Don’t Start a Company with Your Business School Pals
If you’re thinking about co-founding a company with your B-school buddy, break it off right now.
This is the “Cool Kids Start Companies” syndrome. But for every Warby Parker or Rent the Runway, there are hundreds more that quietly combust in the background without fanfare or notice. And as I’ve argued before, it’s certainly tempting to imagine that your Batman-and-Robin duo might be the team to beat the odds but it’s just not going to happen (at least for 99.998 percent of new entrepreneurs).
The first issue is sharing the same blinders. Business school often attracts people with similar personality types and perspectives. Seeing the world through the same lens means you can’t anticipate critical questions, factors and influences that should be considered as you think about the market, the product or service you’ll offer, and how to pivot intelligently as your company faces new or unexpected pressures.
Sharing the same strengths is just as risky as sharing the same weaknesses. All too often, MBA students’ previous work experiences center on investment banking, private equity, financial services, consulting, etc – in fact, about 56 percent of Wharton’s 2015 incoming MBA program participants fall in these categories. But a successful start-up requires a technologist – someone with the intelligence and technical skill to, you know, actually build a worthwhile, sellable product – and a product person, one with accurate perspective and a solid handle on penetrating the market you’re hoping to capture.
At the same time, your shared experience is no guarantee that you share the same values. When you go to business school with someone, it’s so tempting to think you hold similar values. After all, you get along so well – all those great memories made hanging out in Cambridge or bonding over living at Schwab. But again, unless you’re asking each other very tough, pointed questions, the way you each perceive and live your values is shrouded in mystery. But rest assured: you’ll almost certainly see reality at precisely the worst possible moment for you and the company. Maybe it’s learning that your co-founder is prepared to work with the wrong venture fund or that they’re actively willing to hide bad results from your board. Whatever the case may be, there is no more fertile ground for conflict than a fundamental mismatch of the values that make you who you are.
Finances make people twitchy – and are another source of conflict. It’s easy – too easy! – to assume that your business school colleague mirrors your perspective on financial issues. False. Each of us comes from different financial backgrounds; just because someone carries a Fendi doesn’t mean she shouldn’t really be driving a Ford. We can have stratospherically different levels of tolerance for risk. Your co-founder may go home, look at her bank account or see his kids’ faces, and succumb to perceived financial pressure to look for a so-called “real job.” We may intellectually understand what’s required of us as co-founders but it may feel very different when we’re in the blood-and-guts of daily decision-making. That especially is true in times of business uncertainty, which is omnipresent in start-ups.
Finally, you just don’t know this person as well as you think you do. Business school relationships are forged in a highly artificial environment – where socialization with others is notoriously cocktail party superficial. You can’t be confident that these people are capable of stepping up to the plate outside the carefully constructed constraints of a hyper-achieving educational environment. It’s like marrying the person you met on vacation under the stars and palm trees. The harsh light of everyday life often reveals a completely different person. Someone who copes just fine with a professor’s deadline or creating a mock business plan could crumble under the pressure of your first pitch to a VC.
Can B-school partnerships ever work? I’m sure there are some exception cases to the rule. But by and large, it’s not a sustainable strategy for long-term success.
MICHAEL FERTIK
Michael Fertik is a repeat Internet entrepreneur and CEO with experience in technology and law. He founded Reputation.com in 2006. You can follow him on Twitter at@michaelfertik.
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