1) we all got our undergraduate degrees. we dropped out of our graduate programs.
2) we were never encouraged by a faculty member to drop out. we were encouraged by the strength of the company and product. most all of us never talked with our university-affiliated investors about the company until after we dropped out, and after they invested (yes, basically all of them invested after we all dropped out. that's how we had a product to demo them with...)
It was annoying while I was in grad school, but it makes a ton of sense for preventing the appearance that a faculty member might abuse their authority to get a student to work on something that provides them with financial incentives.
This is standard conflict-of-interest mitigation stuff, I'd be amazed if Stanford didn't have it in place as well. I think at MIT they can't even offer you a job until you're no longer enrolled to prevent sub-par graduate research getting through because an adviser wants a student to work for them. (i.e. "If you accept this job, I'll sign off on your thesis.")