(FORTUNE Magazine) – Charlie Tillett remembers the year he entered MIT's business plan competition. It was 1991, and the second-year business student counted himself among the 50 or so active members of the school's New Ventures club. His team placed third that year--good for a $2,000 check. "We didn't get any calls from venture capitalists," he quips. "We just split the money three ways." Tillett would never have dreamed of starting his own company back then. The barriers confronting aspiring entrepreneurs were simply too great. Instead, he left MIT to become the ninth employee at NetScout Systems, a technology startup. "It was rare even for people to go and work for small companies, never mind startups," he says. "People wanted to get big, recognizable names on their resumes." But that was BIB--before the Internet boom. Before the fountain of venture capital erupted in Silicon Valley and flowed unabated to the shores of Boston Harbor. Before anyone with a dot-com dream could indulge their wildest mercantile fantasies. It seems that there has never been a better time to be an entrepreneur. So why bother going to business school? After all, this era of limitless opportunity has to end sometime. Imagine if it happened during your ten o'clock corporate accounting class.

Business schools on the West Coast have been competing with the romance and riches of Silicon Valley for some time now. But over the past year and a half, the Internet economy and the big money that defines it have invaded the country's elite East Coast MBA programs, the traditional breeding grounds for the world's business aristocracy. Students have reacted by dropping out in record numbers, either to join existing dot-coms or to start their own. The schools have responded in the only way possible: by embracing the prevailing entrepreneurial spirit. "Our school has become a laboratory for startups," says Dave Schmittlein, deputy dean of Penn's Wharton School. "Students do their courses here with an eye toward something they wish to create. And they can use our faculty as a sounding board for ideas and a suggester of contacts, which is essentially the role that an Internet company's advisory board plays."

Business schools now broadcast their entrepreneurial zeal. The Wharton School, Northwestern's Kellogg School, and NYU's Stern School all recently launched e-commerce majors--welcome mats to prospective applicants that read INTERNET ENTREPRENEURS INSIDE. MIT is offering nine courses under the rubric of its Entrepreneurship Center. The mission: "to train and develop leaders who will make high-tech ventures successful." Even Harvard, which for decades traded on its reputation as a school of general management, has bulked up its entrepreneurial offerings. In the past two years the school has added 13 new courses to its second-year curriculum--most of them with the word "entrepreneur" somewhere in the title. The school's new Silicon Valley research center is generating many of the e-business cases for these and other courses. Most significant, Harvard decided last fall to move its required first-year general management course into the entrepreneurial studies department--and to change its name to The Entrepreneurial Manager. "The course now gives students the chance to identify opportunities and implement strategies within the context of small, rapidly growing firms," says Carl Kester, chairman of Harvard's MBA program. "Places where students can actually imagine themselves in the role of CEO."

Imagine? Olukunle Malamo is long past that stage. The second-year Wharton MBA student from Nigeria is also the CEO of Hummingbox.com, a business-to-business wireless application service provider. He won $10,000 at a business plan competition in January, and his business has reached the semifinals of this year's MIT competition. Six of his classmates have approached him, checkbooks in hand, with offers to invest between $10,000 and $15,000 each. Another Wharton alum recently offered between $1 million and $2 million for a stake in Hummingbox and expressed interest in acquiring the company before the end of the year. Says Malamo: "I found it extremely difficult to concentrate in my Information Systems class after I got that call."

But he keeps going to class. After all, it's a great networking opportunity. The Wharton experience, by Malamo's calculations, has saved him $1 million in consulting and recruiting expenses alone. He found one of his partners, Harish Gandhi, after Gandhi accidentally picked up Malamo's business plan from a communal campus printer; he hooked up with other partners--from Wharton, MIT, Harvard, and Northwestern--at school-sponsored business technology conferences. He developed the marketing strategy for Hummingbox during an independent study with one professor and created the revenue model during another. In total, Malamo has six professors working as advisers on different parts of his plan, covering everything from operations and marketing to raising private equity. "If you went to a consulting firm for advice, you would get the same pool of people," says Malamo. "And unlike outside consultants, my professors are very objective, because they have no equity or stake in the company." Malamo, however, plans to offer stock options to his former professors if Hummingbox is successful. "You are paying for the most extraordinary entrepreneurial incubator," says Malamo's classmate Jonas Stiklorius. "Business school gives you the opportunity to figure out what you are good at and whom you work well with, and also to work with startups going through the early stages of financing."

Of course, all this zeal--Harvard's Kester estimates that nearly half the school is working on a business plan--has changed the dynamic on many business school campuses. What if the guy you dissed in the cafeteria goes on to become the next Jeff Bezos? It's not just school anymore; it's a high-stakes game where you ignore classmates at your peril, and where trusting the wrong person could be business suicide. As a result, the word "proprietary" pops up a lot in conversation, and nondisclosure agreements (NDAs) are more ubiquitous than keg parties. Students ask professors to sign NDAs before they talk about their projects; professors require students to sign them before they can enroll in certain classes.

Taking things too casually--actually behaving like a student--can be costly. Rob Thorne, a second-year Wharton student and CEO of Fanlink Networks, has already run through two business partners, a law firm, and $50,000. Last year he decided he would drop out of school if Fanlink got funding over the summer. But when he and his partners couldn't agree on the direction of their business--an information management system for sports and entertainment venues--Thorne was forced to dissolve the partnership, rebuild his management team, and buy back the rights to his own idea. When he returned to school last fall and began to recruit prospective associates, Thorne insisted they all sign NDAs. Of course, Wharton has been good to him too. His startup just got seed money from--you guessed it--a Wharton alum.

The defining moment for many of these student entrepreneurs is the business plan competition. In the ten years since Charlie Tillett won that $2,000 check, MIT's competition has grown, from 54 teams to 206. So has the prize money. The winning team now receives $30,000 instead of $10,000. Though Tillett's entrepreneurial fervor made him a bit of a campus oddball in '91, he made out fine. NetScout Systems, the company he joined out of business school, went public last August, and he took in about $10 million. "It was," he says, "an eight-year overnight success story." But that's an eternity by today's standards. The company on everyone's lips at MIT's competition this year is Akamai. Less than two years after finishing second at the competition, Akamai is now valued at close to $20 billion. As this year's semifinalists are introduced, the venture capitalists sit up in unison, pens and checkbooks at the ready. For aspiring entrepreneurs, it just might be the best possible time to be in business school.