There haven’t been that many significant innovations in venture capital — despite what VCs might tell you — but, arguably, Entrepreneur First is one of them.
While most accelerators and company builders start with ideas, EF started with people. Its programme brings together founders looking to start something with potential cofounders in a way that’s something akin to Love Island. It was a completely new approach to building companies in Europe when it launched 10 years ago — and the first cohort brought investors 17 times their money.
So it’s no wonder VCs are long on EF.
Today, EF is announcing a $158m Series C round to continue doing what it’s doing — and it’s attracted an all-star cast of backers. Amongst them are Stripe founders Patrick and John Collison; Monzo cofounder Tom Blomfield; Wise cofounder Taavet Hinrikus; LinkedIn founder Reid Hoffman; Sarah Leary, cofounder of Nextdoor; and Demis Hassabis and Mustafa Suleyman, cofounders of DeepMind.
Hundreds of people around the world join EF cohorts every year, and spend six months testing out company ideas and potential cofounders, and then developing their companies before pitching to investors. 80% of them find a cofounder.
626 companies have now been created through EF — and 450 of them are still going. Together, they’re now worth more than $10bn; alumni include finance management app Cleo, remote work platform Omnipresent and computer vision business Tractable.
Sifted spoke to cofounder Alice Bentinck to find out what EF’s got up its sleeves for its second decade.
The rush to pre-seed
When EF began, most VCs thought the idea of backing someone who didn’t have a cofounder or an idea was nuts, says Bentinck.
In the last couple of years we’ve seen a big rush to pre-seed as prices at seed got inflated
Now, investing pre-seed — when a company is often at that “idea stage” — is all the rage. “In the last couple of years we’ve seen a big rush to pre-seed as prices at seed got inflated,” says Bentinck. “Lots of investors have gone upstream” — although, she adds, as valuations cool, that might soon change.
EF now has competitors too, though Bentinck says diplomatically that “other talent investors trying to do something similar expand the market”. The most notable competitor is Antler, founded in 2017, which runs programmes in seven cities in Europe and many more around the world.
Over time, the kind of talent that EF looks for has shifted. The average age of a founder is now 27, but it’s years of experience that’s key, says Bentinck: “There’s a sweet spot — it’s between graduating to having about six or seven years’ experience — so people have sufficient experience in a market, but haven’t yet got so much that they’ve lost that naive optimism.”
Academic background is becoming less important. “We had about 40% PhDs at one point; now it’s more like 20%.”
I came into this industry naively thinking that this [lack of diversity] is something that as a woman, I could fix
Backing enough female founders remains a challenge though, says Bentinck. “I came into this industry naively thinking that this [lack of diversity] is something that as a woman, I could fix. I think Matt [Clifford, EF's other cofounder] thought the same. We created Code First Girls [a non-profit coding school for women] as a way to fix this problem — and the conversion [from graduates] to becoming a founder has been miniscule.”
And then there are the challenges that women who do become founders face when they try and raise capital beyond EF.
EF does set diversity targets for the talent it sources, she says — but doesn’t set targets for the rest of the funnel, although the data is tracked. “The conversion rate for men and women is similar,” she adds.
24% of all "historic" portfolio companies have had at least one female founder; the number is 25% for "live" portfolio companies, EF says.
During Covid, EF saw a real uptick in applications — including a 20% increase in applications from women.
Bentinck expects that this latest global speed bump will also create new opportunities for EF. In her view, as startup valuations drop, or grow at less than lightning speed, employees at some of the high-growth startups (the kind of talent that EF would really like to get its mitts on) might not reap as many rewards from sticking around for the long haul for equity to vest. Instead, they might choose to start a company of their own.
As for the kinds of startups formed at EF, they tend to shift with the flavour of the year because, as Bentinck puts it, “we invest in what talent wants to work on”. This year that is, of course, Web3.
Other areas of focus include deeptech, consumer tech and wet bio. By “wet bio” she means startups, for example, creating plants that can remove pollutants from the air or make "clean" meat.
Up next for Entrepreneur First
EF currently runs cohorts twice a year, in six locations: London, Paris, Berlin, Singapore, Bangalore and Toronto. Adding another location in Europe is likely not on the cards, says Bentinck, but they are looking to open in new geographies.
There’s also a team at EF, headed up by Bentinck, working on new products. She’s deliberately vague when talking about what they’re working on — but hints that it includes “different programme formats”. The current EF cohorts run for six months (three months to form an idea and find a cofounder, three months to prepare to pitch to outside investors), but they’ll be testing out running shorter programmes and evening programmes.
Above all: is she still having fun?
“I enjoy it way more now. In the early days there’s that existential dread that you’re wasting your time — it can take ages to seem obvious that you’re succeeding. There were dark days when it felt like we were wasting our time doing something that didn’t really matter.
“I never thought I’d be doing this — or anything — for 10 years. And I can’t think of anything else I’d rather do.”