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.
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.
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...
Stanford and StartX are different entities. It's not clear from the article whether Stanford will take equity in investments it may make outside StartX.
>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.
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?
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.
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 TLDR; it has more to do with the inability to understand what is being said.
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].
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.
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.
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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[ 2.9 ms ] story [ 63.0 ms ] threadThe 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.
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.
Everything I've heard about startup investment recently has made me feel sad about the world.
That said, raising capital is challenging.
[1] http://www.bu.edu/otd/vc/ [2] https://en.wikipedia.org/wiki/John_Silber#Endowment_controve...
[1]http://www.zli.bus.umich.edu/wvf/
Edit: Comma Removed
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.
http://www.smc.stanford.edu/sites/default/files/site_files/R...
Not surprising to see private equity providing the biggest return (35%) of all of Stanford's asset class (Bonds, Real Estate, Stocks, etc.).
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...
Great job.