Jeff Bussgang Tweeted an article this Saturday morning that the percentage of Stanford MBAs pursuing start-ups has gone to an all-time high (more here).
It made me think of the Harvard Business School business plan contests in 1999 and 2000. I gave the kick-off talks for both contests. In the fall of 1999, there were over 500 students at the talk. Everybody, and I mean everybody, wanted to launch or join a start-up.
In the fall of 2000, I gave the same talk. There were 7 students in the room. No joke.
Now, not much had changed between the years: same organizer, same classroom, same talk, same format. But one important thing had changed: the market had crashed in March of 2000. The HBS mantra that year was B2B (“back to banking”) and B2C (“back to consulting”). VCs were forcing their companies to remove the “.com” suffix from their names.
I left that talk then thinking about something one of my professors, Bill Sahlman, had said many years earlier: when MBAs find a space “hot,” you’re near a market peak.
As a VC, I’ve seen time and time again that a contrarian view is what makes money. The free markets tend to go guardrail-to-guardrail. As an investor or entrepreneur, you want to buy low and sell high. Buying high and hoping to sell higher requires a lot of market timing. You can buy low when a space isn’t “hot.” I know from experience that it is no fun to be one among dozens of start-ups largely doing the same thing.
We are in an “up” part of the cycle right now. Start-ups are cool again, many of us are quietly envious of acquaintances at hugely succcessful start-ups, and we think that “if they can do it, heck yeah, I can do it, too.” I think that ambition is great.
But, I hope we as a start-up community don’t lose site of the bigger picture. All good things come to an end (temporarily).
If I were a start-up founder today, I’d have a Plan B for the company in my head. What if truly drastic measures are required? The MBA crowd is signalling that you should be prepared.