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With StartX now financially ‘self-sustaining,’ University discontinues funding for its startups

Stanford-StartX fund to stop investing this June

Courtesy of Alexa Lee

The Stanford-StartX Fund, which invests in Stanford-affiliated startups through the nonprofit StartX, will stop making new investments this June, StartX announced on Thursday.

The Stanford-StartX Fund has achieved its goal of helping StartX — legally a separate entity from the University — become financially self-sustainable, StartX wrote in an online post.

Founded in 2009 by Stanford students to help the school’s entrepreneurs found companies, network and fundraise, StartX has now guided 650 companies, 83 percent of which are growing or have been acquired, according to the recent post. In a testament to its growth, StartX says its companies now raise $9.3 million on average, many times the $1.1 million its companies raised on average half a decade ago.

StartX itself, however, does not invest in the companies it takes on and instead provides mentorship and other resources. The Stanford-StartX Fund, created in 2013, uses University money to invest in StartX ventures alongside other groups.

“We invested in StartX’s program development because we saw the potential for it to provide great value to Stanford entrepreneurs,” said Randy Livingston, Stanford’s Vice President for Business Affairs and Chief Financial Officer, in a statement posted by StartX. “We are pleased that this vision has been realized, with over 800 Stanford alumni, faculty and students having participated in StartX over the last 9 years. It is gratifying that StartX is now in a position to move forward as a financially self-sustaining organization.”

According to Livingston, Stanford decided about a year ago to end its funding for StartX when its agreement with the nonprofit expires on June 30 of this year. Livingston said the choice was motivated not only by StartX’s growth but also Stanford’s “desire to prioritize investment” in its Long-Range Planning effort, an initiative begun in 2017 by University leadership to gather input on and craft a vision for Stanford’s future.

While Stanford will no longer provide its companies with financial support, StartX will continue to work with the University. StartX’s Thursday announcement referenced “new collaborations with Stanford’s Office of Technology Licensing” as well as programs under development that will encourage majors in the humanities and sciences to consider “entrepreneurship … as a viable path for all backgrounds.”

Although StartX began as a resource for new ventures from Stanford students, it emphasizes that its programs are now open to companies at any stage of development. Applicants to StartX can be new founders, “experienced entrepreneurs” or professors at Stanford; the program also takes some applicants without Stanford ties if they are recommended by current StartX members.

In June, StartX-funded medical artificial intelligence company MedWhat sued Stanford-StartX Fund and other investors for breach of contract, unfair business practices and other alleged offenses, two months after these investors filed their own lawsuit against MedWhat on charges including breach of contract, fraud and unfair competition. The ongoing legal dispute, however, “had absolutely no bearing” on the University’s decision to end investments, according to Livingston.

 

Contact Hannah Knowles at hknowles ‘at’ stanford.edu.

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