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Entrepreneurship Education: What DO B-Schools Teach About Venture Capital?

Posted on Friday, Mar 5th 2010

In case you thought otherwise based on the two recent discussions, What B-Schools Don’t Teach You About Venture Capital and Why B-Schools Set Up Entrepreneurs To Fail, I actually strongly believe that financing strategy is a very important piece of entrepreneurship education. Venture Capital MUST be taught at B-schools and even engineering schools trying to build E-programs.

So let me open this discussion up and pose the question: what DO B-schools and E-programs teach about venture capital? And I hope this can also stimulate a related discussion around what SHOULD be taught in a course on financing.

This segment is a part in the series : Entrepreneurship Education

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Sramana,

It strikes me that some very valuable entrepreneurial market intelligence is being generated amongst the discussion threads that you’ve connected to this thread.

For example in the “setting up to fail” thread that you started here ( http://bit.ly/9atgEA ) there are several specific answers, from both faculty and students, to the “what DO” question.

In closing, may I offer that, perhaps, an equally important question is:

WHY do B-Schools continue to focus on Venture Funding, when it seems to be a limiting, and insufficient model from the perspective of increasing GDP ?

Hope that helps, love what you’re doing !!

David Bookout Friday, March 5, 2010 at 11:10 AM PT

I have noticed, David :-) It really is a no-brainer for B-schools to introduce a semester course on bootstrapping.

Let’s use this forum to collect actionable intelligence and move towards solutions. It strikes me that the solutions are not actually that complicated in many dimensions, and a few steps in the right direction will completely change the level of results produced by entrepreneurship education in the next decade.

Sramana Mitra Friday, March 5, 2010 at 11:15 AM PT

Sramana,

re: no-brainer ~ Agreed, and it may be that there isn’t a clear path to either; a selection of essential tools, or presentation methodology to broaden a bootstrapping curriculum offer. That said, I was surprised to see that the number of schools below was higher than I thought it would be from just reading the thread.

re: collection ~ In the spirit of data aggregation here is a quick list of schools that either DO OFFER, or have begun to offer bootstrapping curriculums taken top to bottom from your previous thread here ( http://bit.ly/9atgEA ):

University of Colorado’s Leeds School of Business
Stanford Technology Ventures Program
Belmont University
Harvard-MIT Health Sciences and Technology program
Bellingham Technical College
St. Louis University, Business School, Entrepreneur Dept.
New Jersey Institute of Technology, School of Management
Babson College, F.W. Olin School of Business
FIU, Miami
UC San Diego, Entrepreneur Development program
California State University San Marcos
UMBC, ACTiVATE program
Iowa State University, Entrepreneurship program
Washington University ( St. Louis ), Olin Business School
York College of Pennsylvania
University of Southern Mississippi
Northeastern University, IDEA program
RPI, The Lally School
University of New Mexico / STC
Wharton

, and for those interested in developing curriculums here are two tools mentioned in the same thread that you might find valuable:

Bootstrapping Text Book ( Name ? ) by Jeff Cornwall ( Belmont University ), published by Prentice-Hall/Pearson

“Bootstrapping to billions”, The Finisar Story by Sramana Mitra, a segment of Entrepreneur Journeys

re: solution ~ Speculatively, to me, it looks like a combination of tools and practices are missing to effectively broaden bootstrapping curriculum(s) on a National, and International level.

So, additional offers ( 1M / 1M as one example ) are needed.

Also, speculatively, there may be a socio-economic / age gap between the work being done at the K – 12 level by organizations such as Junior Achievement, and B-School students in general.

So, building awareness earlier, and more consistently could be something worth looking at, and within this strategic partnerships between already existing, and new curriculum / tool providers could play a valuable role in plugging such a gap. Again, 1M / 1M seems a good example.

David Bookout Friday, March 5, 2010 at 4:14 PM PT

David, Thanks! Very helpful synthesis above. I believe there are a few other books on bootstrapping. Two others authors contacted me last week, and I have invited them to write guest columns.

And of course, there’s my Bootstrapping, Weapon of Mass Reconstruction book, as well as the entire Entrepreneur Journeys series which consistently uses bootstrapping as a cornerstone of entrepreneurship.
And here is a slidedeck discussing the EJ methodology that I am teaching in 1M/1M.

Sramana Mitra Friday, March 5, 2010 at 5:33 PM PT

In fairness, I’ll add that the Leeds School of Business at the University of Colorado also teaches about VC funding – and debt, and angels, and grants, and microloans, etc.

The idea is to give students more than just a “one arrow quiver” as we send them into battle, so to speak.

Great discussions, all!

George Deriso Saturday, March 6, 2010 at 6:34 AM PT

Btw, here are my slides from a bootstrapping talk I often give at various entrepreneurship events, under the title Bootstrapping, WMR.

Sramana Mitra Saturday, March 6, 2010 at 11:50 AM PT

I received my MBA from the University of South Florida with a concentration in entrepreneurship. Here are a few things I noted:

* At USF the professors in the entrepreneurship department focused on the various financing strategies with an emphasis on venture capital, angel investing, pre-money and post-money valuations, etc.

* Even in the Intellectual Property courses that are typically a mix of half MBA students and half engineering students the professors would stress how the venture capital process has a direct relationship with both productizing IP and protecting IP.

* I strongly believe that the attention to detail paid by both professors and guest lecturers (angel investors, venture capitalists) to the venture capital process was of great value to me and to every other student in the classes with me. Hearing practical advice from venture capitalist guest speakers was a key benefit to many of my MBA entrepreneurship classes.

Joel Ohman@CreditCardChaser.com Wednesday, March 10, 2010 at 10:15 AM PT

Hi Sramana,

There is very little taught about financing in a B-School I attend (would prefer not to mention the name b/c of potential backlash from the community), but Blank Label (http://www.blank-label.com) is a Babson incubated startup. While I did not attend Babson, my partner knew a lot about financing – not sure if this was from the curriculum, or external resources, but Babson did help provide those external resources, or at least connected him with those resources which informed him about the VC / financing process.

In fact, I’ve never taken an entrepreneurship class because I am fairly confident through my experiences and my network I can / will know more than a class my university can offer on the subject. My peers who are taking or haven taken entrepreneurship classes at my university say its a joke because its the basics of time management, incorporation rules, marketing strategies, management strategies, etc. But nothing truly valuable that can be applicable to real-life situations.

If I am correct, my university just teaches that VCs invest in companies that show great potential – I wouldnt doubt this to be an exaggeration either… my school is heavy in the Service Sector, very little expertise in Entrepreneurship.

Many B-schools operate this way – having a heavy focus on a few majors / careers and neglecting the other majors / careers.

I think B-schools should teach the reality of financing:
-the tough road
-the full-time investment into financing
-the most general guidelines most VCs have for businesses that they might be interested in investing in,
-what businesses can do to be more viable for investment
-why businesses should choose to, or not to, raise money
-the reality of things (how they will fork up a considerable stake in the company, how the term sheet may put the entrepreneurs in an unfavorable position, etc.)

hope this helps.

cheers,
danny

Danny Wong Wednesday, March 10, 2010 at 10:31 AM PT

B-Schools need to teach a whole course (or 2) on internet business and how it is completely different. Specially working with international clients through the internet. I dropped out of B-School to later succeed in the internet industry with my own site that pulls in a bigger salary than I would have ever got from a firm. HoodaMath.com.

Michael Edlavitch Wednesday, March 10, 2010 at 10:32 AM PT

Thank you for writing this piece. It needs to be said.

I’m attaching for your review the GEM (Global Entrepreneurship Monitor). This specific report ispeaks to the lack of proper “education” for entrepreneurs in America. You might find it useful.

I have worked with thousands of members through our PowerBoards, and I’m not a big fan of VC. I’ve seen too many good people, with great ideas fail because of VC. In most (not all cases) the only one that stands to win from most VC deals is the VC agency. Think about about it… in most cases they finance a small busines when the owner agrees to a hand over the majority of their business. When they don’t deliver on their milestones, (and most business owners don’t have the tools, educations or resources to do this – hence our 87% failure rate) the
VC firm takes over the business. They have lost no (or very little) money, and THEY DO have the tools and resources to make the business work. Leaving the orignial founder in the dust. In my opion, they are looking to for an inexpensive option to buy great ideas.

So what do we need to teach entrepreneurs, aside from implementing a new financial system?
– Know your numbers
– Don’t over project
– Get to NO as fast as you can.
– Shop around, look for different terms and explore different corporate values
– $ needs to make $ (It is in your best interest to take $5K and turn it into $10K, take the $10 and turn it into $25K, etc)
– Avoid big deals!!! You’re on the line for it all.
– Watch the intrest rates – recognize the impact they’ll have on your business, especially if they are cumultive and you can repay.
– Avoid PERSONAL guarantees
– Avoid handing over majority
– Know your exit strategy
– Assess your alternate options

These are just several ideas. If you’d like to chat more, please call me at (306) 205-5510.

Taunya

Taunya Woods Richardson Wednesday, March 10, 2010 at 10:32 AM PT

Bootstrapping definitely…but I would also add a lesson on how to use social media (esp. LinkedIn and Twitter) to find and network with angels. I read a great article the other day about how FanBridge used Twitter to connect with Chris Sacca.

Kris Alban Wednesday, March 10, 2010 at 10:34 AM PT

I attended Kellogg from 2002-2004 and started TravelPost.com during school (it’s now part of Kayak), and I am currently working on my second venture DealBase.com, a travel deals website.

At Kellogg, I took every entrepreneurship class and I chaired the Entrepreneurship Club. The classes and speakers went over venture capital and private equity models in depth. One particularly memorable class covered Turn-Around companies: how to find, finance and operate them.

What I didn’t get exposed to, that was ultimately essential for financing TravelPost.com, was an internet-startup flavor of seed stage funding. For example, the investment marketing materials I used was a 15 slide powerpoint. No one even asked for the 40-page business plan we created at Kellogg. And the terms and capitalization all differed in various ways due to the norms of where I raised the money and the type of business I was starting.

In fairness, Kellogg is not an internet business-focused school (vs. Stanford or MIT for example), and it’s curriculum reflects the fund raising environment of Chicago (where there is less angel activity and a higher percentage of startups are spun out from larger companies or universities, with funding and marketplace traction already in place.)

Ultimately, what helped me most with TravelPost.com is the excellent marketing and general management education from Kellogg and the network of other students which led to finding TravelPost’s lead investor.

Sam Shank Wednesday, March 10, 2010 at 10:38 AM PT

Some lessons i remember being taught while a student at Harvard Business School are:
-fundraising takes time and distracts you from running the business
-fundraising is easier if you have hit some milestones
-fundraising is easier if you have an accomplished team or proprietary asset like a technology
-raise enough money to get past the next milestone, with room for error
-raise money when you don’t need it

Phil Michaelson Wednesday, March 10, 2010 at 10:59 AM PT

I teach a course entitled “Venture Capital” to MBA students at American University’s Kogod College in Washington, DC. The course attempts to put students in the shoes of VC firm associates. I believe the students benefit from this perspective as well as develop command of the economic power of deal terms. It is a fundamental part of a business education to understand that many different terms will drive the ultimate economics of a transaction.

Don Rainey Wednesday, March 10, 2010 at 10:59 AM PT

I received my MBA in international business at the University of Miami. At the time I worked at FedEx, but last year I started my own business (www.thomasinatafur.com). It was an executive MBA program so the classes were “locked and loaded” and there were no electives choices. Although I loved my experience, looking back I would have appreciated a specific course in venture capital or entrepreneurship. The two classes that did prepare me best for my new venture was a finance class and a law class. I am currently finishing a program at Wharton which has been instrumental in my new venture. Specifically I just returned from a class titled: Creating Value Through Financial Management. It was designed for CFO’s to help them make better decisions about funding projects and mergers/acquisitions.
I completely agree that more focus should be devoted to the subject of entrepreneurship in B-schools. I have a number of clients who come to me with a “great idea”, but understand little about what it takes to “fund” those great ideas. Specifically, they need to address the importance of share holder value, and creating economic profit AND growth at the same time.

Thomasina Tafur Wednesday, March 10, 2010 at 11:30 AM PT

My partners and I have been teaching venture capital for the past seven years at multiple universities on the west coast, including UC Davis, UC Santa Barbara, CalPoly, Oregon Health Sciences University, Portland State University, University of Oregon, Oregon State University, Humboldt State University, Sacramento State University, University of Nevada at Reno, University of Southern California, UCLA, Stanford and others. We have developed curriculum that has been funded by the Kaufman Foundation and have taught in multiple formats, including semester long courses, quarter long courses, and intensives ranging anywhere from one week to one day. We’ve taught well over 1,000 students during the past seven years, and have funded numerous university-created entrepreneurial ventures, including one that was partially discovered through our teaching. We also co-founded the entrepreneurship center at UC Davis.

Our company, DFJ Frontier, is an $80 million seed stage venture capital firm headquartered in Los Angeles whose largest investors are institutions like CalPERS and the State of Oregon. We’re part of the $6 billion DFJ Network.

My perspective, as both a venture capital practitioner and educator, is that the *finance* component of venture capital is what is taught most frequently, even though this is the least relevant aspect of early stage venture capital (finance becomes much more relevant the larger a company gets, since there are some financial statements worth reviewing at that stage–in the early days, it’s about the idea, the people, and the progress). Many b-schools have a class called “Venture Finance” or something similar, and MBA students are eager to take it. These courses also cover means of financing businesses beyond VC funding, including angels, loans, grants, bootstrapping, etc, although if a professional VC is involved, the course usually gravitates toward VC fund-able businesses (to the detriment of students who should be encouraged to pursue small, niche, or difficult-to-scale businesses about which they would actually be passionate). Usually in a related part of the school, there are entrepreneurship classes that touch on new venture creation, the writing of business plans, and how to pitch a business to potential investors successfully (I’m teaching a seminar on this topic tonight for UC Davis’s business plan competition). Most of these programs accept the student’s business idea as an axiom, without forcing critical evaluation, radical rethinking or abandonment, because alternative ideas are in short supply. When discussing the teaching of “venture capital” in business schools, I largely assume that we are really talking about entrepreneurship, although I have also taught Limited Partnership structure, venture capital term sheet negotiation, valuation techniques (I have an article in the Sacramento Business Journal this week under our “Something Ventured” byline discussing VC valuation), VC hiring & compensation practices, and so on. Some of our former students have gone on to work in private equity both on the GP and LP side, but I believe the majority of students who study venture capital will become entrepreneurs, not investors.

What *should* be taught is a more interesting question. For starters, most schools should recognize that there are three key ingredients to successful entrepreneurship spin-outs: 1) strong science (most but not all university-birthed ventures are based on research, even at schools where the venture capital curriculum has its home at an MBA program), 2) access to capital, and 3) a culture of entrepreneurship. While many schools beyond Stanford and MIT have excellent science, they lack access to capital and a culture of entrepreneurship. Problem #2 is easily solved: VCs will travel for a sufficiently interesting deal. If the upside is there, we will find a way. Problem #3 is where business schools can make the greatest strides. Unlike at Stanford & MIT, where there is a natural commerce between scientists and MBAs (and even undergrads), the “flyover” schools do not have this culture of sharing and cooperation. At UC Davis, we structured our program to include approximately 75% MBA students and 25% PhDs and post-docs from various scientific disciplines.

In addition, students need to be taught to evaluate their own ideas critically, rather than “painting lipstick on the pig” that is the one idea they frequently wind up pursuing for a quarter. This practice de-emphasizes the (infrequently read) business plan and includes generating more than one idea (our students review at least ten ideas, emulating the venture capital model of many leads and few deals) and examining multiple variations for each idea (our students must generate at least three business models for each idea). Real entrepreneurs adapt to changing feedback from the marketplace, and students who would become entrepreneurs need to start doing the same from day one, rather than treating the entrepreneurship class as an academic exercise. Rather, it’s more akin to an architecture design clinic, where students make something, see how it fails, and iterate quickly. My co-teacher at UC Davis, Professor Andy Hargadon, comes from a design background at Apple and introduced this modality to our class.

This leads to my most important advice for improving the teaching of venture capital: the primacy of market validation. Too often, the academic approach entails sitting in a room, writing a plan, and designing a product–all with no feedback from potential customers. Only when the entrepreneur has emerged from the cave with the perfect product (often years later) to speak with customers will he learn that the customer wants something different. The sooner a potential entrepreneur learns to make a customer reference call, which is probably the most useful tool for an early stage investor in the due diligence process, the sooner her idea will adapt, grow, and meet the needs of the market. Our most important innovation in our curriculum is a live customer reference call in front of the entire class, using one of the students’ ideas and a real potential customer. The entire class contributes to designing a 10-question phone survey and the call lasts 15-20 minutes. We have taught this exercise at least 25 times, and every time it is a revelation for the students. First, they realize (most of the time) that they have gotten the business all wrong, and that the customer cares about something completely different. Second, they realize that it’s not so scary to pick up the phone, and that it is probably the cheapest form of business prototyping they can do. Finally, they gain immediate next steps, in the form of additional calls, thoughts for product redesign, positioning, and yes, even how to pitch more effectively to investors. If VCs get even remotely close to an investment in one of these companies, we are going to be making the same calls. The students better learn to make them before we do.

This is a subject about which we’re quite passionate, and I hope this quality conversation continues.

Scott Lenet Wednesday, March 10, 2010 at 1:00 PM PT

Yes, the topic of idea validation is one I am teaching constantly at my roundtables. Calling – even cold-calling – a set of customers (prospects) is key, and as I have written in my Infant Entrepreneur Mortality (IEM) post, not validating the idea and going out to raise money is one of the most critical issues that cause high IEM rates.

Business schools, in my opinion, MUST address Idea Validation. I will open a separate thread to discuss how and what.

Sramana Mitra Wednesday, March 10, 2010 at 1:59 PM PT

This ought to get the topic whipped into a frenzy.

IMHO, you are dancing around the issue that, perhaps, most B schools are irrelevant to the real world of entrepreneurial business. Notice, I did not say MBA’s were irrelevant, but, the B-school curricula (at least for the six I interviewed at) focuses on placing graduates into corporate America not on creating start-up businesses that need angels and VC’s. Teaching entrepreneurship in B school makes as much sense as teaching calculus in the third grade.
I am a veteran of the dot-com-bomb and in my 20 years as a management consultant and entrepreneur I have a wealth of data that supports my position that the entire process of capitalizing a start-up business is broken and need overhauling. To wit: I was recently an invited reviewer at a pitch-party for start-ups at our latest “incubator.” It was deja vu all over again. For five of five presenters, their business model should have been retitled “Give me the money so I can do whatever I want to do.” Also, five of five were techno-nerds, not business people and certainly not MBA’s. Their grasp of EBITA was as comprehensive as the 30 seconds they spent on their pro-forma.

Entrepreneurial business start-up is a unique combination of skill, guts, technology, financial savvy, leadership, marketing skills combined with chance and timing. I have never seen ALL of the NECESSARY first seven attributes above in anyone fresh out of B school and I have actually never seen a entrepreneurship that was truly successful without at least four different people contributing one or more of my NECESSARY skills.

Bottom line, a learning institute that teaches all nine of the above topics taught by business leaders, who have failed at least twice, to potential entrepreneurs who have experienced the realities of corporate America, is needed far more desperately than teaching raising capital at Wharton.

Tom Taormina
http://legalquality.blogspot.com/

Tom Taormina, CMC, CMQ/OE Wednesday, March 10, 2010 at 2:46 PM PT

I don’t believe there’s a “magic bullet” for what entrepreneurs should do. Sometimes VC funding is appropriate, sometimes bootstrapping, sometimes angels or friends and family. The best way to teach this is by example. Bring in successful entrepreneurs who can talk about their experiences, how/why they chose a particular type of funding, what they got out of it, and what they would do differently. If you have access to non-VC capital, have deep domain expertise, experience doing a prior startup, an extensive network, and a solid team, then bootstrap away. If, however, if you don’t have alternative funding routes and need the experience and expertise in building your team, then perhaps VC funding is better. With everything there is a cost. VC money is no doubt expensive and is certainly not appropriate for every case, but if you pick the right firm and partner, there’s value beyond the money they provide.

Brian Wednesday, March 10, 2010 at 3:54 PM PT

The best thing that a business school can teach their students is that they need to have a defined business model and some revenue traction before they pitch. Sittercity.com was well into the multi-millions when we raised our first series A round–and we had gotten there based on friends and family angel funding and growing off of site revenues. Pitching an idea only puts you in a situation where you have little leverage and they have little information about the business and its success. Going to them with a beta model, customers and revenues, however, gives you a lot of leverage and shows them that the model really works. It’s a win-win all around.

Genevieve Thiers Thursday, March 11, 2010 at 8:14 AM PT

Great conversation. I co-founded Panjiva, immediately after graduating from Harvard Business School — so I have strong feelings about the intersection of entrepreneurship and business education. A few observations:

* It’s a shame that more people don’t start companies immediately after graduating from business school — because, in my opinion, starting a company is about the best professional experience a person can have.

* In general, it’s not the curriculum that is to blame for the relatively low level of entrepreneurial activity by business school graduates. Rather, it’s the nature of business school — and, more to the point, the nature of the people that business schools attract. Business schools primarily (though not exclusively) attract people who are pretty risk averse.

* Can business school transform risk-averse entrants into risk-taking graduates? Perhaps if they deliver the one truth that I think too few people grasp — ENTREPRENEURSHIP ISN’T THAT RISKY. Businesses are risky, to be sure — most start-ups fail. But even if your start-up fails, your entrepreneurial experience will be incredibly rewarding and will position you well for whatever you choose to do next.

* My business school education helped me avoid several classic first-time entrepreneur mistakes, but the number of mistakes I’ve avoided has been dwarfed by the number of mistakes I’ve made. So is Panjiva really benefiting from my business school education? Panjiva’s VP of Sales and I argue about this all the time. But at the end of the day, HBS gave me two things of enormous value: 1) the opportunity to meet Panjiva’s co-founder and 2) frameworks for thinking about unstructured problems — and, to be sure, there are a lot of these in start-up land.

Josh Green Thursday, March 11, 2010 at 1:28 PM PT

What B-School should teach about VC funding is how it fits in the overall picture, which is that it is only an option for a very narrow group of entrepreneurs.
A few things to realize:
– VC will tell you that when they look at 1000 business plan in a year, they talk to 100 entrepreneurs and they invest in 10. They also admit that out of the 10, 1 will make it really big, 2 or 3 will be good deals, and the others are just ok, or maybe loosers.
So if you choose the VC route, you should be aware that you are getting on a path where only 1% of the entrepreneurs make it, and once you get financed, your chances of success are still limited.
– If you look at the top 500 fastest growing companies, a list published once a year by Inc Magazine, you will see that only 6% of these top 500 fastest growing companies were financed by VCs. And if you look at the top 5000, then only 3% were financed by VCs. Again, if you take the VC route, you have to be aware that your chances of success are slim.

On top of these facts, there is also another reality that should be taught in B-School: VCs will get the biggest share of what you build, so going that route is also not the best way to create value for yourself. There are posts on this topic on your blog, so there is probably no need to add too much. But entrepreneurs have to remember that when the VC sells a company, they get the money first, then employees, then all debts are paid, and then what is left goes to common stock, to be then split between early investors and the founder(s). It is not clear how much you will be left with…

Finally the last thing that should be taught in B-School is that if you are an investor, VCs are not a good option for you either. A study of over 1300 firms has shown that on average the return from VC investments is only S&P -3 points after fees. So much for “high risk high return”.

Once all this is said, it is always good to teach VC as an option, because it may work in some cases, and as long as you know what you are getting into all is fine.

Marc Dangeard Thursday, March 11, 2010 at 9:08 PM PT

Students cannot learn how to develop a rigorous process for making investment decisions from a book or in the classroom, which is the major, widespread fault with many b-schools today. While case studies and coursework can support learning, the best lessons are those that students can experience for themselves in the real world.

At the University of Michigan’s Zell Lurie Institute we strongly encourage students to get their hands dirty by participating on our student-led venture funds, like the Wolverine Venture and Frankel Commercialization funds. Created to provide MBA students with an enriched, action-based learning experience, our funds put students at the center of the venture capital process, from sourcing potential investment deals, conducting initial analyses, and negotiating with company founders and managers, to presenting investment recommendations and working with professional venture capitalists on co-investment deals.

Students in the Funds at Michigan have to put their signature—and their reputation—into the decision. There is nothing like having one’s investment decision not only be public, but to be re-assessed by following classes of MBA students to really make one take pause. Putting the decisions into the students hands instills a sound business sense and a keen eye for analyzing opportunities and real risk. Not every MBA can say they have been part of a successful IPO, but our students have watched the process unfold from beginning to end with Intralase and other successful exits over the past decade. These funds have proven to deliver not just lessons in financing and venture capital, but a wide range of business skills that can be applied regardless of the student’s ultimate career path.

Tim Faley, Managing Director, Zell Lurie Institute Friday, March 12, 2010 at 10:56 AM PT

Yikes! You are trying to get your students to become VCs? These are exactly the kinds of VCs whom entrepreneurs find the least appetizing – those with no operating experience!

Sramana Mitra Friday, March 12, 2010 at 11:01 AM PT

Picking up on a theme in earlier comments… I think B schools should pay more attention to the interpersonal elements — the softer side — of the VC/entrepreneur dance. What are the cues that a VC is actually interested in your deal? What are the signs that an entrepreneur is someone you want to bet your career on?

If I were teaching a class on VC, I’d do a lot of role-plays. Divide the class up into teams of entrepreneurs and VCs — and then have them interact in a mini-market. It is in this environment that students can learn quickly about the importance of the intangibles.

Josh Green Friday, March 12, 2010 at 11:35 AM PT

Hi Sramana,

Nice to read the responses. I do have this feeling — I am from India and applying to US B-schools for Fall 2010 term — I hear so much about B-schools rankings. People have advised me to postpone my MBA plans to next Fall, if I do not get into a top program. In the context of what you say — bootstrapping, entrepreneurship or any other business aspect of business education — how important are BusinessWeek and Financial Times rankings? What does going to a ‘non-brand name’ business school in US translated to?

Vini

Vini Monday, March 15, 2010 at 3:14 AM PT

Hi Sramana:
A few observations about what top b-schools should teach about venture capital and entrepreneurial finance:
1. The day you take a dollar or pound or euro of venture capital is the day you have agreed to sell your business.
2. Unfortunately, most entrepreneurial finance or VC courses are taught from the perspective of the financier. It’s the opposite perspective that aspiring entrepreneurs will value most, though getting both perspectives is essential. Understanding what drives the person on the other side of the table is crucial to any negotiation, not just a VC deal.
3. The importance of writing a great business plan and raising capital from VCs is vastly over-rated. Most great companies began with neither. Learning from others and conducting well-chosen experiments are much more useful.

Needless to say, students at London Business School don’t leave us without these and numerous other real-world messages.

John Mullins
Associate Professsor — London Business School
Author, “The New Business Road Test: What Entrepreneurs and Executives Should Do Before Writing a Business Plan”; and (with Randy Komisar) “Getting to Plan B: Breaking Through to a Better Business Model”.

John Mullins Wednesday, March 17, 2010 at 6:43 AM PT

Couldn’t agree with you more, John, but VERY FEW schools are teaching this essential tenet.

Sramana Mitra Wednesday, March 17, 2010 at 7:51 AM PT

Hi Sramana,

Entrepreneurs are seen as an important part of the economy, and a particularly critical engine of innovation and growth. The inclusion of entrepreneurship courses in B-School curriculum further exposes smart and highly-motivated individuals to that facet of the economy. Rigours research on new businesses funding strategies (e.g., bootstrapping, traditional VC, Corporate VC, grants, or peer-to-peer lending) informs these courses, and in turn instils confidence by offering insights, tools, and frameworks. A student would often comment how an entrepreneurship course made him or her realize that pursuing an entrepreneurial path may not be as out of reach as they thought.

Gary Dushnitsky

Associate Professor | Strategic and International Management and Entrepreneurship
London Business School | Regent’s Park | London NW1 4SA | United Kingdom
Email: gdushnitsky@london.edu | Tel: 44 (0)20 7000 8723 | Fax: 44 (0)20 7000 7001

Gary Dushnitsky Thursday, March 18, 2010 at 3:16 AM PT

I read through these responses and found most interest in what Scott Lenet wrote above. In particular, I wholeheartedly agree with his call for the “primacy of market validation.” Just yesterday in class, a student told me she’s been working on her idea for six years and is just now feeling like she’s getting to the stage where she can talk about it enough to pitch it at our campus Quick Pitch Competition. I encouraged her (okay, maybe I was a little stronger than just encouraging) to get out of the workshop and onto the street to see if her idea has any legs.

From my research on nascent entrepreneurs, I’ve found this recurring theme over and over again: entrepreneurs who haven’t gone through a business school get to the street faster than those who are *unfortunately* burdened with the idea that before you can get your idea out, you have to write a 40+ page business plan. The reason I say, unfortunately, is due to my realization that they’ve often learned this under the tutelage of my colleagues in business schools across the country.

Scott’s other call for more and multiple idea generation is well-reflected in what my students do in their “3 for 3 Presentation.” They have 3 minutes to present 3 new product or service ideas. Simply put, the focus is on idea generation and not idea refinement. I like to think that this directs the students away from “painting lipstick on a pig” and more toward “making something”, “adapting to feedback”, seeing how it fails and iterating quickly.

Thanks for a stimulating discussion, Sramana.

~Ben

Bennett Cherry, Ph.D.
Associate Professor of Entrepreneurship
California State University San Marcos

Ben Cherry Thursday, March 18, 2010 at 1:38 PM PT

Ben, Yes. This will have its own thread soon. I am teaching idea validation continuously at my roundtables.

Sramana Mitra Thursday, March 18, 2010 at 1:41 PM PT

I agree with this "I actually strongly believe that financing strategy is a very important piece of entrepreneurship education".

athletic fit shirts Tuesday, May 24, 2011 at 3:16 AM PT