Business Brains

Forget venture capital; business schools need to teach more bootstrapping

Posting in Education

Tech entrepreneur and author Sramana Mitra says schools need to be more realistic about where most startup funds come from.

It's a popular theme to observe how everyone either benignly neglects or outright picks on entrepreneurs, from banks to government to the media, even though small businesses fuel 80% of economic growth.

Sramana Mitra

Business schools, too, seem to be leading budding entrepreneurs down the wrong path. At least that's the view of Sramana Mitra, a tech entrepreneur herself, who asserts in a recent post that students are being misled to believe that venture capital financing awaits every good idea ready for the marketplace.

That's not the case, Mitra says, citing the views of colleagues involved in entrepreneurial higher education. In fact, there is very little VC money for startups. Rather, new entrepreneurs should be instructed in the ways of bootstrapping and other non-debt financing techniques.

Part of the issue is that entrepreneurial education is still a relatively new discipline. And, it can be argued, entrepreneurship is a fire that dwells within; not something that can be formally taught. (Ask Bill Gates and Steve Ballmer how much they learned about bootstrapping a business while at Harvard.)

Mitra's message to B-schools:

"Unless you are teaching at Stanford or MIT, or a handful of institutions with similar access to the financial community, you better come to terms with the fact that your realistic path to grooming successful entrepreneurs is through bootstrapping. So don't mislead the students, don't set them up with unrealistic expectations."

Mitra followed up her initial post with accounts of how two well-known software companies bootstrapped their way to success -- and eventually, venture capital funding.

Christian Chabot, founder of Tableau Software, an analytics provider, originally bootstrapped another company, BeeLine Software, and used funds from the sale of the company to bootstrap Tableau.

Greg Gianforte, CEO of RightNow Technologies, provider of cloud-based CRM solutions, also used a similar bootstrapping strategy. Funding came from incoming revenues, which were built quarter by quarter. VC money followed later.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure