Stanford University students Fabian Bock (left) and Josephine Chen (right) present a semester project to a group of visiting venture capitalists during their Technology Entrepreneurship class in Stanford, California. Picture taken March 11, 2014. — Reuters
STANFORD, California — At the end of their first year at Stanford University, a half dozen students snagged an apartment-style dormitory on the third floor of Griffin House, overlooking the campus golf course. A little over a year later, in the autumn of 2014, just two were left at Stanford. The others had gone to work on their startups. They had a big advantage: Fellow roommate Chris Barber, 21, was a budding venture capitalist, already learning about the business of injecting funds into promising new firms. He funded companies run by three of his roommates. Long one of America's elite universities, Stanford has grown into the leading alma mater, by far, for entrepreneurs receiving early-stage funding from top venture capital firms. What most outsiders don't see: how early the investment community starts cultivating Stanford students, how committed the students are, and how deeply the VC culture has burrowed its way onto campus. At Stanford now, venture capitalists are teaching, investing in students' startups, volunteering as mentors, occasionally even visiting the dorms. Professor-turned-VC Balaji Srinivasan visited Griffin House last autumn, shortly before he joined top venture firm Andreessen Horowitz. He was invited to discuss the emerging currency bitcoin. For VCs, the attraction of academia is simple: Some of the hottest tech start-ups are founded by college kids. Student-run firms that met venture capital backers at Stanford include Snapchat, the photo-sharing service. Chief executive Evan Spiegel dropped out two years ago to work on the venture. His first VC backer, Jeremy Liew, is a Stanford alumnus. Perhaps most famously, Google founders Larry Page and Sergey Brin were Stanford graduate students. They met their first investor through an introduction from Professor David Cheriton, who also ended up investing. Some on campus find the industry's reach troubling. The students' focus on doing business, they say, distracts from the scholarly mission of college and opens up instructors to potential conflicts of interest. The venture money also provides a temptation to drop out. “VCs can be a bad influence and are not a good role model for students,” says Vivek Wadhwa, a fellow at Stanford's Rock Center for Corporate Governance. Faculty members who aren't venture capitalists counter that VCs provide invaluable real-world insights. Stanford's graduation rates have dipped somewhat in recent years. Of students who enrolled in 2009, 90 percent had graduated within five years, Stanford said, compared with a five-year graduation rate of 92.2 percent five years earlier. Some students say they are quitting to start companies. Stanford says it doesn't track the reasons students leave. Reuters asked Stanford President John Hennessy whether there would be a conflict of interest if a Stanford instructor offered a student an implicit incentive, in the form of venture cash, to leave school. “It's clearly at some level a conflict,” says Hennessy. “It's not a direct conflict, but it is a worrisome issue.” Late last year, the university introduced a formal policy to govern faculty investments in student companies. If a faculty member has direct involvement in the student's academic program, the investment requires approval, including from the vice provost and dean of research. The new policy states “The strong presumption is that such involvement would constitute a significant conflict of interest that could not be mitigated or managed and that it would therefore not be permitted.” It applies only to people with full-time positions. A Stanford spokeswoman said no requests for approval have been made by faculty members. — Reuters
