Victor Belfor, Ben Smith: Backing A College Dropout Might Be Your Smartest Investment Strategy


BelforI recently invested in two companies whose founders either had little interest in school as students or who dropped out of grad school: MixRank and Influitive. Both management teams are driven, hard working and well

prepared for the difficult road of creating a business from scratch.

It got my co-author Ben T. Smith IV and I thinking. We all know that Steve Jobs, Bill Gates and Mark Zuckerberg famously never finished college. But getting to know the founders of MixRank and Influitive suggested that there must be many more with a passing interest in school and perhaps for good reason. There must be a pattern.

With a bit of research, we found over 50 CEOs and founders of successful Silicon Valley companies and many times that running companies elsewhere. Carly Fiorina, for example, didn’t finish her J.D. Sergey Brin and Larry Page got their master’s, but dropped out of the Ph.D. program. Michael Dell dropped out of pre-med.

Image representing Michael Dell as depicted in...

Image via CrunchBase

Ellison attended University of Illinois at Urbana-Champlain and University of Chicago, but didn’t graduate from either. Kevin Rose dropped out of University of Nevada Las Vegas, and the list goes on and on.

In 2001, Michael Spence received a Noble Prize in Economics for his work on information flows and market development. One of his most famous works was the Job Market Signaling Model, where he observed that employees signal their respective skills to employers by acquiring educational degrees. Employers pay higher wages to more educated employees because they know these employees have greater abilities and conclude it will cost less to teach them new skills than employees with lower abilities.

In other words, the education itself may or may not have value to the employer. What’s important to employers and what they are paying for is the signal that the students are sending about their intelligence and willingness to work hard.

What these employers look for in employees is the ability to succeed in a competitive and challenging environment. These are great qualities and we as investors are fans of graduates of good schools. But let’s take this one step further.

What many employers don’t look for in young professionals many investors demand of their CEOs: the ability to focus on what is really important, a predisposition for risk-taking and a healthy dose of irrationality. Can you imagine a bunch of somewhat irrational, laser-focused risk-takers in a corporate environment? You probably can’t.

Ben T Smith IVFor that reason, most entrepreneurs do not make good employees. In fact, when we look at our investments over the last 10 years, we find in our limited data set that investing in people who were great employees – especially ones with more than 5 years in corporate positions – frequently brings lower returns.

Here’s how entrepreneurs themselves think about it:

When we I asked MixRank co-founder Ilya Lichtenstein about his time in college, Ilya replied, “Yeah, I graduated from University of Wisconsin-Madison in 2010. I didn’t go to class much though, was too busy making money with affiliate marketing.” Fellow co-founder Scott Milliken says: “I didn’t spend any time in classes either. In my last semester at Berkeley, I was working 40 hours outside of school and taking 21 units. (I) attended 2 out of 5 of my classes. School wasn’t nearly as important to me as making money and getting professional experience.”

Influitive founder Mark Organ, who dropped out of a Ph.D. program, says, “quitting a Ph.D. program to go build a startup is a touch of madness. Trust me, I know. It was risky. But a founders’ sense of probabilities is different. He over weights the value of the big win, no matter how slim the odds are of achieving it. And it’s not about the money either, at least to me. We are only here on this earth a short time. We might as well take every opportunity to build something truly consequential before we turn to dust. It’s a way of achieving immortality.”

Running a startup is about making big decisions every day. There’s always a shortage of resources with too many opportunities to pursue and too many masters to serve, including customers, partners, investors, employees. Running a startup is all about making difficult trade-offs and being laser focused. But it also requires all-consuming passion to get through the tough times. It requires a slightly irrational power of conviction.

So what signals to an investor that a 20-something kid asking for a million dollars has what it takes? Perhaps it is dropping out of a really good school to pursue her passion and ambition. What struck us after we compiled the list was that successful dropouts came out of many schools, but three colleges dominated the list. They weren’t just good schools, they were great schools:  Harvard, Stanford and MIT.  Not only do they offer fantastic academics, but also have a deep culture of entrepreneurship and thought leadership.

So next time a Harvard dropout pitches you a social network de jour, take her seriously. Getting into Harvard is difficult. She dreamed about going there for a long time and worked hard to do it. The decision to drop out was agonizing. And yet, here she is. And we wouldn’t want to bet against her. Oh yeah, we both graduated, but don’t hold that against us.

(Victor Belfor (pictured top) is an entrepreneur and investor and currently runs strategic alliances at RingCentral, He graduated with an engineering degree from Kiev Polytechnic Institute and is pursuing his MBA at Wharton.. He can be found on Twitter @vbelfor. Ben T. Smith IV (pictured above) is CEO of ShopCo, a venture partner at Accelerator Ventures, and a serial entrepreneur and investor and the co-founder of MerchantCircle and Spoke. He is available on Twitter @bentsmithfour) He graduated from U.C. Davis in Engineering and Carnegie Mellon’s Tepper School with an MSIA.)

About Ben T. Smith, IV

Founder of, investor in and advisor to technology and media companies
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