
Stanford University Is Going To Invest In Student Startups Like A VC Firm - roneil
http://techcrunch.com/2013/09/04/stanford-university-is-going-to-invest-in-student-startups-like-a-vc-firm/
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doctorpangloss
>StartX companies must have at least one founder with a Stanford affiliation.
The majority of StartX companies have a founder who is currently or was
previously an undergraduate or graduate student at the school.

In the world of academia, it _matters_ , for some reason, that a founder have
a Stanford affiliation.

I like startup culture specifically because it doesn't import this kind of
nepotism. Or for that matter any of these academic institutions. Once StartX
takes Stanford's money and plays by the rules of the academic world, it
extends the rules of Stanford's admissions committee onto StartX's investments
(equity or not).

I _like_ that diversity doesn't matter in the startup world, generally
speaking. I _like_ that you don't have to do something charitable or socially-
conscious. I like that you don't need a high SAT score or play a varsity
sport. I like that startup culture doesn't really have a place for people like
that—academic grants do!

Academic grants are so enormously generous and follow such significantly
different standards of accountability that you can't really say that
Stanford's $1 million are the same as NEA's $1 million.

It would be nice if one dollar meant the same thing everywhere, but if the
standards by which that dollar is granted differ, it's hard to objectively
compare two startups as routinely as we do by the capital they raise, the
growth they experience and the revenue they generate.

No doubt my elitism is also an academic import. I get that. At least don't
call what Stanford funds a startup. No equity? Not a startup anyhow. Don't mix
me in with the folks who got where they are under Stanford's priorities,
Stanford's standards of accountability and Stanford's money.

Long story short: taking funny money is bad for the business.

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spenny2112
I didn't go to Stanford or an Ivy League school...nor did anyone on my team
and I'm in StartX. They make exceptions.

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snoonan
They're doing this very right. It's a grant program with no equity stake,
first of all. Second, it requires at least 30% of at least an initial 500k
come from outside VC.

The author seems to be confused about Stanford's "upside" and the value of no-
strings cash / extra PR for early stage companies from these funding events.
More runway for your babies never hurts.

~~~
dapole
Are they? I feel like this goes against most of what startups and VC funding
and incubators like YC are about. Judging people based on the strength of
their ideas and what they have accomplished so far instead of pedigree.

~~~
snoonan
I definitely see your point! It seems to be designed to address part of it,
however. Raising $500k first would seem to suggest the business has merit on
its own. I'm sure it's more nuanced than that in practice, though...

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lhnz
So basically investors won't even give you the time of day if you speak with a
non-foreigner accent and aren't affiliated with an ivy-league university.

Everything I've heard about startup investment recently has made me feel sad
about the world.

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daveove
This is one specific investor therefore I'd caution making generalizations
about "investors" in general. Accents - I presume you mean "if you speak with
a foreign accent" and are alluding to PG's comments about accents. I'd read
PG's clarification on the context of the comment.
[http://paulgraham.com/accents.html](http://paulgraham.com/accents.html) TLDR;
it has more to do with the inability to understand what is being said.

That said, raising capital is challenging.

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cowsandmilk
maybe it is news because it is Stanford, but half the commenters act like this
is something new to academia. It certainly is not. For instance, Boston
University has long joined in Series A and Series B rounds[1]. This is despite
the caution you might expect a university who poured $85 million into a
faculty startup might show[2].

[1] [http://www.bu.edu/otd/vc/](http://www.bu.edu/otd/vc/) [2]
[https://en.wikipedia.org/wiki/John_Silber#Endowment_controve...](https://en.wikipedia.org/wiki/John_Silber#Endowment_controversy)

~~~
enkirah
I agree, this idea is not that novel. University of Michigan has been
investing its endowment money in start ups for a long time in the form of MBA
student run groups[1]. Though I will point out this program does not
specifically invest in Michigan Affiliated Entrepreneurs.

[1][http://www.zli.bus.umich.edu/wvf/](http://www.zli.bus.umich.edu/wvf/)

Edit: Comma Removed

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gregwebs
I am not sure why there are so many negative ideas about academic affiliation.
StartX is not the only startup accelerator around. Limiting themselves to
founders with a Stanford affiliation differentiates them from others and
allows them to heavily leverage existing networks. Disclaimer: I work at a
StartX accelerated company.

As another commenter pointed out: Stanford is probably already investing in VC
funds. This just lets them cut out the middle men, particularly considering
they are required to invest along side other VCs.

~~~
partyanimal
Correct. Stanford already invests 12% of its financial assets in private
equity (PE firms, venture capital, etc.)

[http://www.smc.stanford.edu/sites/default/files/site_files/R...](http://www.smc.stanford.edu/sites/default/files/site_files/Report%20from%20SMC%202011.pdf)

Not surprising to see private equity providing the biggest return (35%) of all
of Stanford's asset class (Bonds, Real Estate, Stocks, etc.).

~~~
gregwebs
Actually that is very surprising relative to average VC return. Is there a way
to break down the PE category?

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charlesbonello
Jesus, this is a tremendous idea and opportunity.

Love to see big academia getting behind this, and looking at incubation in a
different way.

I'm a little biased given that the program I started espouses almost the same
exact structure as this, and of course get press coverage on the same day.
[http://www.forbes.com/sites/alextaub/2013/09/04/meet-rta-
sum...](http://www.forbes.com/sites/alextaub/2013/09/04/meet-rta-summer-
academy-a-new-take-on-startup-incubation/)

Great job.

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rbanffy
I understand some people may feel uncomfortable with what they consider unfair
selection criteria, but I see it more as an extension of the education
process. Building a startup is a very intense educational process.

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001sky
Headline: Stanford is Non-profit investing like a VC firm?

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Sagat
Academics looking to get rich? Can't blame them.

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partyanimal
University endowments of top universities like Stanford and Harvard are some
of the biggest sources of funding for alternative asset management firms
(private equity, venture capital, hedge funds, etc.). They have their own
portfolio management team managing these funds. Why pay VCs and private equity
firms 20%-30% if they can just cut out the middle men and invest the money
themselves?

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Nicholas_C
Who is going to be evaluating these investments?

