A Tech Apprenticeship to Rival Peter Thiel's?

Jasmine Gao spends her days writing computer code at Bit.ly, the New York-based web startup that builds shortened web links for Twitter. Working alongside top computer and data engineers, several with Ph.Ds, Gao also talks on and off all day to Bit.ly Lead Scientist Hilary Mason — a rock star of the startup world and Gao's mentor.

A Tech Apprenticeship to Rival Peter Thiel's?
Photo by Adam Jeffery for CNBC.com

Gao's goal: start her own tech company, either in New York or Silicon Valley.

A year out of Brooklyn Technical High School, Gao, 19, is a member of the founding class of fellows at E[nstitute], a new program that pairs young adults with some of New York's top technology entrepreneurs. The 11 students live together in a loft near Wall Street (two floors above a Chinese restaurant), with their housing, transportation, and food covered during the two-year program.

It's the brainchild of Kane Sarhan, 25, and Shaila Ittycheria, 30, two young entrepreneurs who pulled the entire project together over the course of one year — from a late-night brainstorm in a café to welcoming the first students a few weeks ago.

Gao applied to E[nstitute] because she believes Sarhan and Ittycheria will help fulfill her career dreams. "I have a passionate interest in technology," said Gao, sitting in Bit.ly's downtown headquarters decorated in Startup Chic: wood floors, white walls, exposed ceilings, huge windows, rows of computers on long tables, technology geeks wearing hoodies, blown-up balloons on the floor left over from a recent party.

E[nstitute] is part of a still-small movement away from traditional higher education, partly because of its enormous cost and partly because higher education isn't always a path to success.

In their 2011 book, Academically Adrift, professors Richard Arum and Josipa Roksa documented that a majority of a sample of students from the class of 2009 — all from accredited institutions — earned less than $30,000 per year; 9 percent were without jobs and looking for work. Meanwhile, the average debt load of students is $23,000.

According to a recent study by the Partnership for 21st Century Skills, about 25 percent of employers say the writing skills of four-year college graduates are deficient.

The most famous of the alternative models is investor Peter Thiel's fellowship. Started in 2011, the Thiel fellowship awards no-strings-attached grants of $100,000 to young people who skip college and focus on their work and their research, mentored by investors, scientists, and entrepreneurs.

The difference between the Thiel model and E[nstitute], Sarhan said, is "scale." Sarhan and Ittycheria want to build E[nstitute] into a for-profit program with multiple nationwide locations. They have plans for national expansion in 2014 and are trying to raise enough money, perhaps several million dollars, to educate thousands of students. (More: 11 Entrepreneurs Teaching the Next Generation)

In addition to raising venture capital for their expansion dreams, they are also exploring possibilities for bringing in revenue and turning a profit: A recruiting arm for the fellows to place them into businesses after graduation; an online platform to distribute business-focused educational content; and a proprietary method for helping businesses evaluate and hire entry-level talent.

At this point, the program is a non-profit. The cost to run it this year is $500,000, the majority of which Sarhan and Ittycheria have raised so far from venture capitalists and foundations who want to "disrupt" higher education. Among the backers: clothing designer Marc Ecko, investor and Boston Celtics owner Jim Pallotta, and The Kauffman Foundation, which studies entrepreneurship and education.

"Here's what I like about it," said Kauffmann research director Dane Stangler. "E[nstitute] bridges the two parts of our work. We are hugely enthusiastic about the apprenticeship model as a way to address the human capital shortcomings we have in the American education system."

A Tech Apprenticeship to Rival Peter Thiel's?
Photo by Adam Jeffery for CNBC.com

Stangler had dinner at E]nstitute] in late September and said he was "very struck by all of the kids' general awareness of why college was not serving them well. We want to take these new models elsewhere, and we want to figure out the impact of this, even if only on a few kids' lives."

Hilary Mason of Bit.ly was also smitten with the idea for E[nstitute]. Mason, 32, is a co-founder of Hack NY, a non-profit that helps engineering students connect with the New York startup community.

"We're at a point where we need novel educational models," said Mason, who graduated from Grinnell College. "I wish I'd known more about how to build a startup when I was younger."

Similarly, Shelby.TV founder Reece Pacheco, 29, a Brown University graduate, wanted to teach others what he didn't know when he was starting out. That's why he's a mentor for E[nstitute] fellow Brendan Coffey, 23.

Coffey works during the day alongside Pacheco, learning computer code and building spreadsheets. His first passion is the environment — but he realized the non-profit world has limitations.

"To have a larger impact, I have to have technology training," Coffey said. "I see the promise of video." He's already created a feed of sustainability-tagged videos using Shelby.tv technology. (More: Could the U.S. Run Out of Entrepreneurs?)

"Reece has given me so much trust right off the bat, and it's been awesome," Coffey said.

That enthusiasm is exactly what Sarhan and Ittycheria were hoping for when they launched E[nstitute]. Sarhan, a native of rural Michigan, deferred his first year at the University of Michigan to become an Americorps volunteer in New York.

A year later, he decided not to go back home and instead enrolled at Pace University as the school year was beginning. To pay his bills, he worked as a waiter, and one day waited on Jacqui Squatriglia, partner in the Coyote Ugly chain. Almost immediately, she offered him a job with her company.

After a couple years, Sarhan used that experience to land a job with mobile ad platform Buzzd (later named LocalResponse). That's where he met Ittycheria, a Harvard MBA who was in charge of hiring — a position that showed her a bachelor's degree doesn't always deliver on its promise. Meanwhile, Sarhan said he always knew he was an educator at heart.

A Tech Apprenticeship to Rival Peter Thiel's?
Photo by Adam Jeffery for CNBC.com

And so, one evening a year ago, the two colleagues were chatting in a café and hatched the idea for E[nstitute]. They parted for the evening, but at 4 a.m. Sarhan got a text message from Ittycheria telling him she couldn't sleep she was so excited … and would he meet her to talk further at 7:30 am? (More: The Baby Boomer Entrepreneur)

They gathered their contacts — 31 entrepreneurs from 15 companies — and began developing an educational curriculum for the students. They raised money, advertised their plans — and were stunned when nearly 500 applications poured in.

After sifting through them, they chose 11 fellows and found them a place to live. (Ittycheria lives with them as a chaperone.) They range in age from 18 to 23, and come from all over North America: New York, New Jersey, Nebraska, Illinois, Michigan, Virginia, California, and Toronto, Canada.

The students are paid a weekly stipend of $250, and have their housing, transportation, and food covered by E[nstitute]. The students are in their first month of working at their respective startups, plowing through writing assignments, and attending lectures and weekly dinners with experts. They're also getting to know the big city and meeting some of New York's most celebrated entrepreneurs.

"Kids need to learn," said Sarhan. "It just doesn't all have to happen in the classroom."