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Peter Thiel paid teenagers to forgo college. Here's how that turned out:

The Rich Man’s Dropout Club

Whatever happened to the teenage entrepreneurs whom Peter Thiel paid to forgo college?

The inaugural class of Thiel Fellows. (The Thiel Fellowship)

Paul Gu dropped out of Yale University four years ago to become an entrepreneur. In the time since he has moved to California and teamed up with two former Google executives to create a company, Upstart, that matches borrowers with lenders online.

Mr. Gu is like many other Silicon Valley hopefuls, except in one respect. He is a Thiel fellow, one of a select few who were given $100,000 each to leave college to pursue their start-up dreams. "It has sort of good and bad associated with it," Mr. Gu says of how people react when they find out that he is a fellow. "It comes with a whole set of assumptions and mixed views. People want to know if you think nobody should go to college."

In the five years since the billionaire investor Peter Thiel announced his eponymous fellowship, the project has assumed outsize social significance, as Mr. Gu discovered. Mr. Thiel’s outspoken nature and his view that the value of college is oversold have earned him both enemies and accolades.

For some, Mr. Thiel is a dangerous man, seeking to undermine a system that has proved the surest path to economic success for millions of Americans. For others, his ideas represent the future of American education, in which brilliant minds are freed from the convention of college and are encouraged to educate themselves on their own terms.

For Mr. Gu and other members of that first class of fellows, their experiences have been neither as dire nor as dramatically successful as observers on both sides predicted. While many fellows say they appreciate what college gave them, they also didn’t feel they needed a credential to pursue their dreams. And while they agree that dropping out isn’t the right choice for many students, they hope they’re proof that there’s not just one path to success.

Indeed, while higher-education experts debate his philosophy, they agree that Mr. Thiel has succeeded in getting more Americans to ask what college provides that the working world cannot.

Jake Schwartz, who heads General Assembly, a company that offers business- and web-development courses as an alternative to formal degree programs, agrees with Mr. Thiel that there is an almost "religious" dedication to higher education.

"I mean religious in a sense in that we don’t necessarily ask why, we just presume it’s important and deserves all the resources we can throw at it," he says. "It’s probably a healthy thing to ask why and ask which are the benefits to society and which aren’t. That requires alternatives, counterfactuals."

Peter Thiel, the billionaire investor who established the Thiel Fellowships, has sometimes offered nuanced views of higher education. But he's better known for his blunt criticisms. (Kim Kulish, Corbis, AP Images)

In September 2010, when Mr. Thiel unveiled his alternative, the global economy was in the tank and concerns about college costs were growing. Interviewed on stage at TechCrunch Disrupt in San Francisco, an annual conference focused on start-ups, Mr. Thiel launched into a now-familiar narrative. Silicon Valley, where he had become rich by creating PayPal and investing in Facebook, seemed "strangely disconnected" from the rest of the world. It buzzed with energy, yet American society was in stasis.

"We need to be spending a lot more time focusing on the kinds of breakthrough technologies that will take our civilization to the next level," he said.

Before the crowd of technology enthusiasts, he sketched out his plan: grants of up to $100,000 each for up to 20 people under the age of 20 to "stop out of school" and pursue their passion.

Mr. Thiel had come up with the idea for the fellowships the day before his talk, but his concerns about college had been brewing for more than a year: It’s too expensive, it encourages conformity, and it teaches nothing about entrepreneurship.

In a recent email interview with The Chronicle, he wrote that he initially envisioned building a better university through the Thiel Foundation but concluded that "to compete within the system would be tremendously expensive and probably futile."

"What could we do?" he went on. "The opposite of putting faith in the system is putting faith in young people. When I thought of that, I didn’t think I could wait."

The fellowship struck a chord nationally. It reflected the glossy appeal of Silicon Valley, in which drive, smarts, and venture capital are the requisites for success. But it also tapped into the everyday fears of college students. Are they wasting their time and money in school? Can they strike out on their own without four years of coursework under their belt? What is needed in that black box called college to develop a successful career or lead a fulfilling life?

In the years since, Mr. Thiel’s message has become its own cultural meme. A character in the HBO show Silicon Valley based on Mr. Thiel rails against college, calling it "snake oil." And Wired magazine in 2014 created an online reality series, "Teen Technorati," that follows 40 fellowship finalists.

For his part, Mr. Thiel said he did not anticipate the attention. "Our thought was, ‘This is going to be a very idiosyncratic, small program,’" he told 60 Minutes in 2012. "And the fact that it was controversial was a big surprise to us, but it was because an awful lot of parents are quite worried about the education system. There’s a great deal of anxiety beneath the surface."

To the inaugural class of fellows, the program was very much a work in progress. In the few months after Mr. Thiel announced the opportunity, his foundation drew more than 400 applications for the two-year program. Twenty-four people were selected: 22 men and two women.

About half came from the country’s top institutions, like Harvard University and the Massachusetts Institute of Technology. Six came straight from high school, turning down college entirely. Several were clearly prodigies: One began studying at MIT at the age of 14, while another was in his fourth year of a Ph.D. program in neuroscience at age 19.

Some of their ideas fit Mr. Thiel’s notion of transformative inventions: create a low-cost solar-energy device, redesign the wheelchair, improve biotech research through automation. But other ideas were more conventional: improve e-commerce, create educational games, track your favorite bands.

Of that first class of 24, nine fellows agreed to be interviewed by The Chronicle. Others declined or did not respond to interview requests, although many have been written about over the years. Most of those interviewed said they had left college not because they were disillusioned with it but because they were impatient to start working.

"We didn’t think about it as a grand statement about the value of education," recalls Daniel Friedman, who left Yale to start an e-commerce company with Mr. Gu. "It was just that here was an awesome opportunity to learn something about what we love doing and maybe challenge ourselves. And if a year or two later we messed everything up, we could go back to school."

Daniel Friedman (left), a Thiel fellow, says his decision to join the program was not “a grand statement about the value of education.” 
Rather, it was “an awesome opportunity. … And if a year or two later we messed everything up, we could go back to school.” (Chronicle photo by Lisa Philip)

The most valuable part of the fellowship for many wasn’t the freedom or the money but the network they were plugged into. Although less structured in its early days, the fellowship now offers retreats, internships, summer housing, and teams of advisers who work in and around the industries to which the fellows aspire.

"It looks like I made great decisions by myself, but that’s not true," says Eden W. Full, who left Princeton to work full time on SunSaluter, a device she began designing in high school to provide cheap solar energy and clean water for people in developing countries. The Thiel Foundation connected her with, among others, the founder of a clean-tech start-up, a consultant in the solar industry, and a lawyer for start-ups.

During her fellowship Ms. Full founded a nonprofit that now develops and distributes SunSaluter to 15 countries and has a manufacturing operation in India. She returned to Princeton once the fellowship was over to complete the mechanical-engineering program, but resumed work at her nonprofit one semester shy of earning her degree.

"The only thing I haven’t done is fulfill the arbitrary requirements," she says. If a potential employer thinks that’s a problem, she notes, chances are it’s not a place she’d want to work.

Ms. Full is something of exception in that many of the fellows no longer work on the idea that won them the fellowship in the first place, sometimes ditching it after their plans proved unworkable.

One early success story ended in a company’s collapse. Airy Labs, an educational-gaming company started by Andrew Hsu, who had been studying neuroscience in a doctoral program at Stanford, secured venture capital and expanded to more than 20 employees. But within a year the company was undone by poor management, according to a 2012 article in TechCrunch. (Mr. Hsu declined an interview request, but the Thiel Foundation says he is working on a new company with another fellow.)

Other fellows had early setbacks, although not as dramatic.

Mr. Friedman and Mr. Gu quickly abandoned their e-commerce idea after they realized they weren’t ready to run a business. Mr. Friedman went on to intern at a venture-capital firm and learn about coding and product development, which helped him and a new partner start a company, Thinkful, that offers courses in web development.

David Luan discovered that biotech companies weren’t willing to invest in the kind of costly system he envisioned to automate their research. He used his training in robotic perception to develop instead a service, called Dextro, that analyzes the content of photographs and videos. He also returned to Yale to finish college while his co-founder completed his graduate degree.

One fellow, John Marbach, left the program after his first year. One of the younger participants, he felt out of step with the others. "The Thiel Foundation said, ‘Oh, we’d be happy to introduce you to VCs and CEOs and coaches,’" he recalls. "But there was no, like, ‘Oh, we could introduce you to some normal friends.’" He returned to Wake Forest and will graduate this year.

Despite their struggles, most fellows interviewed say they are glad they pursued the fellowship. Even Mr. Marbach says he recommends it to others, now that it has more of a built-in support system.

It’s hard to know whether the experiences of the fellows who agreed to be interviewed are representative of the first class as a whole. The Chronicle was unable to determine what nine of the original 24 fellows are doing now, although it appears as if they, like others, moved on from their initial ideas.

Of those interviewed, all but one say they learned more about their abilities and the business world than if they had stayed in college. And though most found college socially and intellectually rewarding, few felt compelled to finish. "Both my college education and my Thiel-fellowship experience were very valuable to me. I don’t think any less of one or the other," says Ms. Full. "But we need to encourage students that they can step off the conveyor belt whenever they want. I want to live my life as an example of that."

The most vocal critic of traditional higher education in that first class of fellows is Dale J. Stephens, who dropped out of Hendrix College and wrote a book, Hacking Your Education. He used the Thiel megaphone to promote the idea of self-directed learning through a service he called UnCollege.

Two years ago, UnCollege began offering a gap-year program in which students pay $16,000 for a combination of study abroad, residential learning, an internship, and an independent project. "We totally believe in a broad-based liberal-arts education," he says, "but don’t think it needs to take four years."

Mr. Stephens says the most useful outcome of the fellowship had nothing to do with its effect on recipients. "It sparked a national conversation about the return on investment of higher education," he says. "I think it’s going to benefit an entire generation of kids and put a thought in parents’ heads about how they’re spending money on their child’s future."

That is exactly what worries Vivek Wadhwa. An expert on entrepreneurship and innovation, he is Mr. Thiel’s most ardent critic, having debated him in person and in print.

Mr. Wadhwa, who holds positions at Duke and Stanford, calls Mr. Thiel "disingenuous and dishonest" for arguing that higher education turns people into conformists and is often a poor investment.

"I meet children all over the world who think they should drop out of college," Mr. Wadhwa says. "And if they drop out of college, they’ll be flipping burgers."

He is also unimpressed with the fellowship’s results.

"Right now we should have had a dozen billion-dollar companies, if what Peter Thiel said was true," he says. Instead, he sees small businesses selling small products, and teenagers teaming up with seasoned executives because they lack the management skills they could have learned in college.

Another skeptic, Audrey Watters, a former academic who writes about education technology on her blog, Hack Education, is troubled by the elitism she sees embedded in the fellowship’s structure. If good ideas and hard work are all that separate winners from losers, she asks, why are most of the fellows male and white or Asian—just like Silicon Valley itself?

"It’s part of this larger narrative of meritocracy," she says, one that ignores the influence of race, gender, income, and parental education on a person’s chances for success.

Mr. Thiel and foundation executives dismiss criticisms that the program is underperforming and elitist.

"This isn’t a two-year gap program," says Danielle Strachman, the fellowship’s program director. "We have a long-term horizon over 10 years."

If you add up the work of the four classes of fellows—83 people in all—their ventures have raised $72-million in investments and produced $29-million in revenue, according to the foundation. Those who have sold their start-ups have brought in $17-million. (Two left the program early, and six others returned to their studies when their fellowship ended).

"Almost all of them did and learned far more than they would have in college," Mr. Thiel says.

In terms of diversity, the foundation says the participation among young women has improved. The percentage of applicants who are female has increased from 10 percent the first year to 25 percent in 2014 (five of the 20 fellows chosen last year were women). And Ms. Strachman estimates that six to 10 fellows each year are first-generation Americans or students from abroad.

Mr. Thiel has acknowledged that the fellowship disproportionately draws students from elite colleges, but he says that "we have to question the system starting from the top." Still, he adds, "the message of the fellowship is the same for everyone: You should think for yourself instead of letting an institution do it for you."

Paul Gu (right), a co-founder of an online-lending company called Upstart, was in the first class of Thiel fellows. “Are there alternatives to college?,” he says. 
“Yes, but you have to work pretty hard. It’s pretty unrealistic that most people would find those things on their own.” (Preston Gannaway for The Chronicle)

In the five years since the Thiel fellowship was announced, student entrepreneurship has become something of a movement in its own right, growing in size and sophistication. It has been helped along by the Thiel Foundation’s twice-yearly summits for young people interested in creating their own companies, but also by hackathons, campus TEDx conferences, and other events.

"When the fellowship first started, this was all pretty radical and you’d be hard-pressed to find young entrepreneurs out there in the world running teams," says Ms. Strachman. "We think we helped change that conversation."

Universities are also fueling the enthusiasm, creating business incubators on campuses that enable students to find partners, mentors, and, in some cases, investors. Case Western Reserve, Colgate, and Stanford are just a few of the universities that have greatly expanded, or invested in, programs for students who want to build start-ups.

The creation of such programs raises the possibility that the Thiel fellowship might lose some of its allure if students can stay in college while working on their start-ups.

As for Mr. Thiel’s larger contribution to higher-education reform, fellow disruptors have mixed feelings. They credit him with asking tough questions but say neither he nor the fellowship has suggested viable ways to create a better and more affordable experience for millions of students. "He’s working with a small sliver of people that’s just not going to be relevant to most folks," says Michael B. Horn, a co-founder of the Clayton Christensen Institute for Disruptive Innovation.

The Thiel fellowship may have become a cultural barometer that reflects the uncertainty students feel about the value of a college education. But its ultimate worth could be to show that there are no shortcuts to success—that even with talent, drive, and access to Silicon Valley’s brightest minds, you are likely to stumble many times along the way.

"Are there alternatives to college?," says Mr. Gu, whose 25-person company has secured more than $6-million from investors but is still seeking profitability.

"Yes, but you have to work pretty hard. It’s pretty unrealistic that most people would find those things on their own. Most people would be better off going to college."

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