Bloomberg BusinessWeek: Who Needs the Ivies?
Graduating from an elite university may not ensure entrepreneurial success. In fact, such schools may foster risk aversion
I must confess to being disappointed five years ago when my son, Vineet, told me he had no interest in applying to any of the schools I consider elite. He said he would fit in better at a public state university and he didn’t believe that choice would lessen his chances of career success.
Perhaps it was the bias that my company’s venture capitalists showed toward management teams from top-tier colleges that skewed my thinking. Whatever the cause, I have since concluded I shouldn’t have been upset in the least. An education from one of the world’s top schools may not give that much of an edge after all. And in some cases it may actually lessen the chances you will become a successful entrepreneur.
Founders from Across the Educational Spectrum
I should have known better. I didn’t graduate from an elite university and by elite, I mean schools such as Ivy League universities, Massachusetts Institute of Technology, Stanford University, and top-tier academic institutions globally. Yet I founded two successful technology companies.
My new mindset isn’t solely based on my experience either. After joining Duke University and researching this topic, I’ve learned that the majority of the immigrants who founded tech companies over the last decade didn’t graduate from universities that are the highest ranked or considered elite, based on selective admissions criteria. Schools like MIT and Stanford don’t graduate more founders than Stevens Institute of Technology or Arizona State University. Even the famed Indian Institutes of Technology (IITs) only graduated 15% of the India-born founders of Silicon Valley companies.
Our findings were based on interviews with 317 engineering and technology companies that opened from 1995 to 2005 with a foreign-born founder. One of the biggest surprises was that there was no dominant university in the U.S. or abroad that graduated these company founders; they studied in various schools of all tiers across the U.S. and in their home countries.
Foreign-Born Entrepreneurs Flourish
Our research had focused on company founders who were foreign-born. It could be that American-born entrepreneurs have a different educational profile than immigrants. So, more research is needed before we draw final conclusions.
But this immigrant group does constitute a sizable percentage of all tech startups. In an earlier research project, we discovered that a quarter of the engineering and technology companies founded nationwide, and half of those founded in Silicon Valley from 1995 to 2005, had a foreign-born chief executive or lead technologist as a founder. These companies accounted for $52 billion in sales and 450,000 jobs in 2005.
Could it be that elite education is overrated in the tech world? I asked several friends, most of whom are tech executives, for input. I expected those from top-tier schools to get defensive. Yet I was surprised that every one of the dozens who responded agreed. Most elite university graduates say it was the contacts they made and networks they formed in school, rather than the education itself, that provided the real advantage.
Entrepreneurial vs. Corporate Thinking
Jim Duggan, a senior technology industry analyst who holds a bachelors in engineering from MIT and a masters in science and engineering from Princeton, goes further. He writes that he wasn’t surprised by our findings. In fact, he would contend that attendance at top-tier schools might even be inversely correlated with entrepreneurial success. These schools often focus on producing the next generation of research scientists and academics, not entrepreneurs. He believes that the elitism and confidence these schools nurture may work well in large corporations, but not in tech startups.
His perspective on MIT is that the curriculum had only begun to evolve to be venture-friendly in the last 10 years.
According to John Trumpbour, research director of Harvard Law School’s Labor & Worklife Program, many MBAs say they wish to be entrepreneurs, but relatively few take this path. He reckons a prestigious degree probably makes it easier to take a safe, but nonentrepreneurial, route to affluence and success. With the lucrative salaries and huge signing bonuses offered by top corporations, risking it all to start a tech venture becomes a really difficult decision.
Part of the reason certain types of institutions may be underrepresented among entrepreneurial ranks may stem from school size. Sudhakar Shenoy, an IIT graduate and chief executive of Information Management Consultants, says it’s not fair to compare his alma mater to much larger schools. He notes that IITs only graduate 5,000 of India’s 176,000 engineers every year, and that based on the number of companies started by its graduates, they were five times more likely than others to start tech companies.
To get a reaction from the academic community, I posted a provocative message on the Sloan Industry Studies listserv, which reaches more than 1,000 professors and deans. In this discussion group, challenging academic norms and traditions is like stirring a hornet’s nest. I’ve received dozens of fiery e-mails every time I’ve dared. I was astonished that only one academic responded, and no one went on the offensive.
Taking the Focus Off Pedigree
North Carolina State University Professor Subhash Batra, an MIT graduate, didn’t take issue with our findings, but wonders whether we'e asking the right questions. “If you change the focus to the question, what institutions produce the scholars, teachers, thinkers of tomorrow?”, Batra says, “might get different findings. I think there is danger in making measurements using a one-dimensional scale of entrepreneurial success.”
I decided to seek input from Carl Schramm, who is probably the world’s leading expert on entrepreneurship and education. Schramm heads the Kauffman Foundation, which focuses on advancing entrepreneurship and improving the education of children and youth. It has supported my work. Schramm says that venture capitalists look for talent in the wrong places; they even hire the wrong people in their own firms by focusing just on pedigree.
The university that produces the most blue chip CEOs and university professors, the most Peace Corps volunteers, and the most productive and long-running patents isn’t Stanford or MIT, its the University of Wisconsin. Students “who do the prestige MBA route find it hard to shake the huge offers and end up becoming risk-averse,” Schramm says. Graduates of elite schools tend to be book-smart and have incredible SAT scores, but they often lack street smarts and creativity, he says. Plus, they tend to have a sense of entitlement and superiority that leads to not working well with others, he notes.
Vineet recently completed his undergraduate degree from the University of North Carolina at Wilmington. And he accepted an entry-level position at a Washington, D.C., tech startup. His success or failure will be determined by how hard he works, how much he continues to learn and grow, and how he helps his company meet goals. I don’t think anyone cares about what school he graduated from. I can’t remember the last time anyone asked me to name mine.