Startup Culture on College Campuses

On some college campuses, students live and breathe startups. Out of the thousands of universities in the United States, only a handful have a “startup culture” at a meaningful level. These colleges churn out entrepreneurs at a rate unparalleled elsewhere, often three or four times that of a research university. The total revenue of their alumni’s startups is comparable to that of a developed country of millions.

Startup culture can be approximated by looking at the alma mater of entrepreneurs who seek VC funding, according to a PitchBook report.

The universities with the most prolific startup culture are Stanford, MIT, and Harvard, according to the data. The rest of the Ivy League, Carnegie Mellon, and Duke are below, with a significantly lesser rate of entrepreneurs when adjusted for student enrollment.

entrepreneurship by university startup culture

Interestingly, while UC Berkeley is often regarded as an entrepreneurship hub, this is only true in terms of absolute startups created. While total startups created is comparable to Stanford, when the size of the school is considered (over 30,000 undergraduates compared to Stanford’s 7,000), the entrepreneurs per capita is meek at best, comparable to Northwestern or Tufts.

This metric isn’t perfect. It doesn’t take into account the size of a school’s engineering department or startups who aren’t funded by VCs. This, however, shouldn’t discredit the metric as an approximation of startup culture. Its utility far surpasses its shortcomings.

Startup culture is best considered as a binary phenomenon: a school either has a startup culture or doesn’t. Like a house of cards, one missing piece leads to the culture’s collapse.

Startups naturally cluster into startup hubs, a positive feedback loop that increases the attractiveness of settling there. The abundance of venture capital and technological progress improve the chances of success for many companies — whereas a lack of nearby startups serve as an innovation drought. This creates certain highly-valuable locations for startups, like the Silicon Valley and Kendall Square. Inside is startup culture; outside is nothing.

Paul Graham, a VC involved involved with YCombinator, maintains the incubator’s requirement to move to the Silicon Valley:

“But even if we could somehow magically save people from moving, we wouldn’t. We wouldn’t be doing founders a favor by letting them stay in Nebraska. Places that aren’t startup hubs are toxic to startups… I don’t know exactly what’s suppressing all the startups [elsewhere] —probably a hundred subtle little things—but something must be.”

These hubs often contain groups whose goal is to encourage entrepreneurship among their communities. Examples include a business school (Kendall Square has the nearby MIT Sloan School of Management), proximity to capital (Silicon Valley has Andressen Horowitz and Sequoia Capital), technological advancement (any research university), and various startup incubators.

All of the schools associated with a “startup culture” are considered highly selective universities, ones where a very competitive admissions process chooses the student body out of thousands of applicants. In 2017, MIT’s acceptance rate was 7.2%; Harvard’s was 5.2%; Stanford’s was 4.6%. It’s no coincidence that all schools with a startup culture have these admissions practices — in many ways, the startup culture is a result of it.

This process refines the incoming class into a psuedo-super class. The school ends up with a student body primarily comprised of forward-thinking and highly motivated individuals. The luxury of picking and choosing between applicants allows admissions officers to artificially select for qualities they designate as most promising. It’s even self-selecting, discouraging applications from those with a low chance of admission.

The apparent result of these admissions practices is a student body of refined talent — one with a high density of builders and makers, a critical component of any startup culture. Sam Altman recommends that those who seek to be entrepreneurs “build stuff and be around smart people.” The admissions process, although flawed in many ways, makes this reality commonplace at such a school. Students don’t need to actively seek out projects and smart people; instead, they’re surrounded by them in all aspects of college life.

entrepreneurship by university acceptance rate

The rate at which startups are created is closely tied with the university’s acceptance rate, a statistic which reflects its selectivity. While the graph above clearly shows the correlation, most significant is how the selectivity alone does not account for schools with a true startup culture, namely Stanford, MIT, and Harvard. These schools are clear outliers in the data. A school’s selectivity approximates its startup rate in the absence of startup culture; when the culture is present, students live and breathe startups, becoming entrepreneurs at rates far higher than at other schools.

As a phenomenon, startup culture is contagious. Interactions between students play a significant role in any one student’s decision to create a startup: the crowd collectively decides that forming startups is the best way forward, and individual signals express this. The herd mentality on such a campus develops in a way that favors entrepreneurship, practically selecting it as the optimal way to climb the social ladder. Monkey see, monkey do — the basics of the human unconscious don’t change when one enters a university. Simply put, if everyone is making startups around you, then you’re much likely to do so too. If nobody even mentions the word “startup” then the option might not even occur to you. This explains the binary quality of startup culture: startups encourage other startups, while a lack thereof inhibits others.

Few successful startups today are formed by one individual; instead, they’re often created by two or more co-founders. Finding the right co-founder is perhaps one of the most pivotal moments for a company’s future. Fortunately, most colleges are ripe for co-founder picking. The abundance of makers and smart people on these campuses leads to a relative ease in meeting someone else with the right mentality. Paul Graham’s metaphor expresses this well:

“At a good college you’re concentrated together with a lot of other ambitious and technically minded people—probably more concentrated than you’ll ever be again. If your nucleus spits out a neutron, there’s a good chance it will hit another nucleus.”

Sometimes, these people come to college knowing they’re looking for a co-founder. They might even choose their college on that basis, optimizing for future choices. Ambitious entrepreneurs look for schools with a startup culture to attend. They might face a choice between already creating a startup or going to college. Without an idea already in mind, college can often be a relatively safe way to move forward. Thus those with the ambition know what they’re looking for and seek it out. It’s just like what’s done in the Silicon Valley; like gathers like.

“What nerds like is other nerds. Smart people will go wherever other smart people are. And in particular, to great universities. In theory there could be other ways to attract them, but so far universities seem to be indispensable. Within the US, there are no technology hubs without first-rate universities– or at least, first-rate computer science departments.”

Startup culture is rare in that it cannot be broken down into one or two key characteristics. The stars need to align for startup culture to develop. The location has to be right: a city teeming with other small businesses, an abundance of venture capital, a research university or two. It needs to be filled to the brim with people who question everything, accept nothing, and are interested in becoming a co-founder. Everything needs to come together for startup culture to arise. This phenomenon explains the lack of startup culture elsewhere. Startup culture is all-or-nothing, and few colleges have it all.