, add $1 million for each engineer, and deduct $500,000 for every MBA.”

I heard this at a recent tech event in Dubai, quoting Silicon Valley’s Guy Kawasaki, the former Chief Evangelist at Apple. This is a really common view held in Silicon Valley, where MBAs are generally regarded with suspicion, and everyone knows that business school doesn’t teach you how to build startups. Of course, neither do philosophy schools, but there’s no ban on philosophers. As an MBA myself, I find the attitude puzzling.

I don't for a minute believe that an MBA is required for startup success, or that an MBA is always an asset for startups. But I think that the never-hire-MBAs attitude can be the equivalent of founders shooting themselves in the foot.  

The same reasons that make this attitude charming in Silicon Valley make it silly in the Middle East and North Africa. Silicon Valley startups are innovation-led above all else; advisors are more than willing to fill the gaps in business knowledge, banks and lawyers sometimes take equity in lieu of fees, and some investors have teams of advisors that help startups with the business side.

Unfortunately for startups in the Arab world, this level of support doesn’t exist yet. The venture capital (VC) community, by its own admission, isn’t actively seeking wild and innovative ideas to form the bulk of its investments. The market isn’t built for viral, instant growth: the US is 300 million relatively high-income English-speaking technophiles, while Arab world is comprised of 300 million socioeconomically-diverse and technologically-varied people who speak many dialects of Arabic (or Turkish, French, Farsi, Urdu, Hindi, etc).

In a region where 'clones' of proven business models are popular, it seems illogical to dismiss out of hand people who have experience in execution. Rocket Internet, the German clone shop, recruits heavily at business schools because of their aggressive focus on execution and speed. The MBA also comes with extensive and powerful networks useful for funding round, landing corporate clients, or leveraging relevant industry experience.

Over the past 4 years, I've mentored dozens of founders across Silicon Valley, Europe, Africa, and the MENA region, and I'm an 'official' mentor with the U.S. State Department's innovation program. I've won, judged, and organized pitching competitions. As a temporary operating executive, I've sat on teams to help companies launch or scale. As a connector, I've matched founders to investors, advisers, customers and partners.

In this region, I meet with founders all the time who lack some of the basic skills for building a business, and that's tough when the local environment doesn't value innovation above all else. Understanding the drivers of pricing and profit can mean the difference between winding down and making it to the next funding round. Wowing investors with your professionalism and preparedness can also tip the scales in your favor.

Using my MBA degree and professional experience, I’ve been able to help startups with investment proposals, pitches, pricing models, distribution models, customer proposals, and sales materials. I’ve explained the investor portfolio decision-making methodology to founders so that they can anticipate questions from investors. I’ve calculated ROI and offered valuation methodologies. I’ve sat in client negotiations and run numbers on a laptop to make sure the final agreement is profitable for the startup. I’ve used my network to connect startups to investors, clients, and event sponsors.  These are things that founders could have learned to do on their own, given enough research and time, but my help has freed them to do what they do best: develop and sell great products.

Of course, there are real risks to adding someone with an MBA to the team without looking at what else they bring to the table. The degree itself is simply not enough to add value to startups, and, if there is a culture clash, the fallout could be significant. For another thing, people with MBAs often have well-paid corporate options as backup plans. In a startup where everyone must sink or swim, having a cushy job as a fallback option could discourage people from sticking it out. Like anyone else, an MBA who joins your team should have the skills, passion, and drive to create startups, and bring the skills you need to achieve this.

There is also a big difference between being an MBA and having an MBA.  My business school class included people who had been COOs of gaming companies in Silicon Valley, had founded and sold software companies to Cisco, and had made millions in the tech boom of the 1990’s. These people did not ‘unlearn’ what it was like to build companies, they added to it. They remain just as entrepreneurial, driven, focused, and innovative as they did when they entered the program, but now with new skills to manage the challenges of a budding business.

The fact that an MBA doesn’t automatically spell doom for a startup can be seen in the major companies that have been started by founders with MBAs, including Git Groupe, Warby Parker, Rent The Runway, Zynga, as well as Namshi, Souqalmal, and Sukar/Desado in the UAE. Top tech people like Apple CEO Tim Cook and Facebook COO Sheryl Sandberg also hold MBAs. Not to mention Guy Kawasaki, the MBA who coined the phrase at the beginning of this article.

I recently had a conversation with a Silicon Valley VC about MBAs vs engineers. He had attended an MBA daylong bootcamp and a hackathon back-to-back, and his biggest observation was that the MBA bootcamp produced ideas that weren’t very innovative but were very feasible, while the hackathon produced ideas that were highly innovative but unlikely to get off the ground. Bringing these two groups together in the right way could be a winning formula for some startups. 

Adding an MBA to your team in some capacity isn’t the right decision for everyone. Some of those who ponder innovation have justifiably warned that people with MBAs in startups can create a cultural mismatch, especially if they bring a big-company perspective instead of the nimble and innovative approach startups need. Whatever you do, don’t add someone to the team just because they have an MBA, and without thinking long and hard about what else they bring to the table.

But, as Muhammed Mekki pointed out at Wamda's Mix N' Mentor Dubai event last year, some MBAs can bring valuable relationships and other benefits to startups in the region. In an ecosystem that is still learning how to support startups, swearing off MBAs carte blanche doesn’t make sense.

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Kia Davis is a mentor, advisor, temporary operating executive, and "Fairy Godmother" for startups, living in Dubai. You can find her on Twitter @kiardavis.

 
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Ritesh Tilani , Tue 06.08.2013
Fantastic piece Kia! I like the fact that it's balanced and that you explore both the benefits and risks of having an MBA on the team.

Having been an entrepreneur for many years myself, I can appreciate some of the qualities required to keep your startup alive and grow it. MBAs have the business acumen and perspective to build something that is economically viable for the various stakeholders involved. Many MBAs are also able to build their savings up quickly to a point where they can bootstrap their startups and launch them without having to rely on investor support (which may not materialize, especially if you're trying to do something innovative in MENA). MBAs can go all-in because they can always go back to a high-paying job in the corporate world if things didn't work out. Some might argue that this means there isn't enough at stake, and MBAs don't have to burn the bridge behind them and so don't have a burning and desperate desire to succeed, but I would argue that MBAs are able to place bigger bets and take on more risk than the average entrepreneur. Don't forget, some of the schools out there are extremely competitive, and no matter what you hear about how business school is one big 1-2 year party, getting accepted on its own requires a certain amount of drive, intellect and perseverance.

Most MBAs might not be a part of the founding team of the next Facebook or Twitter, but those are rare success stories anyway, no matter what degree you have or don't have. However, if the relevant analysis exists out there somewhere, I would bet that MBAs are more successful, on average, at creating profitable businesses than non-MBAs. You might not hear about it as often because it's only a $10M business and not a $1B business, and it's sexier to write about the freshman pre-med student who started his computer business from his dorm room and then dropped out and eventually became the youngest CEO of a Fortune 500 company, making him a billionaire in the process. So the smaller success stories, which might have a higher percentage of MBAs in them but aren't as appealing to the mass audience, aren't heard. This doesn't mean they're not successful businesses.

Having said that, I can't vouch for all MBAs in the world, and sure we have our own set of bad apples. This is where the founding team has to do their own due diligence, as with any other candidate for any position, to make sure this person will add value to the startup and help move them towards their goal. It's also the founders' responsibility to make sure this contribution is valued correctly. MBAs aren't God, and it's important to be realistic about what they have to offer to a startup. If founders agree to give away too much equity or compensation, and then have buyer's remorse later on when the MBA doesn't deliver the moon, that's not ENTIRELY the MBA's fault. It could simply mean the founders are bad at negotiation, and perhaps they should go get an MBA. ;)