Dropping Out to Succeed: Entrepreneurs In University




Between 2013 and 2014, I wrote a blog at higher-learning.ca covering a wide variety of student-centric concerns. I have archived some of these posts here since that website no longer exists. For more information on my student leadership experience, please click here.


Recently, I attended a event for the planning of an entrepreneurship centre at my university. It’s a collaborative effort between students, faculty, and administration that will combine industry expertise, university resources, and student ingenuity. It’s a great idea and I’m really excited to be a part of it, especially because students will be driving the centre’s development.

One of the topics that came up during our discussion was the University of Waterloo’s VeloCity initiative, which began in 2008. VeloCity was originally a special residence where entrepreneurial students could live and work together – labs and conference rooms are even built into the residence.

The growing VeloCity program now boasts a 7000-square-foot workspace in downtown Kitchener, as well as a venture fund that awards tens of thousands of dollars to top-performing student companies.

Now, here’s the interesting part – the venture fund was made possible by a $1 million donation from Ted Livingston, a 23-year-old who dropped out to grow his tech startup. The business in question is called Kik Messenger. He originally wanted to call it the ‘Dropout Fund’, but obviously Waterloo wouldn’t allow that and it became known as the VeloCity Venture Fund.

That story is something that really stuck with me, and it got me thinking about how universities are all jumping on the entrepreneurship bandwagon all of a sudden. The phenomenon of the ultra-successful dropout is something that has yet to be addressed by any Canadian university.

I’m going to be examining why Canadian universities are suddenly becoming champions of entrepreneurship, whether they’re doing it correctly, and why they are being shortsighted regarding entrepreneurship (especially dropouts). I’ll end with a few recommendations for entrepreneurial education in a post-secondary setting.

Are Degrees a Prerequisite for Success?

Ted Livingston isn’t the only successful person to have dropped out of university. Here’s a short list of people you may recognize, along with the companies they dropped out of school to work on:

  • Mark Zuckerberg (Facebook)
  • Steve Jobs (Apple)
  • Bill Gates (Microsoft)
  • Arash Ferdowsi (Dropbox)
  • Jeffrey Kalmikoff (Threadless)
  • Sahil Lavingia (Pinterest)
  • Gabe Newell (Valve Corporation)
  • Richard Branson (Student Magazine, then Virgin)
  • Michael Dell (Dell Computers)
  • Giorgio Armani (Armani)
  • Ralph Lauren (Ralph Lauren)

This list doesn’t even take into account the multitudes of celebrities and entertainers who didn’t make it to graduation. Among them are such names as Ellen DeGeneres, Brad Pitt, Oprah Winfrey, Lady Gaga, John Lennon, and Tom Hanks. Walt Disney didn’t even finish high school.

This may seem a little discouraging to university students, but keep in mind that there are a lot of people who drop out of university who don’t become billionaires, business moguls, or celebrities. There are also a lot of successful people with university degrees!

To be precise, about 20% of billionaires have never completed high school and/or university, which means that a university degree is still a safe bet, statistically speaking. However, when one in five of the world’s most successful people have to drop out of school to pursue their passions, this suggests that there is some sort of trade-off between success and formal education for a significant subset of the university population.

The fact that one in five of the world’s most successful people are ‘uneducated’ becomes even more interesting when you look at entrepreneurship statistics in Canada. In 2010, 2.7 million Canadians were self-employed, and that number is growing. One CIBC study noted that 80% of new business owners were entrepreneurs by choice, not because of a lack of employment. Also, a report by the Council of Ontario Universities claims that 46% of Canadian students have plans to start their own business some day.

The face of Canadian employment seems to be changing. For many, the allure of ‘being your own boss’ is beginning to eclipse the brag factor of working for a big company.

Why is Entrepreneurship Suddenly Sexy?

Before the modern industrial economy, nearly everyone was an entrepreneur – think of the businesses in a small town. There’s a butcher, a baker, a coffee shop, a mailman, and a kid who mows people’s lawns in the summer.

Once means of mass production were developed, however, everyday entrepreneurship took a back seat as more and more people became employees. Thanks to petroleum and advances in manufacturing technology, the population could be employed to mass-produce standardized goods. The average person couldn’t hope to compete with large companies, who could blanket their marketing messages across television and billboards.

However, oil is getting more expensive, our ‘modern’ economy (based on constant growth and expansion) is faltering, and our industrialized society is unable to grow much more. With constant budget cuts and organizational restructurings, working for a large company doesn’t necessarily come with a stable salaried income and pension anymore.

The advent of the internet has helped to even the playing field between individuals and corporations. If you write a book, you no longer need to seek out a publisher: you can contract the printing services yourself, and promote it on the internet. If you manufacture custom clothes or jewelry, you can start a Facebook page for your business and begin to raise awareness for your brand – practically for free. Success stories of modern entrepreneurs like Mark Zuckerberg propel once-passive employees to start side projects on Kickstarter in their spare time.

We are slowly re-entering the age of the entrepreneur, where everyone can have the freedom to find their own voice, an audience, a product, and a business – but only if they’re willing to step away from the crowd and risk failing along the way.

Why do Universities Love Entrepreneurship?

Universities are famously slow at adapting to external influences, but even they are beginning to realize that entrepreneurship is something they need to begin to incorporate into their curriculums – 46% of students desire it, after all.

First, let’s look at what universities currently offer, and how they communicate it to students. The short answer is that universities like to say that getting a degree will make you successful. Here’s a selection of university marketing materials I obtained from the 2013 Ontario Universities Fair:

I disagree with a number of post-graduation employment statistics – for example, the Council of Ontario Universities counts full-time employment as thirty or more hours per week, which is misleading and has no basis in reality. I’ve written before about how the unemployment rate for young people is double the national average, and 25% of graduates are working in jobs that don’t require a degree. A great deal more are probably not working in a job related to their field of study.

Quibbling over numbers aside, I believe that Canadian university degrees are positively correlated with employment. This is beside the fact that academic credentials are required to pursue a career as a doctor, nurse, lawyer, engineer, or other legally regulated professions.

However, entrepreneurship and employment are not the same thing. Employees need credentials to set themselves apart in the job market in order to work for other people. In most cases, entrepreneurs don’t need traditional credentials because they work for themselves. In fact, many things that a university degree provides (a so-called ‘broad’ education, academic credentials, and experience with standardized testing) are completely irrelevant in an entrepreneur’s life. Completing essays, assignments, midterms, and exams while conforming to an often-arbitrary rubric does nothing to prepare someone for an entrepreneurial life of risk-taking and non-conformity, where the only measures of success are income and self-fulfillment.

Moreover, the skills required to be a successful entrepreneur are best acquired outside of the classroom through trial and error – in fact, many believe that this is the only way to learn entrepreneurship.

“Our education system, as it stands, from kindergarten through graduate school, is the opposite of resilience, flexibility, and adaptability. It teaches a narrow set of academic/analytic skills, mostly divorced from the practicalities of life, and drills them into you for hours, days, weeks, months, and years on end. Analytic skills may be valuable to success in a rapidly changing, chaotic world, but they are far, far from the whole picture. Success, happiness, contribution, innovation, and leadership depend on a range of human skills, most of which are not taught in school.”

-Michael Ellsberg

In fact, there is a growing movement of people who encourage students to drop out (or ‘stop out’) of school to pursue a real-world education. Best-selling authors such as Michael Ellsberg, Dale J. Stephens, Chris Guillebeau, Tim Ferriss, and Seth Godin have all written extensively on how to pursue a self-driven education. Peter Thiel, the founder of PayPal with a net worth of over $1.5 billion, offers a select group of young people $100,000 over two years to start their own businesses instead of enrolling in university. The Thiel Fellowship has been in existence for a few years now, and if you’re under 20 years old, you can apply to be a 2014 Thiel Fellow.

To be blunt, the primary reason that universities are embracing entrepreneurship is because it helps them drive enrolment in the face of doubt regarding the value of a university degree. This is not a bad thing – embracing entrepreneurship (and experiential learning) is a very good thing for students. However, the way universities think about entrepreneurship needs to change.

Dropouts Can Be Successful Students Too

First and foremost, universities need to realize that an entrepreneurial education occurs best outside of the classroom. I believe that, for the most part, Canadian universities have done that.

My biggest quarrel with how entrepreneurship is currently taught in schools is that the focus is still on the acquisition of a degree. This isn’t much of a surprise, since a significant portion of a university’s funding comes from their undergraduate population in the form of tuition and per-student government funding.

The problem is that for 20% of hyper-successful people (especially start-up founders), school becomes an impediment to their success as time devoted to coursework comes at a significant opportunity cost. At this point, universities have no way to effectively serve this population aside from waving goodbye.

I think this is a missed opportunity of incredible proportions:

From a financial standpoint, many entrepreneurs are prolific philanthropists, and many universities rely on alumni donations in order to finance things like new buildings and scholarships. Ted Livingston’s $1 million donation proves that dropouts can contribute just as much – if not more – than most alumni. Had he stayed in school, it’s likely that Kik would have never been so successful, and the university would have instead received another $20,000 in tuition (much less than $1 million).

From an educational standpoint, universities currently focus on providing a linear education that increases in depth over a period of four years. This typically culminates in a thesis or capstone project that gives the student an opportunity to display their mastery in a certain topic. A real-world education is anything but linear – when it comes to entrepreneurship, that chance to display mastery could come at any time. Universities are unable to retain a great deal of highly successful people because they have no other educational options other than an archaic linear education model.

When a student graduates from university, the implication is that they are ready to enter the world and apply their knowledge. When a student drops out of school to manage a growing business, why should things be any different? A startup that is gaining momentum should be treated with the same gravitas as any thesis or dissertation, if not more – an average thesis will be stored away in a library somewhere, while a viable business has the potential to affect hundreds, thousands, or even millions of lives.

Focus On Education, Not Degrees

As I mentioned earlier, many benefits of a university degree are irrelevant in an entrepreneur’s world. Although this is an unfortunate reality, there are a number of things that universities provide to entrepreneurs. I’ll use Mark Zuckerberg and Facebook to illustrate what I mean:

  • Access to like-minded people. Mark Zuckerberg didn’t drop out of Harvard and then start Facebook. He developed the idea while in school, with inspiration from HarvardConnection.com and help from three classmates (Dustin Moskovitz, Andrew McCollum, Chris Hughes).
  • Access to a client base. Any university is a dense concentration of potential customers with plenty of disposable income and an appetite for novelty. Facebook’s early user base consisted of Harvard students – obviously, it’s expanded a bit since then.
  • Resources. Universities have things like labs, build spaces, and meeting rooms. They also facilitate easy access to subject experts and researchers who can serve as mentors and advisors. As universities begin to focus on entrepreneurship, a great deal of funding is available for student initiatives. In addition, things like campus newspapers and other networks provide would-be entrepreneurs with an easy way of reaching potential clients: publicity from The Harvard Crimson helped generate awareness for thefacebook.com.

In university, you graduate once you have completed the required courses, at which point you receive a degree symbolizing your success. When it comes to dropout entrepreneurs, your ‘graduation’ is when you have gained enough customers and momentum to make a living from your idea, and your business becomes a living degree.

Universities have become very good at celebrating one kind of graduation, but not the other. From their standpoint, someone who has dropped out to pursue success elsewhere is a lost student, not an alumni. It’s time that Canadian universities redefined what it means to be a successful student.

University Is A Lifestyle Choice

Mark Zuckerberg’s decision to leave Harvard likely had nothing to do with the quality of the institution or his enjoyment of the school. The same can probably be said for Ted Livingston and many other dropout entrepreneurs. The bottom line is that it doesn’t make sense to stay in school when there is a massive business opportunity sitting in your lap. Time spent on schoolwork that doesn’t generate income could instead be spent growing a business and making money.

“I think anything that requires real global breakthroughs requires a degree of intensity and sustained effort that cannot be done part time, so it’s something you have to do around the clock, and that doesn’t compute with our existing educational system.”

-Peter Thiel

In order to take entrepreneurial education seriously, universities need to be prepared for the inevitability of students prioritizing their business goals over their academics. Here are some recommendations, based on everything I’ve covered:

Convert Dropouts to Stopouts

Universities need to have clear and comprehensive policies in place to deal with entrepreneurs who believe that they have struck gold with an idea. Making it easy to put one’s education ‘on hold’ is absolutely crucial, as entrepreneurial students need to feel like they will be welcome back at their university should they decide to return.

Many of my peers have pursued 12 and 16-month paid internships at various companies, and returned to complete their degree with minimal hassle. The same mechanisms and resources can easily be expanded to include entrepreneurial students who are pursuing a self-directed internship with their own company.

Another option is encouraging entrepreneurial students to consider becoming a part-time student by taking one or two courses at a time. Their academic workload is significantly reduced and they are still working towards a traditional degree.

Again, acquiring a university degree is beneficial to the majority of Canadians. Therefore, universities should be making every effort to accommodate and retain entrepreneurial students who need to leave for a time. Entrepreneurs love knowledge almost as much as they love freedom. Universities need to provide both. Academic counselors should be empowered to have frank and unbiased discussions with entrepreneurial students about their academic choices.

Dispel the Myths Surrounding Dropouts

Universities need to start being more honest when it comes to post-graduation employment opportunities and stop making it seem like someone without a degree is unemployable. This perception is something that has been shaped through decades of conflation between degree acquisition and employment. Universities aren’t solely responsible for these myths, but they have the power to change how people think about education.

Although the majority of Canadians can (and do) benefit from receiving a university degree, current university marketing creates fear and uncertainty that prevents people from making proper decisions. It’s worth noting that a side effect of changing perceptions about post-secondary education would be increased interest in college diploma programs, which have many other benefits to offer.

Admit That a Degree is Not The Gold Standard of Education

Universities like to proclaim that they are masters of innovation, yet they have a grand total of one educational model that is centuries old, and shows no signs of ever changing.

First of all, universities should make an honest attempt to differentiate between dropouts and non-graduates. Dropouts leave university because of poor grades or personal reasons, while non-graduates quit university to pursue another opportunity – likely after having benefitted significantly from their time at university. In the case of a non-graduate, universities should begin to recognize and celebrate their contribution to that person’s education. Just because someone isn’t leaving with a degree doesn’t mean that the university system has failed them.

This could have profound implications for the university business model. Devoting a portion of Alumni Relations resources to communicating with non-graduates is one obvious consequence.

In a Stanford University commencement address, Steve Jobs famously remarked that he dropped out of a university degree program, only to begin to take courses that interested him. One of these courses was a calligraphy course, which would go on to inspire the Macintosh user interface. There is absolutely no question that Steve benefitted from his non-traditional university experience.

Developing incubator-style programs that provide entrepreneurial students with access to the connections, resources, and potential customers they need to build their businesses without the academic constraints of a traditional degree could completely redefine post-secondary education. Giving students the opportunity to take the courses that they care about while pursuing their business goals would be ideal, especially if they have the option to have those courses count towards a degree in the future. Now that would be innovative.

Conclusion

Let’s conclude with examining Ted’s original desire to name the VeloCity Venture Fund in celebration of his discontinued academic life. I’m not disputing the fact that there are clear benefits to obtaining a university degree in Canada (although I do take issue with some of their statistics).

However, these benefits are eclipsed by business opportunities for some students. Note that I said ‘some’ students, not ‘all’ students. Calling the VeloCity Venture Fund the ‘Dropout Fund’ would most likely have set false expectations among students, which could have led them to make reckless decisions with regards to their education. At this point in time, those decisions could be difficult to reverse.

Not every startup culminates in a six-figure IPO. That said, a business that crumbles is a learning experience, not a failure. Many of the world’s most famous entrepreneurs endure several failures before experiencing overwhelming success.

Universities need to make room for self-directed learning opportunities, and give entrepreneurial students the same considerations that they would give students pursuing internships and co-ops. With 46% of students interested in becoming entrepreneurs of some sort, the demand for these services certainly exists.

I think a lot of universities are making steps in the right direction, but as long as we celebrate the acquisition of a degree as the sole measure of academic success, the Mark Zuckerbergs, Richard Bransons, and Ted Livingstons of the world will continue to be underserved by their university education.

It is often said that life is about the journey, not the destination. I believe that it’s time to recognize that the same can hold true for a university education.