Contribution: This article identifies the participation of external stakeholders as a key contributing factor for positive outcomes in project-based software engineering courses. A model for overlapping virtuous circles of lasting positive impact on both stakeholders and students from such courses is proposed. Background: Project-based courses are widespread in software engineering education, and there are numerous designs for such courses presented in literature. It is found that the needs and motivations of external stakeholders, from industry and government sectors, in these courses has received limited attention in related work. Intended Outcomes: A course design that prepares students for graduate level studies and professional life, through close proximity to external stakeholders in a highly realistic setting, working on "live" projects. Application Design: Building on a long tradition of university-industry collaboration dating back to 1977, as well as findings in related work, students are assigned to live projects proposed by external stakeholders from industry and government, working in close proximity with their respective stakeholders throughout the project. The course places great emphasis on coaching over instruction, treating the many unforeseen challenges of such projects as a valuable part of the learning experience. Findings: Based on interviews with stakeholders and students, it is found that stakeholder and student outcomes are interdependent and build upon one another, and that positive outcomes for both groups are necessary for the sustainability of the course over multiple iterations.