Does An Entrepreneur Need An M.B.A.?

What is the value of an M.B.A. these days for young college graduates who want to start their own company?

Probably about a negative $250,000. (I have an M.B.A., and I was once a young college graduate.) I don't think an M.B.A. matters very much for starting a company. A much better educational background is an engineering degree. You can always hire M.B.A.s, but if you don't have the ability to conceptualize and deliver a product, you've got nothing. By the way, the founders of Apple Computer (nasdaq: AAPL - news - people ), Microsoft (nasdaq: MSFT - news - people ), Yahoo! (nasdaq: YHOO - news - people ) and Google don't have M.B.A.s, but I digress.

What is the thing that will finally convince a VC to invest in your company? Do they absolutely have to believe in your product, or is it enough if you can convince them it has a good chance of making money?

I never worked for McKinsey, but we can make this into a two-by-two matrix: believe in product yes/no and believe you can make money yes/no. Obviously, the best spot is where they believe in the product and your ability to make money. I have a hard time imagining VCs would invest in a product they don't believe in but are somehow convinced they could make money with it nonetheless. The frustrating spot is where VCs love your product but don't think they can make money with it. So the answer is that they have to believe in the product and think that they can make money.

Can you succeed with a good team and hard work even if your initial idea is not a winner?

Sure. Most initial ideas are not winners anyway. You have to be flexible: Sometimes you start with a great idea and a lousy team. Then you get rid of the team. Other times you start with a lousy idea and a great team. Then you get rid of the idea. Great companies often make radical changes in direction as the times change. Nokia (nyse: NOK - news - people ), for example, started in forest products.

What makes a VC a first tier, second tier or third tier? What are the criteria?

Either the egos of the partners or the VC's PR firm decides that it's a first-tier firm. People try to use mathematical calculations like internal rate of return and "cash on cash," but that's subject to manipulation.

For entrepreneurs, there are only two tiers: the tier that invests in you and the tier that turns you down. As an entrepreneur, you should believe that your company will achieve such success that it will vault your investors into the top tier. That's all that really matters.

The United States and to some degree the Pacific Rim seem to be the only places where new technology and startups take off. Is that the case? And if so, why?

No, this isn't the case at all. Silicon Valley simply has had the best PR. If you're an entrepreneur, you can be successful anywhere. If you're not, you'll still fail even if your offices are on Sand Hill Road or right next to Hewlett-Packard (nyse: HPQ - news - people ).

Should a VC, if they have time, try to be more involved in a company, or is a hands-off approach more desirable?

Is this a trick question? A VC should be very involved with a company, assuming that the VC has a clue. This is a big assumption. Not every VC does. With a clueless VC, a hands-off approach is vastly superior.

What criteria should be used to determine what to do with a failing company? Invest more and try to save it? Fold?

I don't know the answer to this question, and I hope I never have to figure it out. From what I can tell, mostly you come to learn that you should or shouldn't have invested more with hindsight: "I knew that company would make it." I think that good VCs publicize the winners that they "knew" would make it and sweep the losers under the table.

Is a good education a key to success in the business world?

If by education you mean book learning and class attending, then the answer is no. If by education, you mean the totality of experiences in your life, then the answer is yes. For example, someone could never attend college and still be a great entrepreneur. And someone could get a Ph.D. in management and not be able to operate a lemonade stand.