Startup Company Survival Rates Look Strong under MBAs: MBA News

The entrepreneurial skills acquired during the course of an MBA program seem to be putting graduates who choose to embark on a startup career at a distinct advantage.

In an international survey of just under 8,000 MBA graduates from the class of 2011, the Financial Times (FT) found that 22% had launched a startup company either during the program or shortly after completing.

Of these companies, 84% were still in business some three years later, when the survey was carried out. This ‘survival’ rate is far higher than those seen in the wider spectrum of the startup world, even if estimations of this nature can vary.

Some put the ultimate failure rate of new enterprises as high as between 75% and 90%. But, the timing of a startup company’s demise, and your definition of ‘failure’ are all important here. The FT cites figures from the US Bureau of Labor Statistics showing that, three years after their formation, the number of startups still operating has tended to be closer to 60%. A lengthy analysis from the Washington Post, meanwhile, suggests that roughly half of new enterprises survive to reach its fourth or fifth year. Either way, the rate reported by this sample of MBA graduates looks strong indeed.

Even more promising still, in terms of the startup life’s appeal to future cohorts, is the news that this group of roughly 1,700 MBA graduates enjoyed salaries that were actually a fraction higher than the sample’s total average three years down the road – at US$134,000, compared to US$132,000. 

However, only 42% of the alumni forming their own businesses said that the startup company was now their main source of income, which would mean that from the FT’s original sample, only 8% can be called full-time entrepreneurs three years on from their MBA. The remaining 58% of alumni, meanwhile, may have been playing it safe in treating their startup company more as a sideline.

Room for improvement in support shown to MBA graduates

Elsewhere in the same survey, there were useful indicators of how MBA graduates feel their business school has helped when it comes to their entrepreneurial endeavors – regardless of whether or not this aspect of their lives is a full-time or part-time gig.

Less than half (40%) said their business school had helped them to secure the finances required to launch their startup company, suggesting there is plenty of room for improvement among business schools in this regard.

A more promising vindication from the pool of MBA graduates came with reference to a business school’s alumni network. Just under half of those surveyed signaled that an alumni network had been useful towards their fundraising efforts and two-thirds found it to be a useful resource for other aspects of getting a business off the ground.

However, placing an increasing emphasis on entrepreneurship and creating more resources for students in this regard has become an important trend among business schools over the past three years. So, one might expect these figures to reflect more favorably on business schools and their MBA entrepreneurs in the near future.