Peter Thiel tried to prove that brilliant kids don’t need college — here’s what happened Print E-mail
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Written by Malek   
Saturday, 10 December 2016 20:39

Peter Thiel

by Jessi Hempel, Backchannel

Jesse Leimgruber has 22 employees, and every last one is older than him. He tells me this over coffee at a downtown San Francisco Starbucks that is equidistant from his company’s coworking space and the one-bedroom apartment he shares with his girlfriend. Leimgruber is the CEO of NeoReach, a digital marketing tools firm he started in 2014 with his brother and a friend; they have raised $3.5 million so far, and last year they did over a million dollars in sales. He is 22.

Leimgruber is one of 29 people who make up this year’s class of Thiel Fellows — the crazy smart youth paid by Peter Thiel to double down on entrepreneurship instead of school. Leimgruber has dramatic eyebrows, longish hair, and the kind of earnest perma-grin that creeps across his face even when he’s trying to be serious. He speaks with the authority of a three-time CEO who has learned a lot on the job, explaining a challenge particular to fellows like him: “A common piece of advice is, don’t hire your peers; They probably aren’t qualified.”

Welcome to the 2016 version of Peter Thiel’s eponymous fellowship. What began as an attempt to draw teen prodigies to the Valley before they racked up debt at Princeton or Harvard and went into consulting to pay it off has transformed into the most prestigious network for young entrepreneurs in existence — a pedigree that virtually guarantees your ideas will be judged good, investors will take your call, and there will always be another job ahead even better than the one you have. “We look for extraordinary individuals and we want to back them for life,” says executive director Jack Abraham. He speaks with the conviction of a man who sold a company by age 25, has spent the entirety of his professional life in the cradle of the upswing of the technology revolution, and only just turned 30. With no irony, he adds: “We consider ourselves a league of extraordinary, courageous, brilliant individuals who should be a shining light for the rest of society.”

This is not what Thiel endeavored to build. In 2010, when he set out to take down higher education by plucking kids from the ivory towers of the Ivy League and transporting them to San Francisco, he had his eye on teenagers. In a hastily conceived plan that he announced at a San Francisco tech conference, Thiel said he’d pay $100,000 to 20 people under the age of 20 to drop out of school for two years, move to the Bay Area, and work on anything they wanted. His goal was to jumpstart the kind of big tech breakthroughs — walking on the moon, desktop computing — that he believed the contemporary Valley lacked. He also meant to prove that college was often counterproductive; it required kids to take on debt while laying out a set of overly prescriptive options for their futures. A college diploma, he once said, was “a dunce cap in disguise.”

andrew hsu airy labs thiel fellow Airy Labs co-founder Andrew Hsu and a Thiel fellow. Andrew Hsu

In the first years of the program, Thiel’s fellows were a hodgepodge group of searching teens, many of whom didn’t yet have clearly defined projects or end up becoming entrepreneurs. Some even went back to school. His first class, in 2011, included a fellow who had begun studying at MIT when she was 14, and another who, at 19, was in his fourth year of a Ph.D. program in neuroscience. Six came directly from high school.

Six years later, the fellowship looks quite different. To a person, the fellows are entrepreneurs, and for the most part, they are already successful.

They include founders who have already built and sold multiple companies, or made so much money they are acting as angel investors on their own. They have raised a collective $409 million dollars in funding and had $40 million dollars in exits so far. Most are now older than 20 and some have even graduated college. Instead of supplying bright young minds with the space and tools to think for themselves, as Thiel had originally envisioned, the fellowship ended up providing something potentially more valuable. It has given its recipients the one thing they most lacked at their tender ages: a network.

Think of it as a kid version of the Young Presidents’ Organization; it’s a group whose network has grown to include 123 past and current fellows. I’ve now spoken to two dozen of them. And sure, most of them have stopped out of school for some period of time (it does remain a requirement of the fellowship). Yes, the money’s helpful. But the network? That’s everything. The fellows lean on Thiel’s name to open the Valley’s doors (though in the aftermath of the presidential election, it’s not working quite as well as it once did). As important, they lean on each other. After all, the set of challenges you face when you are young?—?say, young enough that you’re employing people with mortgages at the same time as you’re signing your first lease?—?are unique. And the types of relationships you cement in adolescence, when you are still forming your ideas about the world and your role within it, are uniquely strong. For Leimgruber, as for many of his peers, Thiel fellows are the first call you make when you have to figure out, say, whether you should hire your friends. Or whom you should ask for money. Or which reporters you should talk to.

“It’s a really strong group, way stronger than even, like, VCs,” Leimgruber says. “If you make friends with three or four fellows, these people are way more likely to have a higher conversion rate on intros than investors do. They’re your friends, whereas with investors, it’s always a favor.”

Like many of the 2016 fellows, Leimgruber didn’t apply. He had grown up in Orlando, where his dad owned an auto shop and his mom worked as a customer account manager. Neither had college degrees. He built his first website at 10, and started an ecommerce site at 15. (Among the most popular products were bright neon hats that said “Rage” and “Party” and became a staple at music festivals.) During his senior year of high school, Leimgruber worked with his brother to start a small digital marketing agency.

dale j stephens uncollege radmatter thiel fellow Dale J Stephens, a Thiel fellow. Dale J Stephens

By the time he showed up for his first computer science class at Stanford University in 2012, Leimgruber’s businesses had pulled in a million dollars in revenue. One of his advisors suggested he think about building software tools for digital marketing, instead of a traditional agency. So, he teamed with his older brother and a friend to start NeoReach. He joined a student accelerator, squeezing his classes in on the side. An older student mentioned the fellowship to him that year, but Leimgruber wasn’t interested in leaving school. He’d worked too hard to get there.

By sophomore year, Leimgruber shared a campus apartment with five friends, all of whom were working on startups. All were raising money. “It was crazy,” says Leimgruber. “We raised millions of dollars between four companies!” One by one, they began to drop out so they could focus on their companies. One roommate left to become a Thiel fellow. In the fall of 2014, as NeoReach closed in on a million dollars in revenue, it got too hard to manage the company and stay in school. So he took a leave of absence.

Leimgruber had been working from San Francisco for nearly a year when an email arrived from Thiel Foundation president Blake Masters. Masters invited him to a two-day conference in San Francisco. The invitation was a bit last minute, with only two weeks’ notice, but he wouldn’t even have to travel. He figured, why not?

When Leimgruber arrived at the conference, he figured out quickly that the event was actually a finalist round for the fellowship. He was one of about a hundred people gathered at Thiel’s offices, which are in the same set of buildings that houses Lucas Films on a leafy campus in the Presidio. Outside, a bronze Yoda statue anchored a fountain in the center of the complex. Inside, supremely young founders from across the globe compared fundraising tips and commiserated on hiring. “It was the first time I met a lot of other young dropouts outside of my Stanford network,” Leimgruber said. Many appeared nervous, he remembers, but he wasn’t. “I was pretty sure that if I wanted it, I would get it,” he said. He had, after all, been recruited. When he got home, he filled out a brief application?—?it maybe took ten minutes?—?and then he waited.

Last January, he got the call. It lasted less than ten minutes. Leimgruber had been accepted.

Leimgruber happened to work from the Bay Area, but these days, more than half the fellows don’t. In Boston, Grace Xiao, 20, is working on Kynplex, a social networking software for scientific innovations and Brian Truong, 23, is building software that replaces ads with questions for online publishers. In Durham, North Carolina, Ivonna Dumanyan, 22, is building wearable sensors for athletes. In Los Angeles, Anthony Zhang, 21, is building an on-demand food delivery app for college kids.

These fellows are very different than their predecessors. They are older. They are often members of founding teams, and occasionally the fellowship will be awarded to more than one founder on a team. (More often, the other founders have aged out; Leimgruber’s cofounders, for example, are 23 and 28.) No one is trying to do anything as impractical and far-reaching as mining space asteroids; their endeavors are scrappier, and more readily turned into the types of businesses that see profit on the horizon. Many come to the fellowship with tech street cred already. Truong managed Boston deal flow for a venture fund while at Harvard, the college from which he graduated in May. Zhang and his cofounders have funding from the accelerator 500 Startups, where they completed the summer 2015 program.

Many fellows, like Sohail Prasad, have completed Y Combinator, or are currently enrolled. A Texas native, Prasad, 23, left Carnegie Mellon’s computer engineering program after his first year. He’d taken a summer internship working on speech technologies at Google. After that summer, he took a startup job and stuck around San Francisco. His YC project was an ebooks company that he later shut down. A couple years later, however, Prasad and two friends started Equidate, a stock market for private tech stocks. One of his YC batch mates was a Thiel Fellow alum (class of ’12) and suggested he apply; he was accepted last May.

Prasad said that while YC offers a larger network, Thiel’s network consistently delivers peers whose companies are more advanced. Also, while YC?—?and nearly every other accelerator?—?accepts companies in exchange for a slice of equity, the Thiel Fellowship isn’t interested in profiting from the companies its fellows start. It takes no equity, and even Thiel’s personal funds and the venture firm he founded, Founders Fund, shy away from backing the fellows.

Once a year, the fellowship gathers all its members for a retreat. This year’s retreat was held in September in Los Angeles. Attendees were treated to a tour of SpaceX, and got individual sessions with executive director Jack Abraham to review any challenges they faced. Everyone received black Everlane backpacks and sweatshirts with “Dropout” written in black letters.

One figure who was noticeably absent was Thiel. In fact, Leimgruber said that in the nine months he’d been a fellow, he’d only crossed paths with Thiel a couple of times, and then, only in group settings. “I don’t think he would know me,” says Leimgruber.

Conrad Kramer, high school, Thiel fellow Conrad Kramer, a Thiel fellow. Twitter/@conradev

In late September, Thiel invited current fellows and a few alumni over for dinner. It was one of those rare hot San Francisco evenings when the fog fails to roll in, and many visitors were still in short sleeved t-shirts bearing startup logos as they climbed the steps to his front door. Pizzamakers had set up an oven in the driveway to bake gourmet pies that were whisked through the garage, to the kitchen. From there, servers brought them out to the dining room, placing them between pasta dishes and salads on a large oblong table.

The room resembled a dorm party in which someone had transported all of the sleep-starved, pizza-munching adolescents to Oliver Warbucks’s penthouse. There was Riley Ennis, a lanky 2013 alum, standing in front of a floor-to-ceiling wall of glass that looked out over the bay. Ennis, 22, had recently landed an investment led by Andreessen Horowitz for his third startup, a genomics company called Freenome that screens blood for early cancer detection. There was Megan Grassell, 20, who had flown in from New York, where she runs a tween bra company. Leimgruber was there. And there, off to the left, was Thiel, hair cropped short, aquiline nose, dressed in light blue jeans and a plaid button-down, chatting with Abraham.

None of the fellows had yet approached Thiel, so I went over to say hello. I asked him how he felt about the fellowship, and he said it had accomplished one of his primary goals: promoting entrepreneurship as a viable alternative to college. Today, there are university-oriented venture funds (like the Dorm Room Fund), college entrepreneurship programs, and hackathon conferences for teens. Thiel takes some credit for this. “Entrepreneurship has become a line you put on your resume,” he said. But it’s also a reason the fellowship has doubled down on more advanced entrepreneurs in recent years. Thiel never likes to do what everyone else is doing.

Thiel is a busy guy, and the fellowship is not his first priority. Apart from parties like this, he doesn’t interact with the fellows too much. For one, he is conscious of the optics of the relationship between the Thiel Fellowship and the Founders Fund. He says he wants to avoid any suggestion that he is creating a training program for his own investments, which is why he almost never invests in current fellows. But he also has a laundry list of obligations. Chief among them, now that Donald Trump has become the United States president elect, is that Thiel is advising him. While he has said that he doesn’t intend to take a formal role in the new administration, Thiel is helping Trump to build up tech policy advisors. Add that to his other obligations, which include his commitment to Founders Fund and his personal fund, Thiel Capital; his foundation’s program to fund early-stage scientific research called Breakout Labs; and the board seats he holds on Palantir Technologies, and Facebook. The fellowship certainly holds his name, and arguably, his interest—but that’s about it.

The day-to-day responsibility for the fellowship falls to Abraham along with Blake Masters, who is president of the Thiel Foundation and also a principal with Thiel Capital. Both guys do a slew of other things at the same time. Both have been rumored to be people Thiel has tapped to share ideas with Trump’s transition team. They both have experience at startups. Abraham dropped out of the University of Pennsylvania to run Milo, which sold to eBay by the time he was 25. Masters cofounded a legal startup called Judicata, and he was employee number 31 at Box, where’d he’d often spend the night in his office (he kept a George Foreman grill and a blow-up mattress there). But he also has a law degree; he got to know Thiel after he took Thiel’s Stanford law class. Masters’s notes on the class became the viral success that led to Zero to One, the startup handbook that he cowrote with Thiel.

The first time I stopped by the foundation, in August, Abraham was on the road in Europe somewhere, fundraising for his new company. I followed Masters past a counter holding a copy of a book with Donald Trump’s image, and into his office, which had a glass door that slid shut at the press of a button, straight out of Star Trek. There was a couch and a chair, but no desk. Instead, a bookshelf stretched from floor to ceiling, holding titles like The Power Broker and Immortality.

Dan Friedman Yale Student Thinkful Thiel Fellow Dan Friedman, a Thiel fellow. Courtesy of Dan Friedman

Masters and Abraham assumed control of the fellowship about 15 months ago, and they’re responsible for its current direction. They did away with large annual summits that had grown to include fellows but also hundreds of other entrepreneurial hopefuls, because they felt these summits were too mainstream. They’d become a stop on the party circuit for entrepreneurial youth. “I remember we had to coordinate with Major League Hacks, which is the organization for all the hackathon stuff, to make sure it wasn’t on the same weekend,” says Masters. Instead, the fellowship now holds occasional smaller events for finalists.

In the early years, fellows needed more structure and guidance; they often lived together, and their attendance was expected at more frequent events. Because they were younger, and their projects were nascent and sometimes unwieldy, they needed more support with the basics. In addition to helping with tips on fundraising or hiring practices, the fellowship’s former directors also lent dating advice, advised on table manners, and generally played a more parental role. Now that the fellows are further along on their entrepreneurial endeavors from the outstart, their needs are different, and often fewer; a central draw for the most accomplished fellows?—?people like Leimgruber whose schedules are tight already?—?is that the fellowship won’t be work; it will help.

The central tenet to the contemporary version of the fellowship is that there are no real requirements. Masters and Abraham make themselves available to advise founders. Abraham keeps a rigid schedule and carves out set office hours to meet. Masters tends to be more fluid; fellows can text him, and he usually manages to get back to them within the day. “I have babies that wake up and yell in the night. So I am around to do email at 2 a.m.,” he said. Fellows receive books?—?and payments?—?in the mail each month, and the fellowship connects with them to see how things are going. The fellowship also holds regular informal dinners in San Francisco, and sometimes New York. But the fellows don’t have to come.

Masters and Abraham also instituted some changes in the selection process. They added three years to the age limit so they could access stronger candidates. These days, they accept new fellows on a rolling basis, allowing the foundation to add a couple each month, and announce the full year’s fellows— now as many as 30?—?each June. Early on, the application was onerous, including essays and test scores. “We’ve changed the application five times,” says Masters. “Each time, we decided it was really long, and cumbersome, and we weren’t getting the information we wanted.”

They got about 6,000 applications for this year’s fellowship, but 60 percent of the current crop of fellows didn’t apply. Instead, Masters and Abraham have tapped their networks for referrals, and recruited them. One such example is Boyan Slat, a long-haired European who founded The Ocean Cleanup at age 17 and became the youngest recipient ever to receive the UN’s highest environmental award. Slat presides over a team of more than 40 people at a Dutch foundation he started to develop technology to clean up the massive plastic garbage dump that rests atop the Pacific Ocean, between California and Hawaii. Masters met him last year when he came by the foundation to request a grant. Slat, now 22, seemed older than his years. Thiel’s team passed on the opportunity to fund him, but Masters remembered him. Earlier this year, when Slat was in San Francisco for a fundraising trip, they met up again. “I wasn’t expecting much but I took the meeting because of whoever introduced us,” says Masters. “Immediately, he was impressive.”

Masters asked him if he would like to be a fellow. “He was a little bit like, ‘I didn’t apply. What’s going on?’” Masters remembers. But he accepted the fellowship, and the $100,000 grant became a donation to his foundation. (I reached out to Slat to learn more, and a spokesperson responded that he was too busy for an interview.)

Thiel’s dinner party concluded abruptly at 9 p.m. He didn’t kick anyone out. But the food stopped coming out of the kitchen, and when I looked up, Thiel had absented himself. We continued to mill around for awhile. I saw Leimgruber, and edged my way over to say hello. He introduced me to Kieran O’Reilly, who’d left Harvard in 2014 to run his GIF-making company, and John Backus, a ’15 fellow who’d been one of Leimgruber’s Stanford roommates during his epic sophomore year, and now is a cofounder at the software identity company Blockscore.

By then, I’d known Leimgruber for a few weeks, and we’d discussed many facets of the fellowship. “C’mon, aren’t you going to ask about dropping out of school?” said Leimgruber. I took the bait.

“Do people ask you guys that a lot?” I said. All three nodded.

“It’s really the worst when school comes up,” Backus said. “It’s offensive, the way people ask about it.” Backus was a tall, highly likable guy with a slightly lopsided face and the hint of a lisp. He explained that none of the successful dropouts ever went back to school. Bill Gates didn’t go back. Mark Zuckerberg didn’t go back. To go back would imply personal failure. Why would he ever do that? He had his network started already, and clearly the opportunities came through the network.

Sure, I conceded, but what if his company failed?

There was a look he shot me then, a look I’d come to recognize. It was the look that said, you don’t get it. Maybe his idea wouldn’t work, he said, and his company would fail. That happened. But there would be a half-dozen more ideas that he’d reach for, and after that, a half-dozen more. Each idea was just practice for realizing the next idea. And thanks to Thiel, he’d know the people?—?funders, engineers, advisors?—?that could best help him translate those ideas into companies. Yes, he could go back to Stanford any time. But why would he ever turn away from the thing that he’d started to build, which was not a company, but a network?—?and start all over again? This network, he contended, was far more valuable than any he could build in college?—?even at Stanford.

Thiel set out to disrupt the existing educational institutions. He suggested he could do a better job at training a small cohort of gifted individuals, and that once free of the shackles of a conformist degree-making institution, these fellows would be capable of jumpstarting human progress. Fellows have not yet spurred the type of innovation that has led to flying cars. Or even, yet, 140 characters. Instead, Thiel has manufactured a pedigree that is starting to look, in many ways, as elite as the one he endeavored to replace. For a select group of already successful entrepreneurs, it’s the ultimate credential.