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Stanford's 'billion-dollar start-up' farm

Where will the founders of the next Instagram or WhatsApp come from?

Many Stanford University students dream of creating the next billion-dollar start-up, but for all the engineering brainpower many of them have, not all have developed the skills to run a company—skills the Stanford Technology Venture Program aims to teach.

"We teach them to have a thick skin," said Michael Lyons, consulting associate professor in the School of Engineering. "Students at this level are not used to being told they are wrong. They are told they are perfect. We don't do that.

Students at the Stanford University campus
Erin Lubin | Bloomberg | Getty Images
Students at the Stanford University campus

"We tell them they smell a bit. They're not used to that. That is part of the training process. We expose them to real world investing environments." Lyons said.

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The program has had its successes. Kevin Systrom, for example, went through the program and went on to sell his company—Instragram—to Facebook for $1 billion.

The program doesn't offer degrees. Instead, its 30 courses (with over 2,000 enrollees) combine technology, management and leadership, along with entrepreneurship. Students learn the basics of corporate finance, business strategy and corporate governance.

"For all the $16 billion stories we see, there are many other stories where there are people who have tried to do something and have not found that much success. I think what excites me is the opportunity to start something new," said Anshuman Sahoo, a Ph.D. student who is taking courses in the program and is interested in working on electrification solutions for the developing world.

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"I think the most important thing I've learned at this program is that there is great value in humility. Look, there are a lot of smart people out there, and one of the most important things is learning from them and treating every single opportunity you have with someone in the community as a learning experience," Sahoo added.

While the conventional wisdom is that students want to make the most money at the biggest firms as soon as they get out of school, many of the students are taught that if they want to be true entrepreneurs, then they will need to take risks and not be afraid to "fail big."

"There are courses in the program in which students are expected to come up with business ideas and then present those ideas to a panel of Sand Hill Road venture capitalists," Lyons said. The road borders on the Stanford campus, which is known as "The Farm."

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"There have been some well-known students who have studied in the program. There are also smaller companies you haven't heard of, like Skybox Imaging, which raised $91 million from investors, such as Khosla Ventures, that grew directly out of the program," Lyons added.

"Joining a start-up, unless you have a stake in it, may not be the right thing to do right after school. Going to work for a larger company, or even a medium-sized one, allows you to learn how a business operates. And it also teaches them how to achieve leadership," Lyons said. "These are important skills you can bring later to a start-up, which makes the start-up much more powerful."

By CNBC's Mark Berniker and Josh Lipton. Follow them on Twitter @markberniker and @CNBCJosh.

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