Silicon Valley’s Stanford Connection

Linda A. Cicero/Stanford News Service

How the university became a driving force behind the world's best-known tech start-ups.

Once upon a time, attending a school like Harvard, Yale or Princeton would put a student on a path toward becoming part of the East Coast elite. Today, going to Stanford could make that student a billionaire.

Judging by the Stanford alumni gathered on the third floor of the university’s Huang Engineering Center this past May—Yahoo CEO Marissa Mayer; LinkedIn cofounder Reid Hoffman; and Instagram cofounder Mike Krieger, among them—Stanford students are getting BAs in Silicon Valley. And if this group—here to celebrate the 25th anniversary of their undergraduate program, Symbolic Systems—is any indication, Stanford is supplanting the Ivy League, at least in terms of output. From the Stanford Computer Forum, which aligns area tech companies with Stanford research, to the university’s Institute of Design (or to the 40-plus entrepreneurship courses and multiple venture-capital, private-equity and iPhone-app clubs, Stanford has become a hotbed, if not the engine, of Start-up Mania.

It is the second day of the Symbolic Systems conference, where “Sym Sys” students and alumni are honoring the Stanford-specific program that explores cognitive science, artificial intelligence and human-computer interaction. It’s a sort of liberal sciences parallel to the liberal arts: Sym Sys students take courses in a range of disciplines, including computer science, linguistics, philosophy and psychology. Over the program’s 25-year history, a significant percentage of its 725 alumni have gone on to become tech luminaries, and today, executives from Silicon Valley’s hottest companies—valuations in this room alone range from $1 billion to $200 billion—are paying tribute at the lectern.

The small audience is low-key, listening to their fellow alumni talk about what they got out of the program. Apple senior vice president of iPhone software, Scott Forstall, notes that his Sym Sys studies “convinced me we could build a simple touch keyboard that would work well.” He closes his speech by saying, “I guess this is a long-winded answer to give credit to Symbolic Systems for the creation of the iPhone and the iPad.”

Mayer, who recently left Google to become Yahoo’s new CEO, gets up and says the only reason she was chosen to work on the company’s user interface was that her boss saw that she had taken psychology, a Sym Sys requirement. Another class, the infamously difficult Philosophy 160A, she says, “gave me a lot of confidence when we were in crunch time” during Google’s early days.

Later in the day, Krieger stands at the podium and announces that every job he has ever had, including founding Instagram, has been because of the Symbolic Systems program. Both he and his Instagram cofounder, Kevin Systrom, also benefited from Stanford’s Mayfield Fellows Program, a selective work-study program run by the school’s Technology Ventures Program. They made contacts in the industry and were able to raise key venture-capital money. “I think of Symbolic Systems as the ideal entrepreneur’s degree,” he says.

Hoffman, a prolific investor, puts it succinctly: “What you’re forming is a set of people you’re going to go through life with.”

Whether Stanford fueled the tech explosion or the industry put Stanford on the map is a chicken-or-egg question dating back over a century. The first major tech company in the area, Federal Telegraph, was founded by a Stanford grad in 1909, making the region a leader in the development of radio vacuum tubes. Then, in 1939, Stanford graduates William Hewlett and David Packard started Hewlett-Packard, which spawned dozens of other tech companies in its wake. In 1954, one of the inventors of the semiconductor, William Shockley, moved to the area looking for engineers to work on a new transistor, and members of his staff went on to start Fairchild Semiconductor, marking the beginning of the Silicon Valley era. By the late ’60s, the area had become the center of American innovation, the natural habitat for the development of the computer industry and the rise of the Internet.

While most schools transition from regional renown to national prestige through an undefeated athletic team, Stanford’s great claim to fame was, arguably, its computer science department. Started in 1965, it followed the department of engineering in working closely with the industry. In 1968 professor emeritus and former provost William Miller helped found the Stanford Computer Forum, which allowed companies like IBM, GE and HP to get an early look at Stanford student research. “That was the beginning of the strong interactions between the computer science department and industry,” says Miller in his office in the business school’s sprawling new Knight Management Center. “It’s become much more intensified since then, particularly in the last 15 years.”

By the time of the introduction of web browsers in the early 1990s, the Internet had Silicon Valley booming. And it was two Stanford computer science grad students, Sergey Brin and Larry Page, who developed one of the most successful and significant companies of the Internet era: Google.

Then came the dot-com bust of 2000. It was in those first years after the crash, when the world thought tech was dead, that the groundwork for Start-up Mania was laid. New open-source technology made building a website affordable: By the mid-2000s, the average cost of starting an Internet company had dropped from $5 million to $500,000, thanks to a combination of factors. First, larger companies like Yahoo! and Google opened their programming interfaces to others; then the front-end revolution made web pages less static; and, finally, bandwidth expanded rapidly. The founding of alone, in 2005, launched many millions of new websites within a matter of years. As Jon Callaghan, whose firm, True Ventures, originally invested in the blogging platform, notes, “Suddenly, to start a tech company, you didn’t have to be a ten-year Intel exec and have one of the Sand Hill firms fund you.”

Fueling much of this rapidly improving technology were Stanford engineers. “Stanford is really one of the engines that drive the tech industry,” says Toni Schneider, CEO of Automattic, the company that owns WordPress. “It is this constant injection of new people and new ideas and research.” At the same time, Stanford has allowed a “tech transfer,” letting companies that are created on campus, like Google, move into the marketplace to flourish. “It had a pioneering role for universities being open to commercialization of ideas,” says Schneider.

Some of the area’s most successful start-up accelerators were founded for and, in the case of Stanford’s own StartX, by students. Y Combinator, the seed-stage funding firm that incubated DropBox and Airbnb, was venture capitalist Paul Graham’s way to encourage students to start companies rather than take internships during school breaks. And angel investor Dave McClure’s 500 Startups grew out of an app-development class he taught at Stanford.

Students who start companies at Stanford tend to stay in Silicon Valley, reinforcing the cross-fertilization between campus and community. In a place where the rates of colossal failure and exponential success are so extreme they cancel each other out, the flatline between them represents the slope of the barrier to entry. Former provost Miller says Stanford stands out precisely because it teaches its students that it’s okay to try and fail. “People are willing to experiment, and that creates this open attitude,” says Miller.

It is that very attitude that Tim Westergren says led him to found the music-recommendation service Pandora, now valued at $2.2 billion. After his Stanford graduation, Westergren took a job as a nanny so he would have time to play music on the side. It was the best decision he ever made, he says, crediting Stanford courses on organizational decision-making and leadership for convincing him to stick with what he loved to do. “The objective in these classes,” he says, “was a think-for-yourself approach to life.” Westergren also applauds the technical bent president John Hennessy has brought to the community. “Now a generation of entrepreneurs who have gone into semiretirement are looking to come back to Stanford and teach,” he says.

After Eric Schmidt stepped down as Google’s CEO, he did just that. And when he met a bright, young Israeli student in his venture-capital entrepreneurship class, he made him his business partner at the end of the semester. Dror Berman, 33, now runs their investment firm, Innovation Endeavors. “All my classmates became entrepreneurs,” says Berman. So far he has funded more than 30 companies—many of them founded by Stanford friends.

Stanford is well aware of the networking opportunity attending the school has become. In 1998 Tom Byers started the Stanford Technology Ventures Program, an entrepreneurship center in the School of Engineering that organizes seminars, conferences and the prestigious Mayfield Fellows Program. The Instagram founders were among a select few who got in. “It is the Navy Seals of entrepreneurship,” says Byers.

Back at the Symbolic Systems conference, as Krieger finishes his presentation, the room is swelling with passersby eager to hear his tricks of the trade. All the while, the question floating in the air is whether the recent billion-dollar sale of his photo-sharing app is a sign of another bubble yet to come—one encompassing Stanford’s very campus. But in a place where entrepreneurship has been democratized and failure is accepted, many students ask instead, what’s the worst that can happen if they leave school to start a company and it flops—they come back and graduate?

Fact: The acceptance rate for Stanford’s undergraduate class of 2016 was 6.6 percent, the lowest in the school’s history.

Entrepreneurs Extraordinaires

Stanford alumni have created—and then helped fund—some of Silicon Valley’s most important and influential companies.

Class of ’88: Reed Hastings
MS in computer science
Estimated Net Worth:
$414 million
Cofounded Netflix in 1997 and currently serves as its CEO

Class of ’88: Tim Westergren
BA in political science
Estimated Net Worth:
$63 million
Cofounded Pandora in 2000; currently its chief strategy officer

Class of ’90: Reid Hoffman
BS in cognitive science
Estimated Net Worth:
$2.5 billion
Former PayPal executive vice president; cofounded LinkedIn in 2002

Class of ’06; class of ’08 & ’09: Kevin Systrom & Mike Krieger
Systrom, BS in mgmt. sci. & engineering; Krieger, BS & MS in symbolic systems
Estimated Net Worth:
Systrom, $375 million; Krieger, $95 million
Sold Instagram for $1 billion

Class of ’89 and ’92: Peter Thiel
BA in philosophy; JD
Estimated Net Worth:
$2.5 billion
Cofounded PayPal in 1998, sold it to eBay in 2002

Class of ’95 and ’98; class of ’98: Sergey Brin & Larry Page
Both, MS; Brin, PhD in computer science
Estimated Net Worth:
Brin, $17.7 billion; Page, $17.8 billion
Founded Google in 1998

Source: Bloomberg billionaires index

Julie Coe