Entrepreneur first made a name for itself ten years ago in its home base of London, and beyond, for the new approach it takes to invest in technology: instead of looking for interesting, scaling startups like typical VCs, it supports founders and their very, very early stage startup ideas – so flimsy that sometimes the startups aren’t really realized when EF writes the first check.
The method and results have catapulted EF into a portfolio now worth about $10 billion across more than 500 companies, and now it is announcing its latest round of fundraising – $158 million. An atypical investor run in some ways more like a startup itself, EF raises money like the latter: the funds come in the form of a Series C that values EF itself at about $560 million.
The investors are often VCs and angels themselves, two groups that are always looking for a better signal in the startup sound; and this round is no different. It brings in new backers Patrick and John Collison — the brothers who co-founded Stripe — along with the participation of a number of others not specifically named.
Those already investing in it is an impressive list, including individuals like Tom Blomfield, Taavet Hinrikus, Reid Hoffman, Matt Mullenweg, Nat Friedman, Claire Hughes Johnson, Sarah Leary, Sara Clemens, Matt Robinson, Elad Gil and Lachy Groom; as well as Sequoia, Andreessen Horowitz, Softbank and GV.
EF’s co-founders Alice Bentinck and Matt Clifford said in an interview that about $100 million will be used to continue investing in more entrepreneurs and their startups, and it will turn that investment effort into an evergreen fund. For some backgrounds, unlike typical venture capital funds, EF does not charge a 2% management fee on top of the investment of those it invests in. There are, Clifford says, “no obligations” for those who take the money from EF, “except if they start a business within EF, for example if two individuals build a business after finding each other through our program, they go to our investment committee. after 12-14 weeks we will have the opportunity to invest in that startup.”
But while you might just think of EF as another syndicate, the purpose and concept in itself is more than that: the rest of the amount, about a third of this funding, will be used to build EF itself.
While EF has always used some of the money raised to grow its own business, it’s using this round to more than double that concept.
It now has 120 employees in offices in London, Toronto, Paris, Berlin, Bangalore and Singapore; and is looking for more.
And besides that, it’s now focused on building its own actual product, software it calls Form, which sounds a bit like an ERP, a bit like a CRM, a bit like a predictive business intelligence tool, and a bit like a Tinder for founders.
EF’s team already uses data science in its work, and it sounds like Form’s next iteration will be the next step in the work it’s already done building tools to manage its own portfolio’s database ($10 billion covers funding for about 4,000 people, Clifford said), to help sort and find the many candidates it gets (17,000 to date, Bentinck added), and critically to help match people with potential co-workers. founders.
“We’ve hit a $10 billion portfolio value with what is essentially a single product for a very specific type of founder,” Clifford said. “EF’s flagship form, Form, works incredibly well for new founders in their first six to seven years of career who are now ready to start. But we know that’s just a fraction of all the great potential founders in the world,” Clifford said. “So over time, we want to reach the place where EF has a product where every aspiring entrepreneur can find their co-founder. We’re not ready to share the details yet, but we think there’s huge growth potential here.”
Part of this will be about trying to take the recipe EF made, the secret sauce so to speak (my words, not theirs), and effectively bottle it up.
“Intuition doesn’t scale, and Entrepreneur First does this at scale,” Bentinck added, referring to how she and Clifford recently collaborated with the data science team that evaluated past applications from the 17,000 applicants it has had. “Now we have some good data points and can say, for example, which criteria are most indicative of future funding. We are wary of spotting patterns in VC in general, but we believe in how you can use data to collectively build better intuition.”
Putting more emphasis on early stage investing has always been a tricky business, not least because companies and founders haven’t proven their ideas yet.
“VC should be tough,” Clifford said of the effort. “Innovation is not easy.”
It’s one of the reasons returning founders, and those with experience at successful startups, generally get more attention: they have a slightly more track record than power better future success.
But as the startup world has boomed and it has become more difficult to get the most premium financing for startups that to have have already proven themselves, it’s interesting to see the focus shift and more investors are looking at ways to connect with those earlier concepts and more green founders. (A recent interesting example: Sequoia and the launch of Arc, his own attempt to connect with startups and founders at a very early stage, which seems a bit inspired by EF… and interestingly Clifford pointed out to me that it at least one EF alum working on it.)
If there’s an element of long game in VC, then EF is probably in the longest game-playing category – which has $10 billion+ in valuations with only $680 million in exits so far. (That exit list includes Sonantic, the voice AI company that Spotify recently acquired; Tractable, a computer vision insuretech startup; employment platform Omnipresent; Aztec Protocol; Cleo; Permutive; and Twitter-acquired Magic Pony Technology; Moody’s acquired Passfort; and Facebook bought Bloomsbury AI, Atlas ML and Scape.)
That world will inevitably see more ups and downs before it fully stabilizes.
This recent period has been one of pressure that has descended from public tech to valuations of the largest private startups, then to those in growth mode, and so on and so forth. I don’t know if that appreciation speaks to EF itself who also sees pressure, but Clifford in particular said it had only gone out to raise $100 million for this Series C (making it a more modest target than its previous one). fundraising, a $115 million round in 2019). While it will always be difficult to see which startups will make it over the longer term, these numbers speak for EF itself, probably one of those “startups” that can weather this storm well.
“We are entering a new era for venture capital financing, with a new generation of global founders who need support to build iconic companies from scratch,” Hoffman, who is also a board member of Entrepreneur First, said in a statement. “Entrepreneur First represents a new way for talented people to access that opportunity and a new way to build startup ecosystems outside of Silicon Valley.”
