You Can't Drop Out of Harvard (If You Never Got In) — Transcript

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1. 0:00Bill Gates dropped out of Harvard.
2. 0:02Zuckerberg dropped out of Harvard.
3. 0:05But you can't drop out of Harvard if you
4. 0:06never got in. I'm a venture capitalist.
5. 0:09Founders pitch me every single week, and
6. 0:11the school they went to is usually in
7. 0:13their first sentence. So, I know exactly
8. 0:16how much it matters because I'm the guy
9. 0:18it's supposed to impress. And the
10. 0:20numbers are brutal. Three universities
11. 0:22take a third of all the venture money in
12. 0:25America. Seven schools take half. But
13. 0:28here's the part that doesn't add up.
14. 0:30PayPal billionaire Peter Thiel pays
15. 0:32teenagers $100,000 to drop out of
16. 0:35college, yet he has two degrees from
17. 0:38Stanford. And the kids he pays to quit
18. 0:41keep coming from Harvard.
19. 0:43So, I decided to look into this and get
20. 0:45to the bottom of it. And what I
21. 0:46discovered is quite interesting. So,
22. 0:48let's dive into it together. And by the
23. 0:50end of this video, I'll show you the one
24. 0:51thing that makes a VC stop caring where
25. 0:54you went to school entirely. Let's go.
26. 1:03Over the past year, if you look at every
27. 1:05startup in America that raised money
28. 1:06from a founder who went to university,
29. 1:08Stanford, Harvard, and MIT alone
30. 1:11accounted for more than 30%of the
31. 1:13funding rounds. Widen it slightly to the
32. 1:15top seven schools, and now you're
33. 1:16looking at around half of all the
34. 1:17funding. Look, I'd love to be able to
35. 1:20say that where you went to school
36. 1:21doesn't affect your chances, but the
37. 1:23data is without appeal. And it says the
38. 1:26exact opposite. And it's the same names
39. 1:29every year, too. PitchBook went through
40. 1:30the education of more than 200,000
41. 1:33venture-backed founders for its 2026
42. 1:35ranking. Berkeley and Stanford
43. 1:37undergraduates alone have started
44. 1:38companies that raised over $392 billion.
45. 1:42Harvard undergrads, another $149
46. 1:45billion. So, let's be honest. Why does
47. 1:47the system work this way? Well, when VCs
48. 1:51are looking at companies at the earliest
49. 1:52stage, there's often almost nothing to
50. 1:55judge. No revenue, sometimes no product,
51. 1:58just a couple of people and an idea. So,
52. 2:00VCs like me are not really evaluating a
53. 2:03business. We're evaluating whether we
54. 2:05believe in the people building it. And
55. 2:08with that little to go on, any hard
56. 2:11signal that lowers the risk gets more
57. 2:12weight than it probably deserves. For
58. 2:15example, getting into Stanford is
59. 2:17usually a signal. It means that years
60. 2:19ago some admissions office run an
61. 2:21extremely competitive selection process
62. 2:23on this person and they came out on top.
63. 2:26[music] So, when a VC leans on the
64. 2:27school, what they're really doing is
65. 2:29borrowing someone else's filter. It's
66. 2:31almost like the university did the
67. 2:33investment due diligence on the founder
68. 2:35and we get it for free. Notice what that
69. 2:37means, though. It isn't that a Stanford
70. 2:39degree teaches you how to build a
71. 2:41company. It's that Stanford already
72. 2:43selected for the kind of person who
73. 2:45might. The school admission is being
74. 2:48used as a proxy for the founder, which
75. 2:50is exactly why it shows up so heavily in
76. 2:53who gets funded and much less in who
77. 2:55actually succeeds. So, does it? I'll
78. 2:58answer that in a few minutes. First,
79. 3:01let's go back to the myth because I
80. 3:02think it's hugely overstated. The whole
81. 3:05point of the Gates and Zuckerberg legend
82. 3:07is that it's supposed to prove the
83. 3:09system doesn't matter. If two of the
84. 3:11most valuable companies ever built got
85. 3:13started by people who walked away from
86. 3:15their degrees, then degrees don't
87. 3:17matter, right? Well, look at where they
88. 3:20walked away from. Gates and Paul Allen
89. 3:23left Harvard. Zuckerberg left Harvard.
90. 3:25James Park from Harvard. Sam Altman from
91. 3:28Stanford. And the list goes on and on.
92. 3:30The pattern underneath the myth is that
93. 3:32the famous dropouts overwhelmingly
94. 3:34dropped out of elite schools. They
95. 3:37didn't skip the filter. They passed
96. 3:39through the hardest part of it, the
97. 3:41getting in, and then decided that the
98. 3:44rest was optional. Now, of course, there
99. 3:45are exceptions like Steve Jobs who
100. 3:47dropped out of Reed, but we're hardly
101. 3:50talking about exceptions if seven
102. 3:51schools get 50%of the venture funding,
103. 3:54which brings us back to Peter Thiel,
104. 3:56because his fellowship is really proving
105. 3:58all this. He set it up in 2011, and the
106. 4:02deal is simple. He gives young people
107. 4:04$100,000 on the condition that they drop
108. 4:06out of college to build something. It's
109. 4:08now updated to 250k, by the way. His
110. 4:11public argument is that elite
111. 4:13universities are basically exclusive
112. 4:15nightclubs valued for who they keep out
113. 4:17rather than what they teach. And it has
114. 4:20been ludicrously successful. Vitalik
115. 4:22Buterin from Ethereum, Dylan Field from
116. 4:24Figma, Tarabochia from SmartSuite, all
117. 4:27amazing, but also all exceptions. Yes,
118. 4:31even the Thiel Fellowship, if you look
119. 4:33closely at who really wins the grant,
120. 4:35well, it is exactly as you expect. In
121. 4:39one recent class, five of the fellows
122. 4:41were Harvard students. The founders of
123. 4:43EdTech, of Cognition, the company behind
124. 4:45the Devin AI engineer, of Mercor, all
125. 4:48Harvard, all pulled out through the
126. 4:50fellowship. The program helped create
127. 4:53over $300 billion of company value, and
128. 4:55it did it almost entirely by funding
129. 4:58people who had already cleared elite
130. 5:00admissions before Thiel ever met them.
131. 5:03So, the man who built a foundation to
132. 5:06prove you don't need these universities
133. 5:08is in practice using them as his short
134. 5:10list. He's not rejecting the filter,
135. 5:13he's just standing at the other end of
136. 5:15it catching the people it already
137. 5:17sorted. You could argue that the
138. 5:19credential still did the work. The
139. 5:22reason this matters beyond a fun
140. 5:24contradiction is what it does to the
141. 5:26advice [music] everyone gives. The
142. 5:28dropout story gets told as though it's
143. 5:31evidence that the door is open to
144. 5:32anyone. What it really shows is that the
145. 5:35people who get to drop out and still get
146. 5:38funded are almost always the ones who
147. 5:40got in first. There is one obvious
148. 5:44objection to all of this, which is Y
149. 5:45Combinator. YC is the most famous
150. 5:48startup program in the world. It's
151. 5:49produced Airbnb, Stripe, DoorDash, and
152. 5:52its whole pitch is that it finds raw
153. 5:54talent anywhere, that it doesn't care
154. 5:57about your CV, only what you're
155. 5:58building. If anything breaks the
156. 6:00university filter, it should be this.
157. 6:02And the interesting thing is that on the
158. 6:04way in, it partly does. In recent
159. 6:07batches, the top three schools made up
160. 6:09only about 16%of founders, far below the
161. 6:13average of 30%you see across venture as
162. 6:15a whole. Berkeley, a public university,
163. 6:18produced the most founders in recent
164. 6:19batches, more than Stanford. Compared to
165. 6:22the rest of the industry, the front door
166. 6:24at YC really is more open. But then you
167. 6:27look at what comes out at the other end,
168. 6:29and some of the old pattern reappears.
169. 6:31YC's biggest successes still skew
170. 6:34heavily towards Stanford and MIT. And by
171. 6:37one analysis, companies founded by
172. 6:39Harvard alumni account for more than 1/4
173. 6:42of all the value YC has ever created
174. 6:45through Airbnb, Stripe, Rippling, and
175. 6:47others. So the door opens wider than
176. 6:50anywhere else in venture, and the same
177. 6:52handful of schools still walk away with
178. 6:54most of the winnings. I don't think
179. 6:56anyone can say yet which way that
180. 6:58resolves. Maybe the wider intake slowly
181. 7:01changes who wins, and then in 10 years
182. 7:03the outcomes look as mixed as the
183. 7:05applications. Or maybe the filter just
184. 7:07reasserts itself a little further down
185. 7:10the track, and the elite school founders
186. 7:12pull ahead once the money and the
187. 7:14network kick in. What you can say is
188. 7:16that even the institution designed to
189. 7:18ignore the credentials can't fully shake
190. 7:21it. I should also be straight about
191. 7:23where I sit in all this, because I've
192. 7:24built my fund, Lapsa Capital, on a
193. 7:26version of this filter I've just been
194. 7:28describing. It's a filter I'm choosing
195. 7:30to trust, because the alternative at the
196. 7:32earlier stage is going in almost blind.
197. 7:35And let's be honest, there's a reason
198. 7:38the school signal persists even though
199. 7:40people hate it. When there's no revenue
200. 7:42and no product, there's very little to
201. 7:44go on that tells you anything about how
202. 7:46a person thinks, how hard they work, how
203. 7:49they handle pressure. Getting into a
204. 7:50place like Stanford or getting into YC
205. 7:52is one of the few things that does cuz
206. 7:55both put people through a selection
207. 7:57process that's hard to fake your way
208. 7:59through. You can dislike the bias and
209. 8:02still admit there's some real signal
210. 8:03buried in the rigor it takes to get in.
211. 8:06So, I've made that trade deliberately.
212. 8:08By investing in YC only, I'm backing
213. 8:10founders who've already been selected
214. 8:12once and who've been taught to build in
215. 8:14a particular way: fast, cheap, obsessed
216. 8:17with whether people actually want the
217. 8:19thing.
218. 8:20Then I run my own filter on top of that.
219. 8:22I'm trying to find the best 2%of
220. 8:24startups coming out of each batch that's
221. 8:26already been filtered. The YC selection
222. 8:29does the first cut and then my job is
223. 8:31the second. That's the honest version of
224. 8:33my thesis and I'll let you decide what
225. 8:35you think of it. I've swapped one filter
226. 8:37for another. I've decided that YC's
227. 8:38version, which cares more about product
228. 8:41than the pedigree, is a better first cut
229. 8:43than the school on a CV. Now, before
230. 8:46this turns into a case for only backing
231. 8:48founders from top schools, which would
232. 8:50be both wrong and bad investing, let's
233. 8:53discuss the other side. [music] The door
234. 8:55is opening. Berkeley topping a YC batch
235. 8:57matters. Another thing that matters is
236. 8:59that more than half of the schools on
237. 9:01some of these rankings are now outside
238. 9:03of the United States, like IITs in
239. 9:06India, Waterloo in Canada, and many
240. 9:08others climbing every year. The raw
241. 9:10number of funded founders from a wider
242. 9:12range of places does keep going up. More
243. 9:15importantly, the school predicts
244. 9:18funding, not success [music].
245. 9:20It might help you raise money, which is
246. 9:22a real advantage, but it is not the same
247. 9:24thing as building something that lasts.
248. 9:26Some of the largest outcomes in tech
249. 9:28came from founders who didn't go
250. 9:29anywhere near those schools. And the one
251. 9:32signal that overrides the credential
252. 9:34completely is traction. The moment a
253. 9:37founder can show that people actually
254. 9:39use and pay for what they built, nobody
255. 9:41asks where they went to university. This
256. 9:44is a signal we strongly index on at
257. 9:46Lobster Capital. So, if you didn't go to
258. 9:48one of these schools, remember the only
259. 9:50thing that really matters is if you make
260. 9:52something people want. So, here's what
261. 9:54to do with all this depending on who you
262. 9:56are. If you're a founder who went to one
263. 9:58of these schools, understand your
264. 9:59advantage. Good schools can get you the
265. 10:01first meeting, but remember [music] it
266. 10:03does not build the company and it runs
267. 10:05out when it's time to make revenue. If
268. 10:07you didn't go to those schools, well,
269. 10:09the filter is real and it's working
270. 10:11against you at the start. But again,
271. 10:13there is exactly one thing that erases
272. 10:16it, a product [music] people want. The
273. 10:18credential is what investors reach for
274. 10:20in the dark, but remember it is traction
275. 10:23that turns the light on.
276. 10:25Nobody has ever asked a founder with a
277. 10:27successful business where they went to
278. 10:29school. And if you're an investor, the
279. 10:31uncomfortable version is that you're
280. 10:32probably doing what I do, which is
281. 10:34leaning on a filter. This is fine, but
282. 10:36you should really understand what that
283. 10:38filter measures. University might tell
284. 10:41you who was exceptional at 17. Says
285. 10:43nothing about who'll be exceptional at
286. 10:4530. Those are not the same person nearly
287. 10:47as often as the funding data would
288. 10:49suggest. That's it for today. Thank you
289. 10:51so much for watching. Don't forget to
290. 10:52subscribe and I'll see you in the next
291. 10:54one.