7 ms·

A venture capital firm says it invests in people “pre-idea, pre-team”

81 points by kixa 11y ago

freedombeer 11y ago
This reeks of sad desperation, but represents a higher risk for risk junkies. Whatever next? Womb portfolios?!
solve 11y ago
MOST accelerators will outright reject, if not make the barrier to acceptance vastly higher for any company that went through a "pre-accelerator". Being in a pre-accelerator makes it far harder to get into an accelerator. So pre-accelerator is really a misleading name. But change the name of these organizations to "VC firms" or "angel groups" - much better description.
TimPC 11y ago
There is such a thing as too early. The valuation for the 8% equity here really bites.. you're getting smaller investment than a top tier accelerator and you're going through that 'accelerator' at such an early point in the product that your next step is likely another accelerator. I get that these programs can have value, but the likely outcome is messing up your cap table. It also is a bit awkward to start a start-up when your personal finances don't give you months of living expenses -- this seems like a recipe for large # of failures and taking bad money when you're too early for good money.
tinkerrr 11y ago
> 10% of applicants are accepted after multiple rounds of interviews and even a logics and computing test. It's interesting to note that they are trying to hire entrepreneurs the same way Google was trying to hire programmers 10 years ago.
- mathattack 11y ago
  It's actually moderately appropriate here if they're "drafting" out of school. (Potential versus having real work to show)
foldr 11y ago
This reads like an Onion headline.
bergmann 11y ago
£10k for an 8% equity stake, how does this compare to other funding in London? The article mentions the "Founder Institute" provides £1k for 3.5%.
- m-i-l 11y ago
  Seedcamp is "€25k for 5% w/ optional further €50k for no more than 2% (totalling €75k for 7%)" [0], which at current exchange rates is around £18K for 5%. [0] http://seedcamp.com/our-deal-terms/ http://seedcamp.com/our-deal-terms/
  - bergmann 11y ago
    I guess it makes sense that Entrepreneur First are offering less money for more equity as they're taking people with "no team" and "no idea".
- robbiehudson 11y ago
  Comparable. Techstars take slightly less for the same amount: http://www.techstars.com/funding/ http://www.techstars.com/funding/
  - deleted 11y ago
    [deleted]
- dheera 11y ago
  Doesn't YC give 120K for 7%? An incubator/accelerator that isn't as good as YC (and therefore has less to offer) should have a better deal than that to make up for the difference. Given YC as a baseline, an investment of 10K GBP == 15488 USD should be taking less than 0.9% of the company.
  - smeyer 11y ago
    >An incubator/accelerator that isn't as good as YC should have a better deal than that to make up for the difference Only from the perspective of someone being recruited by both YC and the alternative. If YC isn't an option (as it isn't for most people), then it doesn't much matter whether or not YC is offering a better deal to someone else.
eculic17 11y ago
don't understand why they keep saying it's a VC in the article. It's a startup accelerator
- jklein11 11y ago
  Because outside of the HN bubble an accelerator is the pedal next to the brake in a car.
pizu 11y ago
also, "pre-birth" and "pre-kindergarten"
- michaelochurch 11y ago
  Well, over 90% of getting funded by VCs is stuff that happens before birth, so yes, that is literally true.
  - trhway 11y ago
    location, location, location... Basically you need to invest in fundamentals while the asset itself is at its cheapest, and "not yet existing" may happen to be among the cheapest states of the asset
  - throwaway435231 11y ago
    Michael, what you've just written is a gratuitously negative comment[1] that adds nothing. Guess what, 99.999% of getting funded happened in Earth's prehistory of 4.5 billion years, at any point during which things could have gone differently and precluded humanity and culture. Out of the remaining 0.001% - 45,000 years - scarcely ten thousand consisted of the establishment of western civilization and only the scant past few decades have established an Internet and a culture where literally anyone in the western world with an idea can start making it a reality, on a physical (if not cultural) level - i.e. physically nothing is required that the average person cannot access. Physically you do not need access to anything except knowledge and culture, which are actively working to take away. You are stealing. The way to expand this opportunity is not to focus on the first 99.99999% of history, but the next ten years. You add nothing and take significant amounts away from that. I'm sick of your negativity. Here's a fact: I'm not asian, but asians are far more likely to get funded. SO WHAT! How does that change whether I'm taking the time to build something? Michael go build something. Anyone can call people names. People should downvote your negative comments on sight. Besides being policy here, anyone who is downvoting you is literally creating good in the world. Because you are actively preventing the expansion of a culture of building. We might not have the power to get a sixty year old who had to go work early in life and received no formal education funded, regardless of this person's merits or ideas. But we can - and should, are required to - downvote you, and contribute to a positive culture where in five years, when that person is sixty-five, and has spent the past five years building something, he can be. [1] the definition of which is that it is not new, not useful, not insightful, and adds absolutely nothing while being negative. Similar to if you said to a commenter: "by the way YOU SUCK at every skill, when compared to Mozart at music". This is undeniably true, he started at the age of four and specialized very hard. It is a comment nobody would disagree with on a literal level. It is also an absolutely worthless comment that adds nothing: the only reason anyone would write it is so that they could say the word "YOU SUCK" and then weasel out of it. Of course you should get downvoted, so hard you delete your comments which add nothing. Go build something, Michael.
sorenbs 11y ago
I'm at month 3 of the EF process. Happy to answer any questions :-)
- mathattack 11y ago
  Once you get past the headlines, is it more like a course (where you pay tuition) or an incubator (where you commit to a % of your future company in exchange for money)?
  - graphene 11y ago
    It's completely the latter. (disclaimer: also in the current cohort)
    - mathattack 11y ago
      Being paid to learn is a great thing!
- bengali3 11y ago
  >pre-idea, pre-team Assuming this was true for you? do you have an idea & team now? How long were you funded/hired without these two in place? Theoretically how long can one last in the program if you dont find these 2? How long have you been burning their cash, have you raised other funds? You could be considered an even Riskier (debatable) investment than the alternate of an actual startup with an MVP actively looking for funding, so does their percentage reflect that? Did you pay an entrance fee as well? Thanks!
  - graphene 11y ago
    They fund individuals for a fixed, three month period, during which you are free to work on whatever and with whomever you want. After three months, they invest £10000 (in exchange for 8% equity) in all teams that are settled on an idea and seem promising. There are no fees of any kind. (disclosure: I'm on the current cohort)
  - 11y ago
troels 11y ago
Isn't that just an entrepreneur-in-residence?
7Figures2Commas 11y ago
> “We are probably the most risk-seeking investors in the world,” said Matt Clifford, EF’s co-founder. This is a great quote, but the reality is more like: "If we didn't start a firm that invests in companies before they exist, we wouldn't have any dealflow." > Despite the risk-–30% of the entrepreneurs EF funds drop out without ever creating a company –Clifford said he has no difficulty finding investors for his venture firm. Most prospective LPs can't get into top funds, but in markets like the one we have today, they don't go home. They funnel their money into second, third and fourth-tier funds. There were a lot of these in the first .com boom.
snorkel 11y ago
Similar to sports agency and drafting young athletes. Will tech hiring become televised events with sideline commentary?
devanti 11y ago
So they give you a couple grand. What other value do they provide? Seems like a bad deal for people who actually have good ideas and can execute.
- gearhart 11y ago
  I've never been through the programme, but I've worked with several people who have. Most young entrepreneurs who "go it alone" tend to pick up a network of useful contacts - advisors, introducers, investors, corporate buyers, talented potential co-founders/employees etc - over a period of a few years. EF are very good at speeding up that process, so when you're starting your first company you've already got a base of people around you who can provide you with the support and connection you need, without you devoting large portions of your time to it. It's easy for young entrepreneurs to downplay the importance of that network because there's a selection bias towards confident naivety amongst people who've decided to set up their own company rather than following a safer, more established path (I know I did when I first started), but looking back on it, objectively I'd say joining them is a good idea for almost any graduate entrepreneur. Having someone who, without any real effort from you, can represent you to a VC from a position of power, make warm introductions to large numbers of angels in your domain, find you really good candidates for early-stage roles in your company, or introduce you to people in big companies who're actively looking to buy products from startups is a blessing you can almost overlook if you've got it but helps you avoid some serious pitfalls.
davidhunter 11y ago
EF solves a real problem in the UK. Our universities don't exhibit anywhere near the same 'entrepreneurial culture' vs the US equivalents (although this is slowly improving - thankfully). We also don't have the big tech companies (google/fb etc) with the means to compete with banks/hedge-funds for the highest quality engineers/PMs. In the US, these institutions serve as natural breeding grounds for startups. Without these environments, it becomes much more difficult to find like-minded people to develop ideas and raises the time/cost associated with doing so. I joined EF on the current cohort for this reason and have been surprised (to the upside) with my fellow cohort members. They have managed to recruit some exceptionally talented and motivated people who would be difficult to find otherwise. Also, apart from the cash investment (which just serves to pay your living costs), they have a great network of industry contacts, alumni and investors. The jury is out on whether the EF model will succeed in producing valuable companies. However, given the level of technical talent it is attracting, they are definitely solving a real problem and I believe it will outperform the YC-style accelerators who have been struggling in Europe. Hopefully they will open the investment fund up to alumni in the near future :) Message me if you have any questions - would be happy to answer.
- aaggarwal 11y ago
  So, in a nutshell, EF is trying to recruit people from different areas who wants to be entrepreneurs, but doesn't have an idea/team, and EF will create suitable teams out of these people and give them money to build some product? I have a question. Who exactly will decide what the product would be?Is this something those people would decide among themselves, or the EF would put them on a particular project idea they think is suitable for that team?
  - davidhunter 11y ago
    You have complete freedom over who you work with and what you work on. They fund you unconditionally for the first three months and you can walk away at any time if you want to. Their website is actually pretty informative: http://www.joinef.com/our-programme/ http://www.joinef.com/our-programme/
M8 11y ago
The 30-year-old with a PhD in neuroscience from Cambridge University plans to set his “media-truth-detector” loose on what he calls Russian propaganda, mostly against his native Ukraine. Unfeasible and uninvestable, but good if you want to get an EU grant I guess. Who is even the target market? Meanwhile just follow all russian, ukrainian and western media sources and compare them.
tkiley 11y ago
Sounds like they are trying to manufacture startups like Lou Pearlman manufactured musical acts. I doubt there will be a tech startup equivalent of the Backstreet Boys, though.

81 points by kixa 11y ago

This reeks of sad desperation, but represents a higher risk for risk junkies. Whatever next? Womb portfolios?!

solve 11y ago

MOST accelerators will outright reject, if not make the barrier to acceptance vastly higher for any company that went through a "pre-accelerator". Being in a pre-accelerator makes it far harder to get into an accelerator. So pre-accelerator is really a misleading name. But change the name of these organizations to "VC firms" or "angel groups" - much better description.

TimPC 11y ago

There is such a thing as too early. The valuation for the 8% equity here really bites.. you're getting smaller investment than a top tier accelerator and you're going through that 'accelerator' at such an early point in the product that your next step is likely another accelerator. I get that these programs can have value, but the likely outcome is messing up your cap table. It also is a bit awkward to start a start-up when your personal finances don't give you months of living expenses -- this seems like a recipe for large # of failures and taking bad money when you're too early for good money.

tinkerrr 11y ago

> 10% of applicants are accepted after multiple rounds of interviews and even a logics and computing test. It's interesting to note that they are trying to hire entrepreneurs the same way Google was trying to hire programmers 10 years ago.

mathattack 11y ago
It's actually moderately appropriate here if they're "drafting" out of school. (Potential versus having real work to show)

foldr 11y ago

This reads like an Onion headline.

bergmann 11y ago

£10k for an 8% equity stake, how does this compare to other funding in London? The article mentions the "Founder Institute" provides £1k for 3.5%.

m-i-l 11y ago
Seedcamp is "€25k for 5% w/ optional further €50k for no more than 2% (totalling €75k for 7%)" [0], which at current exchange rates is around £18K for 5%. [0] http://seedcamp.com/our-deal-terms/ http://seedcamp.com/our-deal-terms/
- bergmann 11y ago
  I guess it makes sense that Entrepreneur First are offering less money for more equity as they're taking people with "no team" and "no idea".
robbiehudson 11y ago
Comparable. Techstars take slightly less for the same amount: http://www.techstars.com/funding/ http://www.techstars.com/funding/
- deleted 11y ago
  [deleted]
dheera 11y ago
Doesn't YC give 120K for 7%? An incubator/accelerator that isn't as good as YC (and therefore has less to offer) should have a better deal than that to make up for the difference. Given YC as a baseline, an investment of 10K GBP == 15488 USD should be taking less than 0.9% of the company.
- smeyer 11y ago
  >An incubator/accelerator that isn't as good as YC should have a better deal than that to make up for the difference Only from the perspective of someone being recruited by both YC and the alternative. If YC isn't an option (as it isn't for most people), then it doesn't much matter whether or not YC is offering a better deal to someone else.

eculic17 11y ago

don't understand why they keep saying it's a VC in the article. It's a startup accelerator

jklein11 11y ago
Because outside of the HN bubble an accelerator is the pedal next to the brake in a car.

pizu 11y ago

also, "pre-birth" and "pre-kindergarten"

michaelochurch 11y ago
Well, over 90% of getting funded by VCs is stuff that happens before birth, so yes, that is literally true.
- trhway 11y ago
  location, location, location... Basically you need to invest in fundamentals while the asset itself is at its cheapest, and "not yet existing" may happen to be among the cheapest states of the asset
- throwaway435231 11y ago
  Michael, what you've just written is a gratuitously negative comment[1] that adds nothing. Guess what, 99.999% of getting funded happened in Earth's prehistory of 4.5 billion years, at any point during which things could have gone differently and precluded humanity and culture. Out of the remaining 0.001% - 45,000 years - scarcely ten thousand consisted of the establishment of western civilization and only the scant past few decades have established an Internet and a culture where literally anyone in the western world with an idea can start making it a reality, on a physical (if not cultural) level - i.e. physically nothing is required that the average person cannot access. Physically you do not need access to anything except knowledge and culture, which are actively working to take away. You are stealing. The way to expand this opportunity is not to focus on the first 99.99999% of history, but the next ten years. You add nothing and take significant amounts away from that. I'm sick of your negativity. Here's a fact: I'm not asian, but asians are far more likely to get funded. SO WHAT! How does that change whether I'm taking the time to build something? Michael go build something. Anyone can call people names. People should downvote your negative comments on sight. Besides being policy here, anyone who is downvoting you is literally creating good in the world. Because you are actively preventing the expansion of a culture of building. We might not have the power to get a sixty year old who had to go work early in life and received no formal education funded, regardless of this person's merits or ideas. But we can - and should, are required to - downvote you, and contribute to a positive culture where in five years, when that person is sixty-five, and has spent the past five years building something, he can be. [1] the definition of which is that it is not new, not useful, not insightful, and adds absolutely nothing while being negative. Similar to if you said to a commenter: "by the way YOU SUCK at every skill, when compared to Mozart at music". This is undeniably true, he started at the age of four and specialized very hard. It is a comment nobody would disagree with on a literal level. It is also an absolutely worthless comment that adds nothing: the only reason anyone would write it is so that they could say the word "YOU SUCK" and then weasel out of it. Of course you should get downvoted, so hard you delete your comments which add nothing. Go build something, Michael.

sorenbs 11y ago

I'm at month 3 of the EF process. Happy to answer any questions :-)

mathattack 11y ago
Once you get past the headlines, is it more like a course (where you pay tuition) or an incubator (where you commit to a % of your future company in exchange for money)?
- graphene 11y ago
  It's completely the latter. (disclaimer: also in the current cohort)
  - mathattack 11y ago
    Being paid to learn is a great thing!
bengali3 11y ago
>pre-idea, pre-team Assuming this was true for you? do you have an idea & team now? How long were you funded/hired without these two in place? Theoretically how long can one last in the program if you dont find these 2? How long have you been burning their cash, have you raised other funds? You could be considered an even Riskier (debatable) investment than the alternate of an actual startup with an MVP actively looking for funding, so does their percentage reflect that? Did you pay an entrance fee as well? Thanks!
- graphene 11y ago
  They fund individuals for a fixed, three month period, during which you are free to work on whatever and with whomever you want. After three months, they invest £10000 (in exchange for 8% equity) in all teams that are settled on an idea and seem promising. There are no fees of any kind. (disclosure: I'm on the current cohort)
- 11y ago

troels 11y ago

Isn't that just an entrepreneur-in-residence?

7Figures2Commas 11y ago

> “We are probably the most risk-seeking investors in the world,” said Matt Clifford, EF’s co-founder. This is a great quote, but the reality is more like: "If we didn't start a firm that invests in companies before they exist, we wouldn't have any dealflow." > Despite the risk-–30% of the entrepreneurs EF funds drop out without ever creating a company –Clifford said he has no difficulty finding investors for his venture firm. Most prospective LPs can't get into top funds, but in markets like the one we have today, they don't go home. They funnel their money into second, third and fourth-tier funds. There were a lot of these in the first .com boom.

snorkel 11y ago

Similar to sports agency and drafting young athletes. Will tech hiring become televised events with sideline commentary?

devanti 11y ago

So they give you a couple grand. What other value do they provide? Seems like a bad deal for people who actually have good ideas and can execute.

gearhart 11y ago
I've never been through the programme, but I've worked with several people who have. Most young entrepreneurs who "go it alone" tend to pick up a network of useful contacts - advisors, introducers, investors, corporate buyers, talented potential co-founders/employees etc - over a period of a few years. EF are very good at speeding up that process, so when you're starting your first company you've already got a base of people around you who can provide you with the support and connection you need, without you devoting large portions of your time to it. It's easy for young entrepreneurs to downplay the importance of that network because there's a selection bias towards confident naivety amongst people who've decided to set up their own company rather than following a safer, more established path (I know I did when I first started), but looking back on it, objectively I'd say joining them is a good idea for almost any graduate entrepreneur. Having someone who, without any real effort from you, can represent you to a VC from a position of power, make warm introductions to large numbers of angels in your domain, find you really good candidates for early-stage roles in your company, or introduce you to people in big companies who're actively looking to buy products from startups is a blessing you can almost overlook if you've got it but helps you avoid some serious pitfalls.

davidhunter 11y ago

EF solves a real problem in the UK. Our universities don't exhibit anywhere near the same 'entrepreneurial culture' vs the US equivalents (although this is slowly improving - thankfully). We also don't have the big tech companies (google/fb etc) with the means to compete with banks/hedge-funds for the highest quality engineers/PMs. In the US, these institutions serve as natural breeding grounds for startups. Without these environments, it becomes much more difficult to find like-minded people to develop ideas and raises the time/cost associated with doing so. I joined EF on the current cohort for this reason and have been surprised (to the upside) with my fellow cohort members. They have managed to recruit some exceptionally talented and motivated people who would be difficult to find otherwise. Also, apart from the cash investment (which just serves to pay your living costs), they have a great network of industry contacts, alumni and investors. The jury is out on whether the EF model will succeed in producing valuable companies. However, given the level of technical talent it is attracting, they are definitely solving a real problem and I believe it will outperform the YC-style accelerators who have been struggling in Europe. Hopefully they will open the investment fund up to alumni in the near future :) Message me if you have any questions - would be happy to answer.

aaggarwal 11y ago
So, in a nutshell, EF is trying to recruit people from different areas who wants to be entrepreneurs, but doesn't have an idea/team, and EF will create suitable teams out of these people and give them money to build some product? I have a question. Who exactly will decide what the product would be?Is this something those people would decide among themselves, or the EF would put them on a particular project idea they think is suitable for that team?
- davidhunter 11y ago
  You have complete freedom over who you work with and what you work on. They fund you unconditionally for the first three months and you can walk away at any time if you want to. Their website is actually pretty informative: http://www.joinef.com/our-programme/ http://www.joinef.com/our-programme/

M8 11y ago

The 30-year-old with a PhD in neuroscience from Cambridge University plans to set his “media-truth-detector” loose on what he calls Russian propaganda, mostly against his native Ukraine. Unfeasible and uninvestable, but good if you want to get an EU grant I guess. Who is even the target market? Meanwhile just follow all russian, ukrainian and western media sources and compare them.

tkiley 11y ago

Sounds like they are trying to manufacture startups like Lou Pearlman manufactured musical acts. I doubt there will be a tech startup equivalent of the Backstreet Boys, though.