There is an increasing trend in MBAs shunning traditional jobs in favour of entrepreneurial start-ups. A huge increase in UK SMEs is predicted this year and in the US, some business schools have reported record numbers of MBAs launching their own companies.
Sir Richard, speaking at a Google Hangout live-stream event as part of Global Entrepreneurship Week along with Pinterest CEO and co-founder Ben Silbermann, says that the best business ideas are often those that make a real difference in the world.
Finding An Entrepreneurial Idea
He launched his first start-up, a magazine called Student, during the Vietnam War when he was 15. He aspired to end the conflict and become an entrepreneur out of a need. “It was a dreadful war and young people all over the world wanted to rise up and stop it,” he recalled.
“We had to become entrepreneurs in order to ensure the business survived. Often the best businesses come when people have the idea and want to make a difference and in the process they end up trying to make sure more money comes in so they can survive.”
Growing your brand
Ben co-founded Pinterest in 2010 and the US-based company now has over 70 million users worldwide. Last week, it was reported that 18 per cent of MBA graduates from last year’s cohort at Stanford shunned traditional career paths to become entrepreneurs.
“I think that everyone starts with a small idea,” he said. “It’s important to give yourself enough time to build a product to get something out in front of real customers. In the process of building, you work out the kinks and the details.”
Sir Richard said that execution of your idea is crucial. “A lot of people have similar ideas and it’s really then up to execution (that distinguishes them): execution is incredibly important,” he said.
Your Team Is Essential
Many MBAs actually find their business partners while studying at b-school. Going it alone may be tempting, but building a team is crucial to start-up success. “Getting the right team of people out there to execute your ideas, to make sure that people get to know about what you’re trying to achieve, means building a strong team is critical,” Sir Richard added.
Ben agrees that your team is essential. He now has over 150 employees at Pinterest, many of whom have been with the company for less than a year. “Your team is everything,” he said. “What I’m trying to learn as a CEO is to create an environment to work together for a simple objective.
“Then even more importantly, identify what the environment needs for those people to succeed together.”
Sir Richard thinks that building a strong entrepreneurial team is “half the battle”: “Get out there and find people who are great to run your companies, who look for the best in people, who inspire people. If you can do that and if they are well motivated by what they’re doing, you can achieve anything, and you can build a great company.”
Financing Your Start-up
Finance is an issue that has always plagued start-ups. MBAs spend thousands of pounds on business education and will be keen to see a return on their investment. In response, many business schools have incubators and start-up schemes to help get SMEs off the ground.
In London, Cass Business School runs The Hangout, a free workspace for City University graduates to let their entrepreneurial juices flow. At Dartmouth Tuck’s School of Business in the US, the Maynard program subsidies 50 per cent of compensation for a first year student internship if they work in a start-up, based on market pricing.
But Ben says that outside funding is often necessary to get a great business idea off the ground. “When we got started… it was a tough time to raise money here in the US,” he said. “If you’re a first-time entrepreneur, there are two things that are important: pick investors that believe in the vision, because you need to be aligned about where you want to go one day.
“You should also pick investors with the same time-horizons. Understanding when they want their money back is an important lesson we’ve learned.”
Sir Richard agrees that funding can be essential to creating the next global brand. “Some businesses can do that (not bring in outside shareholders),” he said. “We’ve lobbied the British Government over the last three years to start entrepreneurship loans for young people,” he said.
“Eighteen months ago they agreed to do that, so there are now thousands of young people getting loans to start businesses. I think this will prove to be a real powerhouse for the British economy.
“If other countries can follow that… sometimes businesses only need not an enormous amount of money to get going and so tiny amounts can create the new Virgin’s of the future.”