How Universities Should Prepare Founders

How should universities prepare students to start startups? Y Combinator is in the perfect position to answer this question, because we get them next. We're like grad school. And because YC has had 20 years to refine its model of what a promising founder looks like, you probably won't find a better target.What do the YC partners look for? It's surprisingly simple. They want people who are good at building things and have a habit of doing it.The hard part of startups is product: knowing what to build, and being able to build it. And that kind of knowledge comes from studying computer science or mechanical engineering or molecular biology, not management or finance. [1]So the way to prepare undergraduates to become successful founders is not to give them some new curriculum focused on "entrepreneurship". It's to do what universities already do best — to teach them computer science and mechanical engineering and molecular biology. [2]Indeed, preparing students to start startups is closer to the ideal of liberal education than preparing them for almost any other kind of career. Startups succeed or fail based on how much customers like the product. Customers don't care what the founders studied in college. So founders are free to study whatever they want, as long as they get good at building things.But building should be understood in a very broad sense. It doesn't mean all would-be founders have to study some form of engineering. Almost any kind of expertise that could be described as building or creating could be useful. It was useful to Steve Jobs to have studied calligraphy, for example; it was one of the reasons Apple dominated desktop publishing. So while math and science and engineering and design tend to be good bets, I would not want to draw a sharp line around them, because I can imagine other forms of building that could be useful. And of course you don't have to major in something to be good at it. Mark Zuckerberg was good at programming, but he was a psychology major, not a CS major.The best way to describe what would-be founders should study is that they should seek out powerful ideas. But smart people are naturally attracted to powerful ideas anyway. So as long as departments teaching powerful ideas exist, the sort of people who'd make good founders will find them. [3]In fact there are only two things universities need to change to be perfect at preparing founders: they need to make students feel that starting a startup is something they can do, and they need to encourage them to work on their own projects.At the moment, the belief that it's possible to start a startup is very unevenly distributed. YC now gets so many applications that our application data is a reasonable proxy for interest in startups at different universities, and Harvard alumni, for example, apply at about twice the rate of Yale and Princeton alumni. Presumably Harvard students aren't that different from Yale and Princeton students; the reason Harvard students go on to start more startups is just that it's more customary there. Which in turn implies that merely by making their students feel that starting a startup is a viable option, Yale and Princeton could at least double the number who do.Once a university has a culture of starting startups, you don't have to convince students that it's a viable option. New students learn that from older ones. But at a university that doesn't have much of a startup culture yet, there are things you can do to help this realization along. The most effective is probably to show students examples of people who've done it.Until you've seen some founders in real life, you tend to think that starting startups is something done by other people. Seeing them pops that bubble. In fact seeing founders in real life is doubly inspiring: they seem impressive, but they also seem human. Especially when they talk about the early years, when they were clueless and made lots of mistakes. So strangely enough seeing founders in real life makes being one seem simultaneously both desirable and accessible. It makes students think "I want to be like that, and I could."How inspiring founders are to students is a function roughly of how rich and famous they are divided by how much older they are than the students. So it's not essential to bring famous billionaires to campus. Founders in their mid twenties who are 3 years into a startup with a valuation of a couple hundred million will do as well; they may only be a twentieth as rich and famous, but they're twenty times easier for students to identify with.________________ It's obvious why universities that want their students to start startups need to make them believe it's a viable option. But why is it so important for students to work on their own projects?There are four reasons. The first is simply that it's a great way, possibly the best way, to understand a subject really deeply. The excitement of creating something new is a much more powerful motivator than the fear of doing badly on an exam.Second, working on projects together is the best way for cofounders to discover one another. The most successful startups tend to have multiple founders, and the only way to tell for sure if someone will be good to work with is to work with them. Apple and Microsoft were just the last of many projects their founders had worked on together.Third, a startup is a project, so starting one will feel natural to someone who's used to working on projects of their own. It won't seem weird that there's no teacher or boss telling them what to do. They're used to telling themselves.Fourth, and perhaps most surprisingly, random side projects are where the best startup ideas come from. The best startup ideas tend to seem so implausible at first that anyone consciously looking for startup ideas would reject them. Who'd expect to start a huge company by creating a student directory? So the way to discover the best startup ideas is not to look for startup ideas but just to work on whatever random projects seem interesting. Because in fact such projects are far from random: young people who are good at building things are technological bellwethers, so any idea that seems interesting to them is disproportionately likely to lead somewhere valuable, even if they themselves don't realize it yet.Now it should be clear why the YC partners care a lot about the projects that applicants have worked on and not at all about their GPAs. Projects are the best source of knowledge, the best source of founding teams, and the best source of startup ideas.But encouraging students to work on their own projects may be difficult for universities. It will mean giving the students more free time, and universities may not like to do that.Microsoft and Meta have something in common that few people realize. They both got started during reading period at Harvard. Reading period is the gap between the end of classes and the beginning of final exams. It's called reading period because students are supposed to spend it preparing for exams. But reading period also turns out to have the unique combination of qualities that make it perfect for starting new projects: the students are all on campus, and they don't have anything due the next day. That latter constraint, especially, is a huge drag on the most ambitious students. Merely eliminating it for a few weeks resulted in two trillion dollar companies. Imagine what the US GDP would be if reading period at Harvard were twice as long.Universities will tend to resist the idea of keeping students less busy with coursework. Partly because administrators feel that if they want to achieve something, they have to do it by taking active measures. Achieving something merely by leaving students alone is alien to their nature.And they should be left alone. These things should be the students' own projects; the university should resist the temptation to make them official. Partly because students will be more excited to work on a project that's entirely their own, and partly because many projects wouldn't survive official recognition, because they break some sort of rule. Bill Gates and Mark Zuckerberg both got in trouble with the Harvard administration over projects they worked on as undergrads. Bill broke university rules by bringing Paul Allen, who wasn't a student, into the computer lab with him to work on Altair Basic. Zuck got in such trouble over Facemash that he was put on disciplinary probation. And their cases are probably more the rule than the exception. Universities have lots of rules, and novel projects are often untidy things.Right now there are students flying drones out of line of sight. Turn a blind eye to it.Another reason it will be hard for universities to keep students less busy is that they'll worry that without some kind of oversight, most students will just waste whatever free time they're given. And they will! The price of giving the most energetic students room to do even better is that it leaves the least energetic ones room to do even worse. But that's a price that's worth paying, because if the most energetic students do better they could do a lot better, whereas the laziest students already learn so little that there's not much room for them to do worse. So giving all the students some of their time back could improve the average outcome a lot, even if it doesn't move the median. [4]It may seem a bit excessive to change the whole schedule of the university just to encourage would-be founders. They're never going to be more than 10% of the students. And it probably would be excessive if this change only helped founders. But in fact giving the students some of their time back would help all the most energetic and ambitious ones. They'd all explore new things of one type or another if the pressure of work were relieved for even a week or two.________________ Now that I've explained how universities should prepare founders, I should explain how not to. One thing universities can't do is actually teach students how to start startups. Starting a startup is one of those things, like chemistry or painting, that you have to learn by doing. Which means a properly run class on how to start a startup would have to be a lab class: the students would actually have to start startups. And I know exactly what a class of this type should look like, because YC is it. But YC is very different in structure from a university, and if you tried to cram it into an undergrad degree program, it would become a joke. Are the students supposed to start these companies without any funding? Are they supposed to run startups, which notoriously take every moment of your time when done properly, while simultaneously taking three or four other classes? And what if, despite these handicaps, some of the startups actually take off? Are the students just supposed to abandon them? Because it's either that or drop out.Running a startup is incompatible with being a full time student. The only way to learn how to start a startup is to do it. Those two statements are so obvious that they're practically truisms. And yet so many people manage to remain in denial about what they imply. You can't teach students how to start startups.One common response to this inconvenient truth is to pretend to teach them how to start startups, for example by organizing business plan competitions. The students collaborate to come up with a startup idea, which they then pitch to simulated investors. This kind of exercise is not merely useless but positively misleading. It trains founders to think that fundraising is the essential step in starting a startup — that the core of starting a startup is to create a story that appeals to investors. As an investor, I can tell you that's not true. Fundraising is merely a necessary evil. The people you need to impress are users, not investors, and the way you impress them is with prototypes, not words. The core of starting a startup is not creating a story that appeals to investors, but creating a product that appeals to users. [5]In fact would-be founders should be doing exactly the opposite of what students do in business plan competitions. Instead of thinking about startups without building anything, they should be building things without thinking about whether they'll turn into startups.Probably one of the reasons universities are tempted to organize bogus things like business plan competitions is that if they actually took the optimal measures to prepare students to start startups, it would look too quiet. Imagine if a university were doing everything right. Students would be getting a deep knowledge of how to build things in classes they were taking out of genuine interest, and working eagerly with their friends on side projects that had nothing to do with school. The students would graduate with exactly what predicts success in founders: the ability to build things and a habit of doing it. Plus a significant number of those side projects would be incipient startups. And yet it would look to parents and prospective students as if the university wasn't doing anything. Where are the classes on "entrepreneurship"? Where is the Innovation Center?And indeed this is another great thing about the optimal plan for preparing startup founders: it costs nothing extra. You don't have to hire any deans of entrepreneurship or build any new buildings. In fact if you do, those things will tend to drag you down; there's no need for them, so if they have any effect at all it will tend to be for the worse. If you have spare money, give it to the people teaching computer science or mechanical engineering or molecular biology. [6]But if the optimal route looks too quiet, the solution is not to avoid it. The solution is to stand firm, knowing that you're doing the right thing, and eventually the results will speak for themselves. If you can develop an organic startup culture among your students and there are multiple students in every year who go on to start successful ones, this will soon become evident to anyone paying attention. Notes[1] Should students still study computer science if AIs will write most code? Definitely. CS is an interesting subject in its own right and also a great way to understand problem solving in general. And even if you have AIs writing all your code for you, you're still in the position of an engineering manager, and good engineering managers should be able to do the work of those working for them.[2] One reason I always put "entrepreneurship" in quotes is that it's a misleading word to use to describe starting startups. "Entrepreneurship" simply means starting one's own business, and startups are a microscopically small subset of that world in which the rules are completely different. So conflating the two is asking for trouble.[3] Of course all departments will claim to be teaching powerful ideas. But false claims of this type don't seem much of a danger. The sort of people who'd make good founders wouldn't even need to see through them; they simply wouldn't be interested enough in the classes taught by such departments to have much of their time wasted by them.[4] There's an interesting parallel here to variation in income. The bottom of the income scale is anchored firmly at zero, because there are some people who are either incapable of working or just not interested in doing it at the moment. If you let there be more variation in income, it won't affect the income of the people at this end of the scale; n times zero is zero; but at the other end of the scale you'll see enormous change.[5] Presumably one reason these competitions lean toward impressing investors rather than users is that it's the only way to have a single set of judges. Investors can be treated as interchangeable, whereas the users of each product might be different. But if it's impractical to measure the right thing, that doesn't mean the solution is to measure the wrong one.[6] Another thing that will tend to draw universities away from the optimal path is business schools, if they have them. Business schools were not designed to train founders. They were designed to train the managerial class of the large industrial companies that arose in the early 20th century; they're the West Points of industrial capitalism. That's why their official name is usually the School of Management. But while the skills they teach might be useful in running companies beyond a certain size, they're not the critical ingredient in founding them. And the skills that are are already taught by other departments. So to the extent business schools affect their parent university's strategy for preparing founders, it can only be by adding error.Thanks to Trevor Blackwell, Daniel Diermeier, Jared Friedman, Diana Hu, Michael Kotlikoff, Jessica Livingston, Robert Morris, Harj Taggar, and Garry Tan for reading drafts of this.