Poets&Quants’ Top MBA Startups Of 2019

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Some of the MBAs behind the companies on the Top MBA Startups of 2019

When we started ranking and celebrating successful MBA startups in 2013, we did so with one goal: to recognize startup founders who met and incubated a successful startup while still in business school. Early on we decided to measure this by funding amounts raised in the first five years of a company’s existence. There may be several ways to measure the success of an early-stage venture, but one common and publicly available data point is venture funding.

Over the six years we’ve tracked and measured MBA startup activity, there might not be a better story than Branch Metrics — literally a modern-day, American, Zuckerbergian classic. First, you have an incredibly selective, elite school like Stanford; next you have a team composed of a baby-faced college dropout, a crafty and determined immigrant, a hard-working and resourceful Midwesterner, and some Northeastern prestige. Since entering Stanford’s Graduate School of Business in 2016, Branch’s co-founders have gone from multiple failed startups to one of the most successful ever.

Launched in 2014 by Alex Austin, Mada Seghete, Mike Molinet — the three MBAs — and Dmitri Gaskin — who dropped out of Stanford as an undergrad — Branch has slowly climbed our annual ranking of Top MBA Startups to the first-place spot this year. Since launching, the mobile linking platform has raised $242.10 million in venture backing.

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The Branch Founders. Pictured from left to right are Dmitri Gaskin, Alex Austin, Mada Seghete, and Mike Molinet. Courtesy photo

STARTUP FUNDING RESURGENCE

Branch set the stage for the most dominant performance we’ve seen from Stanford’s GSB grads since compiling our first list in 2013. Of the 101 startups to make this year’s list, Stanford MBAs were behind 39 of them. Those 39 have raised more than $1.3 billion in combined venture backing. The number is a leap from last year’s 27 Stanford startups to make the list and represents a steady climb from the 23 startups on 2016’s list. The gain came at the expense of Harvard Business School. After claiming 40 spots in 2015 and 42 in 2016, HBS ventures dropped to 21 this year — the lowest number of startups ever for Harvard Business School on our annual list.

As a reminder, here’s how we determine which startups qualify for our ranking. All startups must have a founding or launch date between January 1, 2014, and December 31, 2018. They must also have at least one founder or co-founder who graduated with an MBA during that same period. With those simple criteria in mind, we scour the Internet and reach out to schools to nominate recent startups from their respective schools.

Compared to the previous two years, competition to make this year’s list was stiff from top to bottom. At the top, three Stanford-founded ventures zoomed past last year’s top finisher, Farmers Business Network, which was founded by a team from Harvard Business School and Cornell’s Johnson School. Farmers Business Network stayed put at $193.9 million, while Branch notched a massive $129 million Series D haul last September. Plenty, another agtech company which finished second this year, was also buoyed by a recent $200 million Series B round and has raised $226 million total. And in third, Rivigo moved up one spot from fourth place last year with a Series D round in December and a Series E round at the beginning of 2019 giving it $216.2 million in total funding.

At the bottom, it took at least $5 million to land on this year’s top 100. Last year, the 100th-place venture had $3.67 million in backing while $5 million earned 78th place. In 2017, the cutoff for the list was $4.3 million and in 2016 it was $2.65 million.

The total amount of funding also ticked up this year after hitting a five-year low in 2018. Among the 101 startups to make the list, a combined total $3,172.85 million was raised — up from $2,455.15 million last year and $2,925.52 in 2016. It’s still a dropoff, however, from 2016’s record year of $5,180 million.

One reason for the surge of startups — especially at Stanford GSB — could be a general rise in interest in entrepreneurship. “The level of interest in entrepreneurship is staying quite steady at Stanford GSB over the past five years, but certainly has increased relative to 10 years ago,” says Deb Whitman, the director of the Center for Entrepreneurial Studies at Stanford’s GSB. According to Whitman, every single student from the GSB’s full-time MBA graduating Class of 2018 took at least one class related to entrepreneurship and innovation. That rate has been in the 98-to-100% range over the past three years, a slight uptick from the 92 to 95% range it was before.

The percentage of GSB students actually launching ventures immediately after graduation has climbed to 15-to-17% per class compared to 8-to-12% in the 2007 to 2009 time period. What’s more, Whitman says, over the past few years graduates joining a startup for their first job after graduation has been consistently in the 19-to-24% range over the past few years. In other words, anywhere from 34% to 41% of Stanford’s full-time MBA graduates are now directly involved with a startup immediately after graduating.

“If you are thinking only about the 16% of students starting a business right out of their MBA program, one might imagine that the strong job market and rising salaries might encourage students to wait and start a new venture a little later in their careers,” Whitman reasons. “But I think those forces may be balanced by a reasonably strong funding market, keeping the entrepreneurial interest strong and steady.”

At Harvard Business School, the percentage of MBA graduates launching ventures immediately after graduation has ranged in the 7-to-9% area, but because of HBS’s size, the actual number of founders is larger than the GSB. For example, over the past five graduating classes (2014 to 2018), 356 HBS graduates reported founding or co-founding a startup immediately after graduation, compared to 297 at the GSB. The school with the next highest amount is The Wharton School at the University of Pennsylvania, which had 216 founders or co-founders immediately after graduation.

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Nate Mazonson, founded Plenty with a team from Stanford GSB. Photo by Drew Kelly

When Branch Metric’s founding MBAs arrived on Stanford’s Northern California in the fall of 2012, they did so with the intention of finding potential co-founders for a future unknown venture. Soon after meeting Austin and Molinet, Seghete knew she wanted to work with them. “Alex (Austin) was working every weekend. Mike (Molinet) was building things. And I thought, these are the best people in the entire class, and I want to work with them,” Seghete says. “And I’m going to try to convince them to work with me.”

The convincing happened, but the immediate successful idea did not. After deciding they wanted to be a team together, the trio took Stanford’s infamous Launchpad course in the Design School with the intention and hope to leave the class with the budding of a hot startup. At the end of the course and their first year in the full-time MBA program, all three rejected internship offers to pursue their idea — Kindred Prints, an app that took photos from smartphone camera rolls and printed photos into books. They spent all summer preparing to launch the app in October. Kindred Prints had early success, zooming to 10,000 photo books created on their app, largely riding the holiday season. But as 2013 turned to 2014 and the holidays passed, sales slowed and eventually the team decided to abandon Kindred Prints.

With two weeks till graduation, the team still did not have the startup they intended on founding while at the GSB. Seghete was contemplating a full-time offer at Apple when the idea to create deep linking software between mobile apps came to the team. In June of 2014, the foursome started building their platform with the help of a $300K angel investment from Palo Alto-based Pear Ventures. By September of 2014, the team not only developed a product, but had 30 app developers using its “deep linking” software and a $2.75 million seed round that included investments from long-time seed investor and entrepreneur Ben Narasin and New Enterprise Associates in addition to Pear Ventures. They also had 30 more developers at the helm. After a year, they had 500 more developers using their software for such apps as iHeartRadio, Coffee Meets Bagel, and Instacart. Not to mention, another funding round, this time a $15 million Series A round that included nine investors. And in 2016, the team jumped from 40 employees to 90 and gained a $35 million series B round. They’ve also added some heavy hitting partners that include Starbucks, Pinterest, Airbnb, and Target, among thousands more.

For the first two and a half years of the company, everything they built was being used for free. It wasn’t until Q4 in 2016 that the team started building premium products to sell. “Revenue was still relatively new to us,” Molinet says. But two years later, and revenue has started soaring. The company has also grown from about 90 employees at that time to 270. It also led to the company’s first acquisition of a similar company called Tune in October 2018.

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Away was founded by Steph Korey (right) and Jen Rubio, who earned MBAs from Columbia Business School. Courtesy photo

DIVERSITY IN DISRUPTERS

Like previous years, this year’s list features startups disrupting all sorts of markets. Plenty, also founded by a team from Stanford, is developing technology and sciences for crops to grow and flourish without pesticides and in GMO-free environments. While based in South San Francisco, Plenty, which has investments from Jeff Bezos has factories in Laramie, Wyoming and Kent, Washington. Rivigo is changing the way tech, logistics, and the trucking industry work in India. Away, which is the highest-placed team founded by only women is creating new and modern luggage for travel. Guild Education — also founded by a team of only women founders — is creating new educational and career opportunities for working adults.

“The last ten years have showcased many enormously successful startups creating world-changing companies across such a broad range of industries that the excitement of starting a new venture now feels more tangible, and also more accessible,” says Jeremy Kagan, the managing director of the Eugene Lang Entrepreneurship Center at Columbia Business School. “While some are more traditional technology or mobile based, many are things as fundamental as transportation or retail, with many new startups gaining prominence in areas more differentiated by business strategies — areas where MBAs can more directly start a venture and thrive.”

One thing is for sure. Entrepreneurship continues to be a popular option among MBA students at elite B-schools. Stanford has more than 60 courses that have an entrepreneurship and innovation component. According to Shikhar Ghosh, the faculty co-chair at the Rock Center for Entrepreneurship at Harvard Business School, about 25% of elective courses offered in the full-time MBA program have an entrepreneurial focus. “In the last five years, we’ve seen the interest from students and level of programming from the school go up dramatically,” Ghosh says.

A factor driving the change? The blurring lines of entrepreneurial thinking and general management skills, Ghosh says. From technological developments to influential upstarts compiling massive amounts of venture capital backing, no company or industry is safe — no matter the size or how established they are.

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Dia&Co has been moving up the Top 100 MBA Startup rankings over the past few years. The founders are Lydia Gilbert (left) and Nadia Boujarwah (right) of Harvard Business School. Courtesy photo

“There is this broadening in both interests and offerings in entrepreneurship,” Ghosh explains. “Some of it is because the distinction between entrepreneurship and general management is getting blurred. Much of the vocabulary, the conceptual structure of how you deal with uncertainty, how you deal with new technologies coming in, the disruptions caused by new things, are relevant for well-established companies in different ways, but with the same heightened importance as startups.”

Kagan says the influx in interest in entrepreneurship at the MBA level also has to do with the “aftermath” of the Great Recession a decade ago. “The economic crisis of 2009 and its aftermath created a new appetite among even more traditional companies for employees with entrepreneurial experiences and skillsets,” he says.

At the University of California-Berkeley’s Haas School of Business, Rhonda Schrader, the executive director of the Berkeley Haas Entrepreneurship Program agrees entrepreneurship among full-time MBAs has increased in recent years. “There is definitely more interest in entrepreneurship and increasingly, we’re seeing ‘accidental entrepreneurs’ who become so passionate about solving a specific problem that they give it a go in a low risk/resource-dense campus environment,” she says. “Technologies like blockchain and edge computing have changed the way students think about solving problems. They’re applying these tools in novel ways to extend both impact and equity.”

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Charles Baron, co-founder and vice president at Farmers Business Network Inc. Courtesy photo

ENTREPRENEURS ARE NO LONGER THE ‘PIRATES’ OR ‘MAVERICKS’

Either way, entrepreneurship has slowly migrated to the mainstream at elite business schools. Gone are the days where graduate business education revolves around finance, marketing, and accounting. At HBS, for example, Ghosh says entrepreneurial training has infiltrated virtually all of the core courses. For instance, Finance now includes a section on venture capital and financing early stage startups.

“I’m seeing this significant shift that when we talk about Facebook, for example, we’re no longer talking about a maverick company,” Ghosh says. “We’re talking about how it fits within governments and society and how we live our lives. That’s a really big shift. It’s no longer just how it affects our immediate lives. It’s how does it in larger society?”

Ghosh says educating entrepreneurs at HBS has shifted from starting companies and taking them to a certain size to focusing on what it means to run large companies making significant changes in society. “The emphasis and focus is shifting to how do you exist in society,” Ghosh maintains.

At MIT’s Sloan School of Management, Bill Aulet, the managing director of the Martin Trust Center for Entrepreneurship has been calling his band of entrepreneurs “pirates” for years now. Still, Aulet agrees with the other schools, there is a significant shift in how entrepreneurship is being taught at elite business schools. “Five years ago, it was kind of the people who were the renegades and exceptions that were entrepreneurs,” Aulet says. “But now it’s not that renegade to be an entrepreneur. Everyone wants to do it.

“Our center still has this pirate mentality,” Aulet continues. “You don’t have to work at a management consulting firm or an investment bank. Be different.”

THE IMPORTANCE OF CO-FOUNDERS IN B-SCHOOL

And business school remains a solid incubator for launching a successful venture. For Branch, it all began with finding the right teammates — even if they weren’t friends at the beginning. “I actually remember when I met Mike, I was like, oh man, I don’t actually like this guy,” Seghete jokes. But in all seriousness, a diverse team is crucial, both Seghete and Molinet advise.

“I’ve seen it over and over at Stanford where three pretty similar dudes want to do the same thing in the same company and it doesn’t work because they all want to be CEO or they all want to build stuff. With us, we’re actually super different,” Seghete says. “It’s really important when you’re trying to start something at business school to find people who are different than you and compliment you.”

Molinet agrees at the beginning, egos have to be left at the door.

“First, you’re all in it together, so put the egos aside,” Molinet says. “It doesn’t matter what your role is, you’re all in it together. You’re either going to win together or you’re going to lose together.”

But it definitely doesn’t hurt to like your co-founders.

“All of the founders are still together,” Molinet points out after working together for almost seven years. “And we all still like each other.”

THE CASE FOR FINDING CO-FOUNDERS WHILE EARNING AN MBA

But finding the perfect co-founders isn’t always the easiest process, Stanford’s Whitman warns.

“Get to know your classmates, and prepare to work at finding the right co-founder,” Whitman says. “Unless you are fortunate enough to already have the ideal co-founders in your circle, finding co-founders can be really hard work. The University is a wonderful place to meet a wide array of people, which really helps, but many — maybe most — students still find that they end up doing the same networking, multiple-meeting, get-to-know-you, approach to finding co-founders that entrepreneurs outside the university use.”

Aulet maintains that not only are co-founders crucial, but so is the way in which a school prepare future entrepreneurs.

“The odds aren’t stacked against you if you learn how to be a good entrepreneur. The perception of your chances of being a successful entrepreneur are like 5% is just not true,” Aulet says. “And students are starting to realize that and they see it not as a crazy idea to become an entrepreneur, but an accepted career path to go and one they probably prefer from a perception of impact.

“Our goal is not to produce companies, our goal is to education people about the field of innovation-driven entrepreneurship. We don’t equate our success to startups.”

STANFORD HAS RECORD NUMBER OF STARTUPS ON LIST

As for which schools are preparing students and recent grads for venture backed startups best, Stanford and Harvard continue their dominance. Among the six times we’ve published this ranking, only once Stanford and Harvard did not combine for more than half of startups on the list — in 2017 when they combined for 48. The most they combined for was in 2015 when the total among both schools was 71 out of 100.

For the first time ever, however, the GSB significantly topped Harvard, claiming 39 of this year’s 101 spots compared to Harvard’s 21. Of those 39, the combined funding raised is more than $1.3 billion compared to about $729 million raised by the 21 HBS-founded startups on the list. Up next are Columbia Business School and Wharton, which each stake claim to nine startups on this year’s list. Northwestern’s Kellogg School of Management follows with six startups and Chicago’s Booth School of Business and UC-Berkeley’s Haas School each have five startups on this year’s list.

For those future hopeful MBA-founders, Branch’s Molinet has some sage wisdom.

“When you’re a startup founder, you’re first doing everything yourself,” he says. “If you’re doing an event, you’re going to Safeway and you’re picking everything up — the drinks, and the food, and you’re ordering the pizza. Then as you grow, you become a manager, and then eventually becoming a manager of managers, and eventually you get to the point where you’re only dealing with people problems.

“As founders, what’s important to know is that if you have a startup — especially one that grows and becomes successful — you need to constantly be reinventing yourself. I think the founders that do the best realize that every six months they are reinventing their job, they are reinventing themselves, and they are constantly pushing themselves to change and operate differently.”