One autumn day early in my teaching career, I went for a walk around Yale’s neo-gothic campus with someone I’ll call “Peter,” a wealthy donor to the university. Like many donors, Peter had himself been an entrepreneur — that’s how he became wealthy — although in recent years he had become a well-known angel investor.
As we returned to my office at the School of Management, Peter mentioned that one of my students came to see him about investing in her start-up. “Do you know her? What do you think of her?” he asked.
I knew the student (“Jill,” I’ll call her) well and thought highly of her. She and I worked closely together, meeting weekly as a condition of her enrollment in our start-up practicum — a class in which student entrepreneurs work on their ventures for course credit. Because of our pedagogical relationship, I knew a good deal about Jill’s software start-up. I had seen her pitch, and it was persuasive.
But I also knew it omitted substantial caveats. In our private meetings, Jill had aired her dirty laundry: her conflicts with her co-founders, her indecision about pursuing the venture, her struggles to keep her team together, and the threat of competitors.
I fumbled for an answer to Peter.
Maybe I should encourage him to invest in Jill, I thought. I want my students to find investors and be successful. But what if Peter’s investment went sour? That could lead to a variety of unattractive outcomes, including him distrusting my judgment, not investing in future students, and being disinclined to donate to Yale.
Maybe I should tell Peter about Jill’s struggles, I thought. But I feared violating the trust she placed in me. Did Jill expect I would share what she told me with investors? Did I have an obligation to keep her information confidential?
Maybe I could be clever, I thought. I needn’t say anything: A shrug or wink would be enough to warn Peter off.
For the first time, I found myself marveling at the ethical complexities of entrepreneurship education. Should faculty keep information about student start-ups confidential? I didn’t know. As time went on, I would encounter more questions lacking easy answers. Should professors personally invest in student start-ups? Should the university? Should professors or universities participate in the governance of student start-ups? Should the university support controversial ventures, such as those related to drugs or sex? What is the role of faculty members as intermediaries between students, investors, and other service providers? How should the faculty mediate disputes between student founders? How do we grade entrepreneurship courses in which substantial work is done by nonstudent employees and co-founders?
These are questions made pressing thanks to the terrific success of entrepreneurship in higher education. Modern universities are start-up hotbeds — something that happened not by chance but rather through sustained investment by governments and universities over decades. Universities in the United States embraced the 1980 Bayh-Dole Act, which bequeathed to them ownership of the intellectual property arising from federally funded research. This gave them a financial incentive to ensure their innovations would be turned into products and services benefiting humanity rather than sitting on the shelf. At the same time, universities expanded their extracurricular support for campus entrepreneurs by building innovation spaces, creating start-up accelerators, and sometimes even investing in student start-ups through university-sponsored venture-capital funds.
University curricula kept apace. In 1985, American universities offered just 250 entrepreneurship courses; by 2010 that number had grown to roughly 5,000, taught by 9,000 faculty members serving some 400,000 students annually. More recent statistics are tough to find, but suffice it to say that entrepreneurship courses are now ubiquitous. At Stanford, for instance, “entrepreneurship” appears in course descriptions across nearly three dozen departments. Entrepreneurship garners enthusiasm across campuses in ways that few other topics do.
Start-up success stories are seared into the imagination of incoming students wishing to start the next Google, Facebook, Snapchat, or Dropbox. Of course, few students will find such success. Most start-ups fail, and most student founders would be financially better off in salaried jobs. But in the aggregate, these founders play an indispensable role in our economy. They are the architects of Joseph Schumpeter’s famous “creative destruction,” the innovators who unseat incumbents and reallocate capital, forever renewing economies.
The problem for universities is that supporting student entrepreneurs presents many ethical dilemmas, like the one I faced with Peter and my student Jill. These dilemmas arise due to a confluence four factors.
Many students studying entrepreneurship do so not for some far-flung future, but rather because they are, while in school, already practicing entrepreneurs.
Few disciplines face this issue. Students heading to Wall Street are rarely financiers in college. Those studying civil engineering are not building bridges in town. Students who wish to go into consulting are not often paid consultants while in school. Sure, such students might do internships, but that is not very similar to what the student entrepreneur is doing. Interns practice a tune written by others; student founders write their own scores and simultaneously conduct the orchestra, often at substantial personal risk.
Student entrepreneurs forge business relationships on and off campus.
Entrepreneurship is a team sport. Student entrepreneurs establish relationships with faculty, university staff administering entrepreneurship-related programs, mentors participating in those programs, co-founders both inside and outside the university, alumni, employees, investors, attorneys, accountants, other service providers, and, of course, customers (of which one hopes there will be large numbers).
As Steve Blank, a 30-year veteran of Silicon Valley tech start-ups, famously said, entrepreneurs need to “get out of the building.” That exhortation applies far less to students studying other subjects. It matters little to the physics student or classicist. In contrast, student entrepreneurs cannot succeed if they are sequestered in the library.
Yet the relationships that result bring the potential for ethical problems, if for no other reason than that they create more opportunities for ethical transgressions. Entrepreneurs have higher ethical “surface area” than most other students. Which other students on campus create so many high-stakes commercial relationships while on campus?
Entrepreneurship education creates the potential for great wealth.
Imagine a group of students jointly author a paper in an English course. Such a paper rarely has even the slightest impact on their financial lives; it is relevant for the semester and probably forgotten shortly thereafter. In contrast, a start-up idea conceived in class or a college-sponsored hackathon could be worth billions of dollars. That may not be common, but it is not impossible: University students do indeed sometimes churn out unicorn start-ups.
The value created accrues to the student entrepreneurs and potentially each of the stakeholders that participated in baking the proverbial “pie” together — cofounders, employees, investors, the university, and so on. Each may desire, many can expect, and some will deserve a piece of that pie. Dividing it creates many opportunities for our ever-acquisitive universities to abuse their power over their young students. Imagine a Ph.D. student dividing equity with a university and her adviser. How voraciously can she advocate for her position if she requires her adviser’s approval when she defends her dissertation? Or imagine a university’s summer start-up accelerator foisting contracts upon freshmen. What hope do those freshmen have of identifying nonmarket terms? Or imagine a faculty member with a Rolodex of wealthy alumni and investors. Will he dole out introductions preferentially to student ventures in which he is planning a post-graduation investment?
Entrepreneurship educators are often not just faculty members but also investors, board members, advisers, and entrepreneurs themselves.
We have some sense that entrepreneurship cannot be learned from books and lectures alone, that it requires practice outside the classroom. For this reason, practitioners are common among entrepreneurship faculty in the same way that musicians are in music departments and architects are in architecture departments. It is also common for tenure-track research faculty in entrepreneurship to become practitioners of a sort — they are often investors or advisers to start-ups.
This, of course, can create problems. Imagine a hypothetical Professor Smith who invests in his students’ start-ups. How is a student seeking advice to know if she is meeting with Professor Smith the educator or Professor Smith the investor? The entrepreneur-investor relationship is transactional — the parties make some agreement in a competitive marketplace — while the educator-student relationship is more akin to the relationships between attorneys or physicians and their clients. Those sorts of relationships are characterized by high expertise asymmetry and trust placed in the professional, who acquires a fiduciary-like responsibility to the client — a responsibility to act in a manner consistent with the client’s best interests. For educators, it can be unclear which ethical norms apply in which situations. Janus-faced faculty risk bringing the ethical norms of the marketplace to an interaction with unwitting students.
Is there a better job on campus than teaching entrepreneurship? It’s difficult to imagine. Entrepreneurship educators are in the enviable position of seeing the university’s boldest students — the dreamers, the doers, and sometimes the delusional. These students come from all over campus and work on all manner of ventures, from heartwarming nonprofits to scalable tech ventures potentially worth billions of dollars. What a privilege to be in the service of these students, to stand beside them at the inception of their ventures, to delight in their successes, and to console them in their failures. But if the role of entrepreneurship educator is rewarding, it is in equal measure challenging.
As I stood with Peter on that autumn day, I struggled to answer his inquiry about Jill’s merits. I equivocated briefly before deciding to warn him about her. I didn’t tell him the details, but I sowed within him the seed of doubt.
I now regret that decision.
I thought what I told Peter was for the greater good and that it would contribute to various worthy ends: Peter’s continued investment in our students, his continued philanthropy to Yale, a thriving start-up ecosystem. In retrospect, I feel I ought to have focused on my duties to my student Jill. What I knew of her start-up was from a class in which I was her instructor. Surely, sitting across the table from me, she did not suspect her secrets would be shared with investors.
I am now more circumspect with investors and in similar situations where my priorities are put into conflict. I try not to think of my students as means to an end. I try not to think of them as potential future donors, success stories to extol on social media, instruments of local economic development, or potentially lucrative investments for me or my university. They are just students. And I am just their educator, not a future investor, board member, or consultant, nor the due-diligence team for venture-capital firms.
Entrepreneurship is not alone in presenting ethical dilemmas. Other lucrative activities are similar, particularly at university-administered hospital systems and in college sports. Each of these areas exists at the interface of the marketplace and the academy, pitting profit against pedagogy. To make our ethical dilemmas disappear altogether would require neutering campus entrepreneurship, rendering it the domain of abstract study rather than engaged practice. Doing so is not only impossible — that genie is already out of the bottle — but also foolish, as it would leave the university diminished. And so, if we are to have campus entrepreneurship, we are left with its ethical dilemmas.
This essay is adapted from The Ethics of Entrepreneurship Education (The MIT Press).
