Along with the problem of rich parents buying their kids’ way into universities of their choice, do we also have a problem with business schools focusing on entrepreneurship education that is targeted to rich kids, rich schools, and venture capital?
What's common among Richard Schulze (Best Buy), Richard Burke (UnitedHealthcare), Glen Taylor (Taylor Corporation), Earl Bakken (Medtronic), and Bob Kierlin (Fastenal)? They are all Minnesotans (Burke moved from Georgia to Minnesota). They built unicorns from startup. They were not born rich. They saw entrepreneurship as opportunity, not risk.
This goes against the theme of Fortune's article, which suggests that entrepreneurs need family money (“Entrepreneurs come from families with money”). I don’t know the data used, but the article raises a key question – is entrepreneurship now a playground for rich kids, from top schools, whose families can afford to invest.
Is this a recent phenomenon? Nearly all of Minnesota’s unicorn-entrepreneurs started their ventures in the 1950s, 60s, and 70s. Burke borrowed against his house. Schulze used his savings. Taylor built up his equity in the venture before buying the venture from his partners. Bakken bootstrapped until the IPO and then got VC. Kierlin got funds from his friends and his own savings. There were some U.S. entrepreneurs in the same era who used family money, including Walton and Dell. But many unicorn entrepreneurs did not need family money at the time. They grew with skills and bootstrapped to the top.
Has this trend changed recently? If you examine some of the “rich” kids who have used family money along with angel capital to build giants, the group includes Mark Zuckerberg and Jeff Bezos, both of whom received family money. But unicorn-entrepreneurs such as Michael Bloomberg, Thai Lee, and Vijay Goradia seem to have used a variety of alternative-financing sources including savings, alliance capital, venture revenues, and bootstrapping, but not family money.
The assumption that entrepreneurs need VC to build ventures has affected entrepreneurial education, especially in universities that have rich angels and rich alumni. Business schools have developed incubators and connections to angels, and the “lucky” ones, who get capital, are often selected based on pitch contests. Many entrepreneurs are convinced that they cannot start a new venture unless they get angel and venture capital, and need mentors to help guide them. Is this because of nanny-business schools that are pampering the “rich” kids? Is the assumption that if entrepreneurship has any pain, it is not worth doing?
One of my fellow-professors on a recent panel noted that his entrepreneurship students try out venture development. If the venture does not launch while they are in college, they accept a job with a large company. Are we educating “fair-weather” entrepreneurs where students become entrepreneurs if their innovation gets capital? Otherwise, join corporate America to avoid risk.
Is this one more fallout from the business-school emphasis on the opportunity rather than on teaching skills? Are business schools mainly focusing on the opportunity because they have been convinced by VCs to focus on the opportunity. VCs want proven opportunities. After proof of potential, the VCs often recruit a new “professional” CEO if they invest in the venture. But when the entrepreneur has the skills to lead the venture to take off, the entrepreneurs can stay in control and continue to build the venture. Some get VC. Most did not.
Few business schools are teaching the skills to help entrepreneurs take off without VC. They teach capital-intensive entrepreneurship, get rich alums to capitalize a VC fund, and dole out funds to their students. If they show traction, hello entrepreneurship. If not, hello corporate job.
Unfortunately, this trend towards capital-intensive venture development has been copied by foundations, such as the one run by Steve Case, and by states with Silicon Valley alums such as Steve Grove in Minnesota. This is the Silicon Valley disease, but it does not do much outside Silicon Valley. Instead of focusing on skills and smart strategies to take off without VC, they are focusing on opportunities and pitches and reinforcing the need for VC, even though the reality is that VCs fund 0.1% of U.S. ventures, only 0.001% are home runs, and that too mainly in Silicon Valley. It is time for the educational world to get back to basics and teach all students how to take off with skills and not VC.
MY TAKE: Entrepreneurial education, not entrepreneurship, is becoming a rich kids’ game. Entrepreneurship is Andres Corton who was born in Union City, NJ, to Cuban exile parents, and has built a chain of 4 restaurants (Black Bean Deli) in Orlando and is on his way to building a giant – without family money, without VC, and without winning pitch contests. Entrepreneurial education needs to help all students, including those for whom entrepreneurship is the only choice, not a risky choice. It can give them the skills to help them grow – and not just stay a small business. If universities and foundations want to democratize entrepreneurship, and I hope they see this as their mission, they should focus on skills, not opportunities. Skills can make high-potential entrepreneurship an all-kids game.
