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Jump-starting MIT’s startup culture

For decades, MIT kept its distance from local high-tech
startups. In this excerpt from his new book, From the Basement to the Dome, Jean-Jacques Degroof chronicles how alumni and students took it upon themselves to kindle an interest in starting companies

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Simon Landrein

Shortly after World War II, startups building on wartime research at MIT’s laboratories began to appear in the Boston area. Most were small technical consulting operations and contract R&D boutiques, but the hugely successful initial public offering of Digital Equipment Corporation, founded in 1957 by Lincoln Lab veterans Kenneth H. Olsen ’50 and Harlan Anderson ’53, marked a turning point. It validated the model of the venture-capital-backed startup and showed the value of startups in the American economy. 

By the late 1960s, Boston’s Route 128 area was home to a plethora of high-tech startups, many with links to MIT and Digital, and 128 and Silicon Valley were considered the leading centers of innovation in the US. When a recession hit a few years later, the minicomputer industry—including Digital, Data General, Prime, Wang, and Computervision—would lead the way in pulling the region out of the economic crisis, kicking off a decade of explosive economic growth that would come to be known as the “Massachusetts Miracle.”  

An arm’s-length relationship

While many MIT alumni were involved with the Route 128 high-tech cluster, MIT as an institution kept its distance from the surrounding startups, probably a legacy of its long-standing relationships with established corporations such as DuPont, Eastman Kodak, and Standard Oil. Within MIT, there was little interest in entrepreneurship. Sloan’s curriculum was primarily centered on Wall Street and the needs of Fortune 500 companies; only one course on startups, the “New Enterprises” class begun at the instigation of entrepreneur Richard Morse ’33, had been taught at Sloan since 1961, and it seldom attracted more than 20 students per session. In 1964, Professor Edward Roberts ’57 pioneered the first stream of research on technology entrepreneurship at MIT, but it would be the only such research on the topic until the late 1990s. 

In fact, until quite recently there has been a belief at MIT that the vibrant entrepreneurial ecosystem of the Boston area, with its venture capitalists, specialized lawyers, and other technical consultants, would select the best ventures and provide them with adequate support. As Lita Nelsen ’64, director of the Technology Licensing Office from 1992 to 2016, once observed: “People say to me, ‘Does MIT have an incubator?’ And my classic answer has been, ‘Yes—it’s called the city of Cambridge.’” Although leaders of MIT schools, when lobbied, provided approval and space to experiments in entrepreneurial education, the MIT administration did not actively encourage entrepreneurship. This arm’s-length relationship with the entrepreneurial sector was seen to protect MIT from potential conflicts of interest that could have influenced its research agenda.

Entrepreneurial alumni

As early as the late 1960s, however, a nascent interest in entrepreneurship had begun percolating among local MIT alumni. When Panos Spiliakos ’66 and Martin Schrage ’63 came up with the idea of sponsoring a seminar series on entrepreneurship as a way to attract and engage young alumni, the Alumni Association was skeptical at first, recalls Roberts. That reluctance, he says, reflected the then-dominant perception that entrepreneurship was not important, and certainly not a major driving force of the economy. The seminar idea was accepted, though, and 10 alumni organized the first weekend seminar, which was held on October 4 and 5, 1969. Called “Starting and Building Your Own Company,” it included sessions related to launching a business, such as organization, financing, marketing, and legal issues. Instead of the 40 or 50 expected participants, around 300 alumni signed up. It was the MIT Alumni Association’s most widely attended seminar series up to that point. 

“To our surprise, the greatest number of those attending were people interested in starting their own business rather than men and women who had already founded their own firms,” wrote William Putt ’59, who credits Spiliakos and Fred Lehman ’51 for replicating the seminar in eight cities across the US, attracting 1,000 alumni. Each seminar was keynoted by Roberts, who presented the results of his pioneering research on technology entrepreneurship. Several alumni, such as Neil Pappalardo ’64 (cofounder of Meditech), Richard Spann ’61 (who—with Lincoln Lab colleagues including Harry Lee ’57—cofounded Applicon, one of the first manufacturers of computer-aided design and manufacturing systems), and Bob Metcalfe ’68 (a pioneer of the internet, the principal inventor of Ethernet, and the cofounder of 3Com), credited these early seminars with inspiring them to found their firms.

In 1971 and 1972, to facilitate networking, alumni involved in the seminars published the MIT Entrepreneurship Registers, which included résumé information about each participant. Then the founding committee wrote How to Start Your Own Business, a book largely based on the seminars that became one of a handful of sources of information on entrepreneurship at that time. “We think this book is unique because it is not a collection of success stories,” Putt noted in the introduction. “Many of the authors are still only a few years beyond the startup phase. They haven’t yet had time to forget the problems of startups or to romanticize them. It is this quality of immediacy that we hope to communicate to our readers.”

Building on the alumni entrepreneurship seminars, a group of New York–based alumni organized the New York MIT Venture Clinic, which offered early-stage entrepreneurs the opportunity to present their business plans to alumni club members and receive feedback. The Boston alumni group soon adopted the Venture Clinic format, and in 1978 it founded the Cambridge MIT Enterprise Forum (MITEF) under the umbrella of the MIT Alumni Association. The forum focused on education, publishing a monthly newsletter and offering annual workshops and monthly business plan evaluations. Budding entrepreneurs would present their plans and receive feedback from a panel of experienced entrepreneurs, venture capitalists, and other experts; they would also field questions and comments from other attendees. The forum’s bimonthly Startup Clinic at MIT gave early-stage entrepreneurs looking for advice and funding a chance to present in a friendly venue. Bill Warner ’80, founder of Avid Technology, would later cite the Startup Clinic as a key factor in his company’s success. 

“At MIT in the 1980s, there were lots of people with interesting ideas, but few opportunities for people to meet to discuss them.” 

—Peter Mui ’82 

In 1982, the Cambridge MITEF organized “Starting and Running a High-Technology Company,” the first entrepreneurship course offered to students and other members of the MIT community during MIT’s Independent Activities Period (IAP). Stan Rich, the chapter’s chair, coauthored Business Plans That Win $$$: Lessons from the MIT Enterprise Forum, a book based on the class, which is still offered during IAP. 

The Cambridge MITEF had a big impact on the local startup community, in part because it wasn’t restricted to MIT alumni. In 2011, Trish Fleming, its former director, estimated that 700 companies had presented to, and been helped by, that branch, whose events often attracted up to 300 entrepreneurs, venture capitalists, business angels, lawyers, and consultants. MITEF’s sphere of influence began to extend beyond Massachusetts as well, with chapters founded in Baltimore and Washington, DC, in 1981; a decade later, the first of many international chapters launched in Israel.

Students get on board

In 1988, Massachusetts governor Michael Dukakis and Harvard Business School professor Rosabeth Moss Kanter wrote that as many as 72% of new firms established in the Route 128 area since 1975 could trace their origins to some affiliation with MIT. But by the late 1980s, the Massachusetts Miracle was fading. By the early 1990s, most minicomputer and even workstation firms in New England had disappeared or were no longer independent. Perhaps given this bleak economic backdrop, MIT students became interested in promoting entrepreneurship on campus. In 1988, Peter Mui ’82, a researcher at the Strobe Lab (now called the Edgerton Center), launched the MIT Entrepreneurs Club, the first student club focused on encouraging entrepreneurship. 

“‘Entrepreneurship’ was not a major term in the MIT vernacular back then,” says Mui. “At MIT in the 1980s, there were lots of people with interesting ideas, but few opportunities for people to meet to discuss them or to learn how to turn the ideas into companies, and there was little interaction between the people developing technologies in the School of Engineering and those with expertise in business at the Sloan School.” The E-Club was conceived as a way to meet that need and to bridge the management and engineering sides of campus. At its meetings, which were also open to alumni and to students from other schools, participants got 10 minutes to pitch their venture ideas, followed by a 10-minute Q&A. Presenters could return several times to present their ideas again after refining them.

In 1989, E-Club students roped their advisor, entrepreneur Joe Hadzima ’73, into developing the wildly popular “Nuts and Bolts of Business Plans” seminar by adding it to the IAP catalogue before he’d officially agreed to do it. That inaugural class attracted several hundred attendees, reflecting a growing interest in entrepreneurship in the MIT community. One of the first classes that mixed students from science and engineering with Sloan students, the IAP class would morph into an IAP degree class in 1994-’95 and be named one of the 10 best entrepreneurship courses in America by Inc. magazine in 2009. It is still co-taught by Hadzima, along with Joost Bonsen ’90.

Around the time the E-Club formed, a group of Sloan students was launching the Sloan New Venture Association (SNVA) on the other side of campus. The group facilitated networking among faculty, students, alumni, and business leaders and promoted entrepreneurship through elective courses, workshops, research projects, and a speaker series with VCs and entrepreneurs. And in 1990, Roberts responded to student requests for guidance in starting new businesses by founding the MIT Entrepreneurship Center, now the Martin Trust Center for MIT Entrepreneurship.

As E-Club and SNVA were getting off the ground, engineering grad student and E-Club member Douglas Ling ’87 took the then-unusual step of venturing across campus to take a few classes at Sloan. Spotting the SNVA’s flyers, he went to an event and introduced himself to SNVA leader Rob Aronoff ’90. The two clubs decided to join forces—and to work together to realize the E-Club’s idea of launching a business plan contest. The $10K Business Plan Competition (later renamed the Entrepreneurship Competition in its $50,000 and $100,000 versions) materialized out of the clubs’ joint meetings. 

The first competition, in 1990, drew more than 50 teams—a surprisingly high number, given MIT’s virtually nonexistent entrepreneurial ecosystem. The winner received $10,000—an amount suggested by John Preston, director of the Technology Licensing Office and chair of the judging panel, because it covered the cost of filing a patent. The second- and third-place teams won smaller cash awards, and all teams got several thousand dollars’ worth of in-kind legal and accounting services and a “trillion bucks’ worth of free advice,” according to Hadzima, the E-Club advisor and a fellow competition judge.

The business plan competition gained momentum with help from venture capitalist David Morgenthaler ’40. In 1994, he agreed to fund the $10,000 prize for three years (and to fund Roberts’s entrepreneurship research), setting the competition on a course to become a world-renowned event that has helped countless students dive into entrepreneurial waters. As Hadzima wrote in Mass Hi-Tech in 1993: “This year’s $10K contestants and their business plans are excellent examples of an entrepreneur’s special ability to see opportunities where problems or needs exist, to forge a vision of the possible, to ask ‘Why not?’ and to motivate, prod, beg, persuade, and sometimes drag together the people and resources necessary to turn their vision into reality.” 

With the growth of the internet and its applications in the late ’90s, followed by hiring freezes at large companies after the financial crisis of 2008, student interest in entrepreneurship reached new heights and entrepreneurship became a credible career path for the first time. Today, MIT students can choose from more than 80 extracurricular activities and 60-plus classes related to entrepreneurship. And with support from alumni, faculty, and staff members, and the Institute’s explicit adoption of entrepreneurship as part of its core strategy, MIT’s entrepreneurial ecosystem is thriving.

Adapted from From the Basement to the Dome: How MIT’s Unique Culture Created a Thriving Entrepreneurial Community by Jean-Jacques Degroof, SM ’93, PhD ’02, with permission from The MIT Press. Copyright © 2021