A lot of undergraduate students ask me whether they should pursue an MBA or a technical PhD as a foundation of their entrepreneurial career. I have pursued both at some point, and frequently meet (and invest in) entrepreneurs with both degrees. Each has advantages but overall I’d recommend a PhD for most tech entrepreneurs. Here is why:
Education: Both degrees will teach you something. The MBA focuses on case studies and financial concepts (e.g. accounting). A PhD emphasises independent systematic research and domain knowledge (e.g. electronics). The latter is simply more valuable for a tech entrepreneur. Steve Blank is right that most of the great entrepreneurs were Scientists and Engineers, not MBAs.
Moreover, a well-trained technical PhD will have no problem at all picking up financial concepts on the side if needed. The reverse doesn’t work at all. I came into my MBA program (Drexel, Technology Management) with an Science Bachelor (UBC H.B.Sc. Physics). There was *nothing* in any of my courses that wasn’t trivial with good skills in math, excel and Wikipedia. I have since then found this to be true for *all* aspects of “business” other than the informal aspects like Sales which cannot be taught in school anyhow. Building a business is hard, but the fundamentals, literally, aren’t rocket science.
Certification: Much of the value of an MBA is condensed in the piece of paper. Don’t laugh – this is a very real effect in a lot of domains. My wife (B.Eng., MBA) has a very successful corporate management career (Proctor & Gamble, Nortel, McKinsey & Co). Her MBA definitely contributed to that career progression. But the MBA certificate is a lot less relevant for entrepreneurs. It doesn’t matter at all for proven operators (i.e. those with successful exists in the past). Newcomers will be technical co-founders with a PhD or business co-founders with an MBA. A dozen of the latter will fight over one of the former at any networking event. That should be a hint about the relative value.
Relationships: This is where MBAs shine. You will meet lots of other bright people who can become your support network in your future career. A PhD is just too isolationist in nature to be useful in this area. Ironically, the best way to overcome this shortcoming of a PhD program is to become a student entrepreneur. Very few career options require more interaction with diverse stakeholders. So being a good entrepreneur while studying will effectively force you into more relationships than an MBA ever would. That said, in a fair comparison, the MBA will still be much more valuable in this category.
Financial Impact: Unlike a corporate career, the earning power of an entrepreneur is defined entirely by the quality of your work and not your pedigree. Neither degree has an advantage in this regard. But the PhD dominates on the other side of the financial equation: cost. PhD tuition fees are generally much lower than in the MBA program of the same university. In fact, many universities offer scholarships to anybody who makes it into their graduate program. MBA schools are profit businesses so this difference isn’t going away. A PhD can also have a long term impact on the financials of your start-up. It gives you access to several types of academic grants, allows you to co-supervise graduate students (a great way to get smart engineers into your team while they are still at school), and makes it massively either to get technical tax credits for your business.
Alignment with Entrepreneurship: This is the ultimate argument in my mind. You can do your PhD while building a tech start-up. It’s incredibly hard to do the same with an MBA. A technical founder should be able to leverage at least half of her start-up work for the PhD (and vice versa). The MBA program offers no such leverage at all. That’s the difference between success and failure for your start-up.
I am seeing this playing out at TandemLaunch right now (and saw it over and over before). We have a PhD student interested in a technical leadership role for a new portfolio company. This will combine nicely with her PhD work; any paper or patent that she writes at the company will be directly “credited” to her PhD; there are scholarships designed specifically to fund her work on the boundary of academia and entrepreneurship; and the overall alignment will be strong enough that her PhD won’t take any longer despite contributing to a company “on the side” (mine got shorter). Universities *want* her to have impact in the real world.
Her comparison was just accepted into an “elite” business school. No scholarships for him, just 5 times more tuition. No encouragement for his entrepreneurial career either; no way to get any consideration for the fact that he has already build a successful marketing business and might not need “Introduction to Marketing”. He won’t even be able to use his company work as a case study or homework assignment. Zero alignment or leverage. Encouraging real world impact? Not so much…
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There is I would also argue alignment on the personal characteristics and traits between requirements for a successful entrepreneur and a successful PhD student more than the requirements of a successful MBA degree student. In a PhD study, there is a definite need for good initial research, vision, clarity of purpose, a solid action plan, the ability to persevere until results are achieved, having alternative backup scenarios, considering setbacks as learning experiences and carrying on, better time management, self-discipline which are all traits of a successful entrepreneur.
Thanks for the comment. You are absolutely right. An MBA prepares you for corporate activities, a PhD for entrepreneurship.
I would like to add some thing here – while Phd prepares you for technical side of entrepreneurship, it rarely teaches the strategic planning and other aspect like marketing etc to bring in the raw technology or research to market i.e striving to get that market fit and scaling it up.
Eg. Recently I got acquainted with a technology company which the founders have been working to polish it for past 5 years. They had 6 full-time technical staffs yet one non-business part time staff who met the potential clients and juggled between administration and marketing. I met with the founder who has PhD in his field and after asking some deep questions I found he was under impression that customers would automatically love his product once he launched it when he did not test it on market.
Moreover most Phd’s fall in love with their product which makes them hard to follow Steve Blank’s lean approach or pivot in time when needed. Somebody with good strategic planning, people skills, tenacity and ability to adapt to customer feedback plus PhD might have much better chance of success than just Phd alone.
Thanks for the comment. Obviously a PhD alone doesn’t turn you into an entrepreneur. Nor does an MBA or any other degree. Any venture requires a combination of business and product (technology) skills to get anywhere. Falling (unjustifiedly) in love with your product can bring down your company just as badly as falling in love with the latest business buzz.
All that said, I think an entrepreneurial person with a PhD will have a higher chance of success than the same entrepreneurial person with an MBA. Take out the entrepreneurial part and neither degree is going to help.
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Lot of people wrongly assume a PhD as a “super MBA”. It isn’t the case. The goals of each type of program are entirely different with the PhD focused on training the students to become academic researchers and enter in a professorship track in a university after graduation. Anyone not interested in pursuing an academic path shouldn’t consider a PhD program (which take 4-6 years to complete).
Moreover, I disagree that an “MBA prepares for corporate activities and a PhD for entrepreneurship”. It’s not the case for the very essential reason I’ve mentioned before, in addition that there are several very strong MBA programs in Entrepreneurship that provides a deep training and focus on entrepreneurial activities.
So, if you’re don’t want become an academic go for an MBA, and find the best suitable program for you. Each MBA program is different and focus more or less on specific issues. Do your homework and find the program that best fits your needs.
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“Anyone not interested in pursuing an academic path shouldn’t consider a PhD program”.
I am not sure this is true. If this is the case, one of the most successful CEOs of our time Jack Welch (former CEO of GE) wouldn’t have become a corporate leader. Same is the case with many CEOs in the medical device and pharmaceutical industries where they have a PhD. In essence, it is not necessary that a person with a PhD must pursue an academic path and it depends on the interests and career goals of the particular individual.
“Anyone not interested in pursuing an academic path shouldn’t consider a PhD program”.
This is far from the truth. I know plenty of PhDs who went into industry to take on research jobs. This is true across engineering, and a lot of the sciences. Again, your quality of work will come into play, as a good worker will find better opportunities. It also helps to get your name out there. Bottom line is the PhD makes you a very capable worker at whatever you want to pursue.
I have to put it frankly – it is a bad advice. At one level, yes it is better to be technically proficient, period. “Do PhD and pick up business later” is not action plan that works out but for a very small minority. For all practical purposes, innovation is about value creation. The process of value creation is much slower for a scientist these days, due to amount of specialization that is required. Business innovators on the other hand can experiment with much more ideas, in a short time to find and commercialize path for value creation. MBA degree and the company of professors and peers it provides, hones that thinking, at a right school. “Do PhD and pick up business later” is a very long path, probably good 10-12 years after your baccalaureate. It much straight forward to get good GMAT and essay, get scholarship or loan, get into good school, spend 1-2 years and come out kicking with new business idea to try.
But yes, please we need more scientists. If you are super technically inclined, brilliant beyond measure in Math, can’t wait to figure out the next scientific formula and create scientific innovation, formulas and algorithms, PhD is the way to go, and yes you can figure out business later, or better yet, hire someone with an MBA.
Thanks for your comment Saqib. I obviously disagree that PhD’s are for scientists only. Of course I am biased, being an entrepreneur with a PhD and all that… That said, I can name a pretty long list of top entrepreneurs with “only” a technical PhD:
Larry Page (Google, PhD)
Sergey Brin (Google, PhD)
Jerry Yang (Yahoo, PhD)
Jack Welch (GE, PhD)
Gordon Moorse (Intel, PhD)
and so forth.
I can also find lots of big ticket entrepreneurs who have technical undergrad/masters degrees (or dropped out of technical undergrad/masters degrees). It’s much harder to find major entrepreneurs with non-technical degrees and MBA’s. The only wave of MBA entrepreneurs was during the late 90′s and we all know how that ended…
All that said, I am not at all arguing that a PhD is necessary to be a good entrepreneur. There are plenty of successful entrepreneurs who dropped out all together so clearly neither a PhD nor MBA is a necessary condition. Entrepreneurship really only requires two things: exceptional depth in one domain & getting stuff done in all other domains.
Technical degrees, at least for technology startups, are the best way to be exceptionally deep in one domain. That’s the benefit of technical degrees. The “getting stuff done” part is an attitude, not a knowledge skill. Your entrepreneurial career will throw all kinds of challenges at you in the areas of finance, HR, operations, sales, tech, etc. You need to be able to get stuff done in each of those. No need to be the best in the world in all of them, but you need to move the ball forward in all of them. And therein lies the problem of the MBA. It might teach you knowledge about those other domains but it doesn’t teach you how to get stuff done.
Over the last two years we ran over 40 aspiring entrepreneurs through our Associates Program (entrepreneurship training school to create new leaders for our portfolio companies). Lots of MBAs, lots of tech degrees – absolutely no correlation between degree and “get stuff done” attitude. So both degrees are neutral on half of the entrepreneurial requirement, and tech degrees have an advantage on the other half. And we have a winner
PS: I concur that PhD’s take too much time for some people. Mine took 4 years, including Masters (and building a startup in parallel). 4 years after Bachelor should be the norm and something that universities should encourage.
I ponder as to why you named this particular blog,
“MBA or PhD – Picking the right degree as
a University Entrepreneur | The Tech Entrepreneurship Blog” jarronegro.
com . In any event . I personally loved the blog!Thanks for your time,Evelyn