How Stanford Cultivates Its Startup Culture

T.J. Duane began the Startup Garage course at Stanford University’s Graduate School of Business last September planning to build a closed online network for lawyers.

About eight weeks into the 24-week class, he and his team ditched that idea.

“We pivoted….and decided to instead build a community tool,” he says, during a recent break on campus from working on his company. His team’s startup, an innovative cross between Facebook and LinkedIn, will help graduate students find each other based on their skills and academic backgrounds.

AN INTENSIVE HANDS-ON CYCLE OF TRYING, FAILING & TRYING AGAIN

In the Startup Garage course at Stanford, failure is encouraged. That intensive, hands-on cycle of trying, failing and trying again – helps prepare students to pitch bullet proof ideas to angel investors, says Startup Garage instructor Stefanos Zenios, who is also a professor of operations, Information, and technology at Stanford.

“Startup Garage focuses on the seed-stage of funding – getting to the point where you can stand up in front of investors and ask them for $250,000 or half a million or maybe a million,” Zenios says.

About 95% of Stanford’s Graduate School of Business’s 809 students opt to take at least one entrepreneurship class – whether Startup Garage, Product Launch or Formation of New Ventures. At the Stanford Venture Studio, students who apply to be residents are using the space to design and build companies. Others are taking advantage of services like practice pitch sessions, mentor matching, or peer-to-peer coaching.

COURSES WITHIN AN ECOSYSTEM OF TECHNOLOGY & VENTURE CAPITAL

While those elective courses are at the core of Stanford’s approach to entrepreneurship, one obvious edge the school has over others is its location in Silicon Valley, the tech heartland. It’s also just miles from the biggest venture capital firms in Menlo Park, Ca. Since its creation in 1996, the Stanford Graduate School of Business’s Center for Entrepreneurial Studies (CES), had taken advantage of that proximity, hiring from Silicon Valley and bridging partnerships with its leaders, as CES directors have developed the school’s entrepreneurial curriculum.

Stanford’s vast ecosystem of advisers, investors, and entrepreneurs, coupled with the latest startup techniques, tools and thinking coming out of Silicon Valley “rubs off quicker and more deeply at the school,” says Russell Siegelman, an angel investor and former partner at Kleiner Perkins Caufield & Byers, who teaches Startup Garage and other courses.

The result: Stanford tends to attract a far higher percentage of prospective students who want to do their own thing and once here in Silicon Valley, the school serves up enough opportunities to push the odds in favor of startup founders. A record 18% of the 2013 Stanford MBA class chose to do a startup, up from 12 % in the late 1990s. According to a Poets&Quants list of the top 100 startup companies founded by MBAs, Stanford and Harvard’s business schools together accounted for more than half of the list. (To make the list, an MBA startup had to have raised a minimum of $1.6 million.)

A CULTURE OF COLLABORATION AMONG MBAS, ENGINEERS, LAWYERS & MED STUDENTS

While Harvard Business School had founders at 34 of the top 100 MBA-founded startups. Stanford’s wasn’t far behind with 32 startups on the list – including video streaming company Viki, satellite imaging company Skybox, mobile startup Karma Science, student loan refinancing company SoFi, and genetic testing startup Counsyl. And at the top 100 list is a name well-known on Stanford’s campus: Wildfire, a social media marketing company founded by a Harvard/Stanford couple in 2008. Google bought WildFire in 2012 for a reported $350 million.

SoFi, number six on the list, came out of Startup Garage. In 2011, Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady had an idea for refinancing student loans at lower rates. They decided to ask Stanford alumni to loan money to Stanford students who were refinancing. “They raised a couple of million within a year,” Zenios says. By last September, SoFi was funding $450 million in loans to 4,500 borrowers at an average savings of $9,400 per borrower.