Good and bad of Stanford’s startup scene
THE CHANCES that your startup will become a billiondollar company are almost zero. But if you do somehow manage to create a unicorn, the odds are better than 1-in-10 that you or your co-founder attended one school: Stanford.
It’s a remarkable statistic even considering its student population is overrun with go- getters — people ambitious enough to apply and smart enough to get in. More unicorn founders and top venture capitalists attended Stanford than any other US university, according to data compiled by Bloomberg and based on CB Insights’ lists of top venture capitalists and unicorn companies. And while Harvard has spawned more alumni with self-made fortunes of at least $ 500 million, Stanford’s are 11 years younger on average.
How do they do it? One obvious answer is location. Rather than create a bubble of academia within the heart of the world’s tech mecca, Stanford has embraced its proximity to Silicon Valley to give students a powerful advantage.
Stanford and Silicon Valley are “inextricable,” said alumna Heidi Roizen, a venture capitalist and co-leader of Stanford’s DFJ Entrepreneurial Leaders Fellowship, where she’s on the teaching team. “You have to look at them together.”
While that bond provides students with unparalleled access to mentors, role models and funding, it also comes with problems: startups are prioritised over schoolwork and conflicts of interest arise when professors are also seed investors.
Bloomberg conducted dozens of interviews about Stanford’s startup scene and its perks and perils. Here are some of the people who capture different aspects of the school’s culture.
If you walked into Ryan Breslow’s Stanford dorm room in the spring of 2014, you’d be forgiven for thinking no one lived there — no pictures on the walls, no clothes in the closet, no comforter on the bed. That’s because no one was supposed to be living there.
Breslow was a sophomore computer science student when he dropped out earlier that year to work on Bolt, his payment startup.
“I just became much more passionate about that than my classes,” said Breslow, 24. He spent the rest of the school year squatting on campus, secretly living in the spare dorm room and getting meals with the help of a dining hall cook he had befriended. Today, Bolt is worth about US$ 250 million, according to Adam Augusiak-Boro, a senior associate at EquityZen, a marketplace for trading employee shares of closely held companies.
At least three members of the computer science faculty are Bolt investors.
Breslow isn’t the only successful Stanford dropout. Take Snap Inc.’s Evan Spiegel, who dropped out of undergrad, or Tesla Inc.’s Elon Musk, who lasted less than a week in his Ph.D. programme before withdrawing. One notable alumnus, billionaire Peter Thiel, encourages it so much that he set up a fellowship offering young entrepreneurs US$ 100,000 to put college on hold.
Some companies are born in the classroom. Terry Winograd looks like an academic, with bushy white hair and a moustache to rival Einstein’s. When the former computer science professor first went to work at Stanford in 1973, his intentions were academic, too. Getting crazy rich wasn’t part of the plan, but as fate would have it, he was an adviser on Larry Page’s graduate research project involving web search.
Winograd never invested in his student’s startup, but he was invited to work at Google during a 2002 sabbatical and was largely paid in pre-IPO stock. The company, now called Alphabet Inc., went public in 2004 and is valued at US$ 797 billion.
“I’m not a billionaire,” he said. “But I’m comfortable.”
Winograd recognises that there’s a downside to the cosy relationship between academia and industry.
“The negative side effects are cultural,” he said. “If a student sees their fellow student getting really rich it’s hard to say to them, ‘Yes, but philosophy is important, too.”’
Other computer science professors have taken a more direct approach to profiting from their students’ ideas. David Cheriton, for example, was an early Google investor. The proceeds Cheriton has received from selling his Alphabet stock make up the bulk of his US$ 4.3 billion fortune, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 wealthiest people.
Also in the department is Mehran Sahami, who still teaches at Stanford and famously had Mark Zuckerberg, the Facebook Inc. co-founder, visit one of his computer science classes for Q& A sessions. Sahami has invested in several of his students’ companies, including a mobile payments startup called Clinkle Corp. In early 2013, more than a dozen students in the computer science department dropped out to work with Clinkle founder Lucas Duplan. The company folded about two years later.
“My expectation for the students and Lucas Duplan, who was the CEO, was that they would graduate,” Sahami said.
The negative side effects are cultural. If a student sees their fellow student getting really rich it’s hard to say to them, ‘Yes, but philosophy is important, too.’ Terry Winograd, former computer science professor