Quantifying the impact of MIT’s startup culture.
MIT alumni are known for being exceptionally entrepreneurial. But when I quantified their achievements in a study initiated by the MIT Alumni Association, even I was surprised by the results. Estimates based on 2006 data revealed that living MIT alumni have founded or cofounded 25,800 companies that today employ 3.3 million people worldwide. The annual sales of these companies add up to about $2 trillion–the equivalent of the 11th-largest economy in the world.
Massachusetts alone is home to about 6,900 alumni companies (accounting for roughly a million jobs worldwide), including Raytheon, Thermo Fisher Scientific, Analog Devices, Teradyne, BBN, Bose, Avid, International Data Group, Medical Information Technology, Progress Software, and Genzyme. Although fewer than 10 percent of MIT undergraduates grew up in the state, roughly 31 percent of all companies founded by alumni are based here. Meanwhile, California has more than a half-million jobs created by MIT alumni, and major firms founded by alums abroad include Patni Computer Systems, founded in India by Narendra Patni, SM ‘69, and Sohu.com in China, which I helped Charles Zhang, PhD ‘94, establish in 1995.
With strong ties to industry from the very beginning, MIT has been producing entrepreneurs ever since William Nickerson, Class of 1876, created the Gillette Safety Razor Company in 1901. James McDonnell, SM ‘25, founded what is now McDonnell Douglas in 1939, and Robert Noyce, PhD ‘53, cofounded Intel in 1968, to cite just two other pioneering examples. Recent MIT spinoffs include Brontes, which produces technology for 3-D digital imaging, and A123 Systems, which makes innovative batteries for electric cars. We found that MIT’s reputation in this area attracts both students and faculty with an entrepreneurial bent. Indeed, 42 percent of alumni entrepreneurs who graduated in the 1990s said the culture drew them to MIT.
Over the past 40 years, the MIT Alumni Association and the Institute itself have created many programs and organizations to foster that entrepreneurial culture. In 1969 the MIT Alumni Association asked 10 of us to create a pilot Young Alumni Entrepreneurship Seminar. Our first seminar attracted 325 alumni, dramatically exceeding our target of 30. We rolled out a nationwide program over the next three years, reaching more than 3,000 alumni. (If you attended one of these programs, I’d be delighted to hear about what, if anything, happened as a result of the seminar!) Eight of us then established the now-worldwide MIT Enterprise Forum, which builds connections between technology entrepreneurs and their local communities, producing educational and coaching programs through its network of 24 chapters. The Cambridge chapter alone has helped nurture about 700 young companies.
In 1990 I persuaded Lester Thurow, then dean of the Sloan School, to let me start the MIT Entrepreneurship Center as a permanent source of support for would-be entrepreneurs throughout MIT. We now have about 20 faculty members, including both academics and businesspeople, who teach 30 entrepreneurship subjects to hundreds of students each year. We also helped develop the $100K Business Plan Competition and many student clubs, including the Venture Capital/Private Equity Club and technology entrepreneurship clubs specializing in biotech, energy, media, and nanotech. Three years ago we raised our sights even higher by launching the MIT Sloan Entrepreneurship & Innovation (E&I) MBA Track to provide intensive opportunities for students committed to an entrepreneurial life. So far, about 25 percent of incoming MIT Sloan MBA candidates are enrolling in the program. Already, E&I students have taken steps toward founding companies and have won important university business-plan competitions. A third of the alums who graduated in the first E&I class had started new firms before or soon after last spring’s commencement.
Meanwhile, since 2000 the MIT Venture Mentoring Service has provided free entrepreneurship coaching to students, staff, faculty, and alumni. And in 2002 the Deshpande Center for Technological Innovation began to fund faculty research with a high probability of commercialization. The Deshpande and MIT Entrepreneurship Centers also conduct Innovation Teams classes to encourage people to form new companies.
It’s all part of an entrepreneurial ecosystem that has left the world richer in everything from razor blades to microchips to electric cars.
Edward B. Roberts ‘57, SM ‘58, SM ‘60, PhD ‘62, the David Sarnoff Professor of Management of Technology at MIT’s Sloan School of Management, is founder and chair of the MIT Entrepreneurship Center. He collaborated with David Hsu, PhD ‘01 (now an associate professor at Wharton), and Charles Eesley, PhD ‘09 (now an assistant professor at Stanford), on the report Entrepreneurial Impact: The Role of MIT, available at entrepreneurship.mit.edu/impact.php.