Piazza founder and CEO Pooja Sankar

Piazza, the social network that lets college students and instructors discuss material online, has closed on $6 million in new funding.

The funding round, which serves as the Palo Alto, Calif.-based startup’s Series A, was led by Bessemer Venture Partners with the participation of previous investors Kapor Capital and Felicis Ventures. This brings Piazza’s total outside investment to approximately $7.5 million.

Growing beyond Q&A and STEM studies

Piazza will use the money to expand its service to more schools and add more features beyond its existing Q&A format, said founder and CEO Pooja Sankar in an interview this week. Such growth initiatives mean hiring more people: Piazza currently has around 10 full-time employees, and the company expects to double its staff by the end of 2012, Sankar said.

Another priority in the months ahead will be making Piazza friendlier to disciplines beyond science, technology, engineering and math (also referred to as STEM fields.) “There’s a different structure in [humanities] majors such as the arts, literature, and history. A lot of our focus going forward will be in understanding their needs,” Sankar said.

Taking on study group snobbery

Piazza aims to provide a single place where students can ask each other and their instructors questions about their studies and homework assignments. Students can opt to post to Piazza under their real names, or anonymously — which is meant to eliminate fears of asking “a stupid question.” Professors and teaching assistants, meanwhile, can help guide the Piazza discussions and access workflow and stats on the service.

Sankar says she was inspired to create Piazza after feeling excluded from study groups while she was earning degrees in computer science from IIT Kanpur and the University of Maryland, College Park. “I noticed all my classmates were in the computer lab working together, but I was too shy to ask to be included,” Sankar said. “They would all be done with an assignment by 2 a.m., and I would be working on it until 6 a.m…. Google and other search engines on the open Internet would have been too general for my purposes and the questions I had.”

Screenshot of Piazza questions and dashboard

Once Sankar joined the working world — before founding Piazza, she held developer positions at Kosmix, Oracle, and Facebook — she discovered that many other people had similar feelings of exclusion while studying engineering. “Sheryl Sandberg held an interesting event while I was at Facebook for women in technology, and I found that many of the people there said the exact same thing: They didn’t feel they had a support group in their studies.” In mid-2009, while pursuing her MBA at Stanford University, Sankar developed a working prototype of Piazza to help solve this problem.

Big growth, but no revenue yet

During its first few months, Piazza kept a low profile, operating only at Stanford in private beta. But in December 2010, the company opened its service to all universities, and 2011 brought fairly explosive growth: Piazza started the year with 4,000 student users and ended it with more than 100,000, Sankar said. Today, Piazza counts such schools as Berkeley, Columbia, Cornell, Duke, Harvard, Princeton, the University of Michigan, the University of Texas and Virginia Tech among the hundreds of schools worldwide that utilize the service.

For all that growth, however, Piazza doesn’t make any money. It doesn’t charge universities or students for access to its service, nor does it serve advertisements. Sankar tells me revenue generation will probably not be on the agenda until mid-2013. “For the next 1.5 years, our focus will probably be to continue to grow our user base and expand the product,” she said.

Piazza is by no means the only company vying to be the social network of choice for college study services. Blackboard is hugely successful with its educational software; college textbooks now often come with their own social and online components; and many universities have their own white-label services to help students keep up on coursework. But Piazza’s growth over the past year shows there are still big needs that haven’t been fulfilled by these existing offerings, and instructors and students are willing to try out a free new service. Its challenge now is proving it has staying power as a truly must-have tool for professors and universities for many semesters ahead.

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When you add a large and economically accessible employee base to our first three criteria, you have the recipe for successful startups. Tel Aviv is a good non-U.S. example. Israel has more PhD’s per capita than any place on Earth, plus a military that turns out gobs of advanced technology. The result: There are now more VC’s in Israel than there are rabbis.

Similarly, after World War II, oil companies in Texas needed to find new sources of petroleum, and they turned to geological survey companies for help. One of them had a little subsidiary, Texas Instruments, where the computer on the chip was eventually built. Some years later, Michael Dell arrived at a much-enhanced engineering school on the campus of the University of Texas, and the rest, as they say, is history.

I am what you might call a startup gray-beard and I’ve seen it all. Founders can sometimes get too fixed to the idea that they must be in a certain incubating environment to succeed, when really, getting out of the startup fishbowl is sometimes the best thing they could do. I often encourage startups I invest in or founders I counsel to be contrarian and start their firms outside of the Valley, or failing that, to move East while they still can.

If you want to stay stateside, I’m partial to Boston, my home town, but there are plenty of other cities to consider, too. My top non-Silicon Valley cities are: Boston; Pittsburgh; Philadelphia; Austin; Research Triangle, N.C.; Minneapolis; Tallahassee; Toronto; and Basking Ridge, N.J. Here’s why:

1. The weather sucks in some of these towns (not Tallahassee) so your people will actually work instead of bugging out at 5:15 to train for a marathon, triathlon or Ultimate Frisbee.

2. You can recruit better outside the fishbowl. Every technology company hits the wall — some multiple times. In the Valley your employees will bail at the first sign of trouble and jump to a better job in the next parking lot. That means you will have to spike salaries to rebuild your team. Other places in the world aren’t quite so spoiled – or they come to you already cynical and stay through the rough times.

3. You won’t get lost in the startup maze. In the Valley, every VC has a portfolio company in each flavor – their own LP’s can’t tell them apart.

4. In my experience, other startup communities aren’t as pre-occupied with the “exit” as Da Valley. SV VC’s have attention spans measured in picoseconds and will sell/merge your company at the first sign of trouble. I can say that in Boston, at least, we are used to gutting out long “winters.”

5. Academics make great board members. Each of these cities has a rich educational environment and are great places to recruit sartorial advisors. And unlike at Stanford, you wont have to give up 1 percent of your equity just to put the provost’s name on your board!

Howard Anderson is a founder of The Yankee Group, a cofounder of Battery Ventures, and a professor of business at the MIT Sloan School of Management.

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Saffo says a startup must take a long view of its place in the world — even imagine its legacy — if it is to succeed, especially in a recession. And what, in his view, is the best way to achieve this? “Focus on doing good, in addition to doing well.”

F|R: It’s hard to stop and consider “the forest” when you’re just trying to get a beta launched, meet payroll and stay afloat to the next funding opportunity. Can founders pressed by such demands make time for the “long view”?

Saffo: It is hard being an innovator, so most entrepreneurs think, “I just don’t have time to think about the rest of the world. I’ve got other things to do.” But such a micro focus is actually bad for business. At Long Now, we often invoke the phrase: “The whole point of life is to learn how to become good ancestors.” If you brood on that at a business level, it says that it is no longer sufficient to do well. You must also do good.

F|R: An infamous litmus suggests there are only two kinds of founders: those who want to be rich, and those who want to be king. Where does the do-gooder-founder fit in?

Saffo: Every entrepreneur has a devil on one shoulder and an angel on the other. The angel is saying “Change the world!” The devil is saying “Get rich! Get rich!” If you’re only trying to get rich, you’re not going to innovate. You’ll be like late arrivals in the dot-com bubble — the managerial equivalent of cholesterol in our veins. Only listening to the angel isn’t right, either. That just creates a children’s crusade — sounds wonderful, doesn’t get anywhere. Those who are most successful, like Steve Jobs, say, “Of course I will change the world. I will do something nobody else has done, and my just reward is that I will get rich.” But the Andrew Carnegie model of selling your soul for profit, then buying it back with good works won’t fly anymore. We all have to find our way to make a contribution, and waiting until you’re a big company isn’t enough. Quite simply, the world cannot wait for you.

F|R: Starved for time and resources, what sorts of good works can startups realistically do?

Saffo: In the dot-com era they bought billboards, so buy a roadside clean-up sign instead. Or in lieu of the Christmas party, donate the party money to charity. Let your employees vote on which one. These things are becoming quite standard in Silicon Valley, and they have tax benefits that help your cash flow. But this shouldn’t just be do-gooder activity. If you apply the same entrepreneurial spirit to it that you applied to creating your company in the first place, you will find ways to do good that benefit your company in very tangible ways.

It’s an old example, but look at Interface, the residential and industrial carpet company. It bugged founder Ray Anderson that his product was getting thrown out whenever anyone remodeled. So he wrote his 1-800 number on the back of his carpets. “Call us, we’ll pick it up.” Installers loved it because it eliminated dump fees. Customers loved, it was environmental, etc. So Ray takes it a step further: He stops selling carpets and starts leasing them. Now he says, “We’ll charge you if you don’t return it.” So people start replacing only the damaged parts, like corners that were stained. Guess what this inspires? FLOR tiles. Suddenly Ray isn’t in the carpet business anymore; he has innovated a whole new consumer line of “beautiful flooring.”

It all comes down to share of mind: If you do good, you stand out. And if you stand out, that makes your customers feel good, and you get more attention. So doing good is strategically valuable, especially in a recession, when you have to fight so much harder to win business.

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