Does a small startup really *need* someone with an MBA?

Inspired by this question, I want to know if people think a small startup (3-5 people) actually needs someone with an MBA. Especially if the group has reasonably diverse skills and isn't going the big-money VC route.

Thoughts?

I don't believe you do. I am not planning on having someone with an MBA, but, then I have my M.S. Engineering Management.

You need:

1) Someone to develop

2) Someone to sell

3) Someone for marketing

4) Someone to ensure bills are paid

 

I personally think an MBA is over-rated, but then I am probably biased from my education.

If you reach a point where you are stalled and you need new ideas, then an MBA may be useful, as, like lawyers, they have read a great deal, of case studies, and they may have ideas that may help you moving forward again.

In doing more research on what an MBA actually entails (Business Leadership as a focus at most good schools), I think the answer has to be a qualified No.

A small, self-owned startup with fewer than 5 people is going to be practically governed by concensus and group agreement. The CEO needs to have the last word, and if there are serious disagreements they probably need an outside mentor who can provide guidance. Bottom-line though, if 3 or 4 people can't come to agreements about decisions, they probably shouldn't be working together and certainly won't benefit from someone with a fancy degree telling them what to do.

On the flip side, if your goal is to raise quick VC funding and get big or sold fast, it may be in the best interests. MBAs look good to VCs, and will definitely prove their worth if you suddenly grow to 100 people over the next month.

What needs to be made clear is that MBA does not equal "Marketing Guy" without other experience to prove it on the resume.

It really depends on the current configuration and background of the existing members of the startup. One doesn't necessarily have to pick an MBA per say but the key is to bring diversity and complementary skill sets to the team.

Aaron Patzer gave a really good overview summary of what skill sets you should be looking for at different stages of your startup.

He mentions that MBA etc are actually worth -$250k to the valuation of a startup whereas an engineer is worth +$500k.

He is clearly onto something as he recently sold his startup for $170m.

After I read all the answers I had to pause for a moment, in total disbelief at what I was reading. I am shocked that people can feel so smug in there own domain that they marginalize the misunderstood, yet inherent expertise of a different domain.

After some reflection, I believe what's happening here is an outpouring of frustration from people who have had no real experience or bad experience with someone who had an MBA. Just as there are terrible engineers, there are also terrible MBA's so it doesn't make sense to pollute what should be a pragmatic decision regarding the complimentary skill sets with poorly made, overly broad assumptions.

There are literally hundreds of successful startups born at an university when an engineering and an MBA student get together and build a business plan and then execute on it. Look up all the start up competitions, business plan competitions, etc. and the real businesses that spawn from these exercises and I think you might get an idea of how real the value is of having both sides of this equation present.

That said, I don't want to down play the value of experience at all; experience can also be a critical factor in this decision. Ideally, if you are forming a startup, you should get the most experienced, highest educated people you can find who have complimentary skill sets with minimal overlap.

What Alain said in his comment holds true, and I'll take it a step further:

MBAs come from a diverse set of backgrounds: some have 20 years of experience and a great network, while others went to B-school just a few years out of undergrad and hoped to use their degree to catapult their career upward.

Ultimately, it comes down to three questions:

1. What skills/knowledge will this person provide for my business that nobody else can?
2. Who does this person know that will help my business?
3. Am I planning to do something that will look better if I have someone attached who has "MBA" after his/her name?

Bear in mind that #2 is extremely important, and that the top-level schools (Tuck, HBS, Sloan, Wharton, etc.) create fantastic networks. Adding the HBS MBA network to your business is a pretty good thing, at least for most start-ups.

Anyway, the short answer is "No," you don't NEED an MBA - and bear in mind that this is coming from someone who has one.

I don't think there's any documented evidence that bringing an MBA onto the team of an early stage company increases your probability of success.

But, I have heard people joke about the opposite.

Having said that, as it worked out, about 6 of our first 12 hires had MBAs (but that's not why I recruited them). I solve for smart people that get stuff done.

As a software engineer turned software development manager currently studying for an MBA from a top UK business school, I would have to say no - you do not need an MBA at a startup. However, that doesn't mean having an MBA on board is a bad thing.

MBA is a generalist degree with students tackling diverse business subjects from Strategy to Marketing to Economics to HR to Innovation to Operations. For businesses who have no understanding of these things someone with an MBA can be very useful, however, you don't need an MBA to know about these things.

Ultimately you have to consider the balance of the team and what skills each individual brings to the table. Getting an MBA for the sake of having someone with those three letters after their name is a bad path to go down.

Final point to make - quite a lot of MBA programmes are primarily focussed on corporate environments rather than startups and SMEs. Consider this when selecting someone and make sure they have the right background.

experience experience experience experience experience

Did I mention a person with experience? They can save you a lot of time, a lot of money and greatly improve your chances to succeed. They may have an MBA or not, doesn't really matter in a lot of situations though.

In general you should avoid hiring MBAs into a startup. Most MBAs are not going to be valuable to a startup and can actually be a drag so it's generally not worth the risk. I was an early employee at a successful startup ($1.0b IPO, $1.5b acquisition) that actively avoided MBA candidates. The problem with MBAs is that they can be expensive, aren't always ready to roll up their sleeves, don't always have the "street smarts", rely too much on "textbook" experience, etc. MBAs burn two years and upwards of $300k (tuition plus lost salary) which would be much better spent gaining real world experience and investing into the business.

Short answer no, long answer:

I recently read an interesting blog post on the issue called "Geeks Rule and MBAs Drool":
http://www.ericsink.com/bos/Geeks_Rule.html

As someone who HAS an MBA I get frustrated when I see people say that it "counts to the negative". I initially got my MBA as a means to accelerate myself up the corporate ladder. I focused in entrepreneurship and picked one of the better entrepreneurial programs in the country at Bentley College. (now Bentley University). I think I learned something, but to be honest I learned 10x as much in running some of my other small part time businesses than I did getting the MBA.

Here's my philosophy: pick the right person for the job. Don't let someones education or background cloud your judgment. It doesn't matter if someone has an MBA, or even just a high school education. Talk to them. Find out what motivates them. Find out what their passions are. If it lines up with what you are doing, then education and pedigree shouldn't matter.

I am working on a new startup idea with a friend now and we are in the middle of building a prototype. I sure hope no one holds the MBA against me.