No Regrets (Mostly): Reflections from Class of 1999 MBA Entrepreneurs

by Tom Eisenmann

MBA students who are debating whether to launch a startup upon graduation often ask me, "What are the career consequences if my business fails? What do MBAs who founded failed firms do now?  Do they regret their decision to launch a business right out of school?"

We have plenty of experience with student entrepreneurship at HBS. Over the past 15 years, an average of 3-4% of students in each class of 900 HBS MBAs have founded firms upon graduation, and another 4-5% have joined startups in non-founder roles.

At the dot com bubble's peak in 2000, 11% of our MBA class founded firms upon graduation. To determine whether we're in another bubble, I'll track this figure for the Class of 2011. Interest in entrepreneurship has been rising at HBS, but so far, it lags 1999/2000 levels.

To respond to my students' questions, I assembled some data on career outcomes for a sample of a dozen MBAs who founded firms upon graduation in 1999 or 2000. I also asked these alums whether they had any regrets about their decision to follow an entrepreneurial path. Most of the startups in my sample failed. A pattern of highly skewed outcomes—with just a few big winners, a modest fraction of firms that earned back their investment, and many failures—is just what we'd expect from any portfolio of VC-backed tech startups.

Specifically, in my sample, one firm is still a going concern; one was sold at a price that roughly yielded a breakeven return to early investors; two were sold at prices that returned only a small fraction of capital invested; and the rest were complete wipeouts. So, most of the alumni I contacted can comment from direct personal experience about the career consequences of startup failure.

What are these alums doing now? One is still CEO of the firm he cofounded upon graduation. Three are serial entrepreneurs who have been successful—so far—with a second startup. Three are partners in VC firms. Two are presidents of medium-sized businesses, having stepped in as professional managers to replace founders. One is at Boston Consulting Group. One is planning to launch another startup after holding a senior marketing job in a public Internet company. One is searching for a role in a new venture after a hiatus to start a family. As a group, the alums are in impressive positions. Those whose first startups failed do not seem to have suffered negative career consequences.

Do the alums regret their decisions to found firms upon graduation? Eight of nine who answered my email query said "no." Here's a sample of their comments:

• No: There is no substitute for the sense of pride and accomplishment that comes with starting a business. 
• No: But you need realism, an understanding of drawbacks and most importantly, to be passionately entrepreneurial. Starting a business is not for the timid. You need to be resilient, optimistic, able to deal with uncertainty, and strong-willed.
• No: The lessons learned have applied to my subsequent businesses. Each has been less stressful, because the experience provides groundwork for doing a better job the next time.
• No: Right after graduation is a great time to get start a business. You have amazing drive, focus and a smaller personal overhead. 
• No: I got to participate in every aspect of my company as a true general manager. I never would have that opportunity in a large, established company.
• No: The Internet boom was a unique moment and I could not pass up that opportunity.

One alum did voice regrets:

Yes. But I have no regrets about launching another business later. For me, it was just a matter of timing. Coming out of HBS, I had blind spots. I was an engineer undergrad, and even after HBS, a couple years with McKinsey or on Wall Street would have made a world of difference in developing structured thinking and hardcore analytics. I also needed more experience in areas like partner selection and more maturity in dealing with negotiations and employees. These blind spots introduced founder risk and reduced the likelihood of our success. The smart investment would have been to spend 2-5 years doing other stuff, getting paid while addressing blind spots.