Dropouts look to learn from Zuckerberg
By April Dembosky in San Francisco
An increase in the number of students dropping out of US universities to follow their dreams and launch start-up companies in Silicon Valley may be the latest sign of an internet bubble, according to industry experts.
Professors at MIT, Stanford and the University of California at Berkeley, three universities with a strong tradition as IT powerhouses, confirm an uptick in entrepreneurial dropouts as students seek to emulate the examples of famously successful non-graduates such as Bill Gates at Microsoft, Steve Jobs at Apple and Mark Zuckerberg at Facebook.
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About a dozen college dropouts interviewed by the Financial Times said that they knew others who had made a similar choice. All confirmed investor willingness to fund them.
“They want to see that you believe your story enough to risk everything for it,” said Julia Hu, who left MIT when she got funding to build her sleeping device company, Lark. “They don’t like to fund non-committed entrepreneurs. In that sense, it’s in their interest not to deter you when you say you are dropping out of school.”
Harj Taggar, a partner with Y Combinator, an incubator founded in 2005 that funds young entrepreneurs, said applications from students were rising. He noted that there was strong interest from angel investors who were “willing to fund these 18 and 19-year-old kids”.
Part of the reason, he said, was that it was a lot cheaper to start an internet business today than during the internet bubble of the late 1990s. Laptop computers have become less expensive and web-based companies do not have manufacturing costs. Young people without families or mortgages were also willing to live in cheap apartments, eat noodles and work long hours, he said.
“Mark Zuckerberg showed that a guy sitting in his dorm room can code a website that’s worth $100bn,” Mr Taggar said, referring to the explosive growth of Facebook. “Now others have realised, next time we hear a 19-year-old who has a smart idea, we should listen.”
As investors scramble for a stake in the frenzy of online start-ups, university students are attracting funding from venture capitalists and angel investors, and are in turn choosing, or in some cases being asked, to abandon their studies.
“The environment encourages students to leave,” said Andre Marquis, director of UC Berkeley’s entrepreneurship centre, who had three students drop out of his programme last semester alone. “In Silicon Valley, it’s almost a badge of honour to have left school for your start-up,” Ms Hu said.
“Certainly people leave when there’s not a bubble,” Mr Marquis said. “It’s just more people do when there is.”
In a culture where risk-taking and making unconventional choices are seen as necessary traits to finding the next technology trend, skipping a conventional education is often celebrated rather than shunned.
Copyright The Financial Times Limited 2011
Why many star students are dropping out of college
By April Dembosky in San Francisco
When 19-year-old Ben Yu decided to drop out of Harvard in the middle of his freshman year to launch a price-comparison website for travel gear, his mother could not understand.
“In China, during the Cultural Revolution, she was sent to the farms when she was in elementary school,” he said. “She never had an opportunity for an education of any kind.”
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For Mr Yu, the choice to walk away from an Ivy League school was easy. “It seemed like it was unnecessarily postponing the future,” he said. “I realised there was no reason why I couldn’t pursue what I wanted to do entrepreneurially, now.”
In Silicon Valley, investors who are clamouring for a piece of the internet action are more than happy to help entrepreneurs like Mr Yu get started.
Peter Thiel, a prominent Silicon Valley investor, said the emphasis in US society on having a college degree has created “a bubble in education”, in which the professional value doesn’t match the $200,000 price tag. He is countering that by giving $100,000 each to 24 people under 20 to pursue an entrepreneurial idea in Silicon Valley instead of going to college
“We need more innovation,” he said. “There’s a tremendous cost to having the most talented people in society take on enormous debt, then take well-paying but dead-end jobs to service those loans for the next 15 to 20 years of their lives.”
Investors often prefer to have young founders at the helm of internet companies, because they grew up with the technology and are intimate with the young audiences many are targeting.
“The technology that young people use, it’s almost critical to have young people driving it,” said Andre Marquis, director of the entrepreneurship centre at the University of California at Berkeley. Three of his students dropped out last semester when they got funding to start a website that offers daily deals to students.
College dropouts and recent graduates also have ties to broad networks of other students, who have become prime targets in an increasingly tense talent war for engineers.
“I’m inclined to ask people to drop out,” said Jessica Mah, 19, founder of the money management site inDinero. Though Ms Mah was offered venture funding during her final year at UC Berkeley, she chose to graduate, in part to give herself more time to recruit her classmates. Now she is racing to hire more engineers and is offering summer internships to college students in hopes they will become employees, perhaps before they graduate.
Though small start-ups cannot offer huge salaries, they often promise a big chunk of equity. That prospect sometimes succeeds in luring students from school, as it did with several early employees at Facebook.
“If you have an opportunity to be an early employee, that’s justification to drop out,” said Aaron Levie, founder of Box, a document management company. He dropped out of the University of Southern California after billionaire Mark Cuban invested in his start-up. He now has 200 employees and says he’ll never go back to school: “God, no. I learnt so much in the process of building the company and there’s so much excitement. Receiving a B in advanced accounting wouldn’t do much more for me now.”
University officials defend the value of degrees, but acknowledge that schools struggle to provide the most relevant training to future entrepreneurs.
“Young people doing start-ups, they’ve got to juggle 20 things at a time, how to get financing, how to manage people, how to meet commitments,” said Joel Schindall, an engineering professor at MIT who believes the lack of these “soft skills” among engineers drives the talent war.
“There was not a shortage of engineers, but a shortage of the kind of engineer who can take the responsibility of doing the engineering and also follow through on the cost, getting it done on time, and making it well suited to what the customer needed,” he said.
Even if a start-up fails, the founder is not a failure, said Max Hodak, 21, who dropped out of Duke University to start an education company. The skills one learns at a start-up make any founder a desirable employee, he said. Mr Hodak was hired by another start up as was his co-founder, who also dropped out .
“People always say Bill Gates or Mark Zuckerberg are the exceptions,” said Mr Hodak. “The truth is, it’s way more common. You can be a dropout and not be famous, but still be really successful.”
Copyright The Financial Times Limited 2011.