“The whole purpose of education is to turn mirrors into windows.” – Sydney J. Harris
Mirrors portray a reflection of ourselves. However, a window gives us a view of the world in front of us – the possibilities in a microcosm of our own which is completely different from that of others’. Education empowers us to look into ourselves while seeing the world. Rather than a mere learning of facts, education is the training of the mind to think.
This article shall explore whether formal education of the founder of a startup is important or not for securing funding.
Who is a founder? Creating something from nothing – that’s what makes one a founder. A founder of a business or startup not only comes up with an idea and transforms it into a reality, but also plants the seed at the heart of a business that changes everything.
Before a profile-idea combination is picked up, do investors care about the educational background of founder/s? As much as a ‘No’ to that question would be an exciting answer, reality presents a different picture.
According to the ‘Pilot Survey on Indian Startup Sector (2019)’ by the RBI, out of the 1246 startups that participated in the survey, 39% of the founders had a Bachelor’s degree, 30% a Master’s degree and around 19% an MBA/CA qualification. Moreover, 33.3% had an academic background in Engineering, 16.7% in Commerce/Finance, around 13% in Science, and 10.2% in IT. Furthermore, 52.1% had a professional background and 29% were business owners.
Adding to the above facts, following are the ten colleges whose alumni in the Indian startup world secured the most funding in H12020, according to data intelligence firm Tracxn:
- IIT Delhi
- IIT Bombay
- IIM Calcutta
- IIT Kharagpur
- IIT Kanpur
- BITS Pilani
- IIM Ahmedabad
- IIT Madras
- IIM Bangalore
- IIT Roorkee
Students from the above ten colleges have founded over 4,900 startups.
Does this mean that an educational background from an elite institution(s) could earn a founder those brownie points? In the words of Kunal Shah (founder of CRED),
“They say people with high IQ have a good chance to be an atheist, but it doesn’t mean one will become high IQ by stopping to believe in God.”
If a founder has secured big funding, there is a good chance that s/he is from one of the colleges above. Nevertheless, it doesn’t mean that one will secure funding by virtue of such an education. The combination of natural abilities and the skills imparted towards the journey of an education from such colleges may work wonders.
PE/VC investors don’t care about an educational background as a ‘must-have’, rather they care about it from the standpoint of using it as yet another data point to embellish their rationale for investing. Investors ultimately look for the following:
- An idea’s merit and exclusivity.
- Is the founder passionate?
- Is the market big?
- Does the product/service solve an important problem for the market?
- Can the team build and scale the business?
A high-ranking degree may be a passport/surer path to success as it is a proof-of-concept of one’s capability. However, it is not always that big money or high-ranking degrees make good business, but it is always an idea and relentless efforts to execute that idea for turning it into a reality that makes a successful enterprise.
Keeping the above in mind, a PE/VC investor would rather choose the commerce graduate with no prior working experience but who is extremely passionate about his well-formed idea over an engineer with work experience who lacks a proper idea. It is a major tick to point nos. 1 and 2 above in what investors ultimately look for. Moreover, such a founder would belong to the 39% with a bachelor’s degree. This is assuming that the founder has studied from a college with a good standing, if not necessarily elite, because the educational background does serve as an important filter among the thousands of applicants in the fast-moving Indian startup ecosystem. Lack of work experience isn’t as much an important factor as the founder’s abilities of learning, un-learning and re-learning, managing self and teams, and perseverance. These abilities come in the course of a relentless and passionate journey of turning an idea into a reality rather than only in the course of an educational program.
Two of the biggest dropout stories in the Indian startup ecosystem are that of Ritesh Agarwal of OYO Rooms and Kunal Shah of CRED. Ritesh is a college dropout who founded Oravel (later rebranded to OYO Rooms, $9 billion+ valuation as of Mar 2021) when he was 18. Kunal did BA in Philosophy from Wilson College, Mumbai and later dropped out of NMIMS Mumbai. Today he is the founder of the fintech startup CRED which has a valuation of around $2.2 billion as of April 2021.
Yet, Bill Gates, the Harvard dropout, himself admits that he got lucky pursuing a career in software after dropping out of college. According to Billy, getting a degree is a much surer path to success because even though famous dropouts have struck gold, not everyone can do so because the perspective of knowing ‘where to look’ is provided by formal education.
To sum it up in the words of Bhagat Singh,
“Study so that you are able to meet arguments of your opponents. Equip your ideology with supporting arguments. If you oppose a prevailing belief, if you criticize a great person who is considered to be an incarnation, you will find that your criticism will be answered by calling you vain and egoist. The reason for this is mental ignorance. Logic and free thinking are the twin qualities that a revolutionary must inevitably possess.”
So, if you are aspiring to be a revolutionary in the Indian startup ecosystem, studying is not a bad idea. In fact, studying is a lifelong journey. Bidding a goodbye to the formal education system after a point in your journey towards entrepreneurship is your choice to make.
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Wonderful Writing! Gives a Real Clarity!
Thank you, Hanu!