In this post we estimate the mean net worth of Stanford alumni who made their wealth primarily through founding startups.
Our estimate is that the mean net worth of a Stanford alumnus who founded a corporation is $10.8 million as of 2013.
The reason we are interested in making this estimate is because it fits in with a larger research project to into entrepreneurship, and within that project, into estimating the wealth that can be gained by becoming an entrepreneur.
In this post, we estimate:
- The total net worth of Stanford alumnus billionaires who have founded corporations
- The total net worth of Stanford alumni who have founded corporations
- The total number of Stanford alumni who have founded corporations
- The mean net worth of a Stanford alumnus who has founded a corporation
We arrive at this estimate by dividing the total net worth of Stanford alumnus founders by the number of Stanford alumnus founders. We close with some caveats and qualifications to our estimate.
Note: Initially, we estimated the wealth of Stanford founders using only the wealth of billionaires. We have since revised our estimate to include the wealth of non-billionaires
Total net worth of living Stanford alumnus billionaires who founded corporations
Our estimate: $98 billion
How we worked this out: We added up the net worth of living Stanford alumni who made their wealth from entrepreneurship by looking at the Forbes list of richest people in America and Wikipedia’s list of notable Stanford Alumni. You can see the spreadsheet of our data here. Note that this includes only billionaires, and so is a lower bound on the total net-worth of Stanford alumni founders. Our estimate is similar to the estimate of a consulting firm, WealthX. They found that self-made billionaires who have studied at Stanford have 76 billion of total net worth.1
Total net worth of living Stanford alumni who founded corporations
Our estimate: $346 billion
How we worked this out: We divided the billionaire wealth by 28.3%, the proportion of entrepreneurial earnings claimed by billionaires, according to the models of Hall and Woodward.2 This gives a total somewhat higher than the $171 billion that consultancy WealthX believe to be in the hands of the ultra-high net worth individuals among Stanford’s alumni.3
Number of living Stanford alumni who founded corporations
Our estimate: 32,183
How we worked this out: In a recent survey of all living Stanford alumni, 15% (4,290 out of 27,700) of respondents said they had founded a corporation.4 If we assume that this proportion holds across all living Stanford alumni, we can estimate the number of living Stanford alumni who have founded businesses. In 2013 Stanford had 214,553 living alumni, and 15% of this is 32,183.
Mean net worth of living Stanford alumni who founded corporations
Our estimate: $10.8 million
How we worked this out: We divided the total net worth of living Stanford alumni who founded corporations (after adjusting for the 28.2% share) by the total number of living Stanford alumni who have founded corporations.
Caveats and qualifications
- The net worth of an individual can come from many start-ups and later investments, so this isn’t how much net-worth founders gained from one start-up.
The net worth of Stanford alumni who founded companies is certainly highly skewed (it likely follows a power law), and so the typical Stanford founder will have a net-worth much lower than this mean.
Note: in response to comments, we add three further qualifications:
- We assume that billionaires own 28.3% of the entrepreneurial wealth of Stanford alumni because this was the proportion claimed by billionaire entrepreneurs in Hall and Woodward’s model. However, the distribution after a lifetime of work may be more or less skewed than the distribution after founding one company.
Many of Stanford’s living alumni are midway through their careers, and may have greater total lifetime earnings by the end of their working lives
We assume that the rates of entrepreneurship are the same among individuals who responded to Stanford’s Entrepreneurship Survey as those who did not. However, there may be a selection effect. Alumni who did found corporations may be more likely to respond (to boast about their achivements) or less likely to respond (due to being busy), thereby interfering with our estimate of the total number of Stanford founders.
In this post we estimated that the mean net worth of Stanford alumni who made their wealth primarily through founding startups is $10.8 million. We arrived at this estimate by dividing the total net worth of Stanford alumni who are billionaire founders by the total number of Stanford alumni founders.
Notes and references
- Page 14, WealthX UHNW Alumni Rankings Report ↩
- Figure 4 The Burden of Nondiversifiable Risk of Entrepreneurship by Robert Hall and Susan Woodward ↩
- Page 10, WealthX UHNW Alumni Rankings Report ↩
- Impact: Stanford University’s Economic Impact via Innovation and Entrepreneurship (2012: p.15) ↩