No Team? No Idea? No Problem! This VC Will Fund Your Startup
Source: Ania Nussbaum
A team of entrepreneurs working at Entrepreneur First in London this week.
Ania Nussbaum
Alejandro Vicente Grabovetsky wants to build a software program that checks the veracity of online news items. 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. He has three problems though: he’s not exactly sure how it’s going to work, he doesn’t have any money to develop it, and he’s got no team to work with.
Also, he’s not sure the technology “is there yet.”
Enter Entrepreneur First, a venture capital firm that says it invests in people “pre-idea, pre-team,” which this week let Grabovetsky pitch his idea to see if he can get it off the ground.
Many wannabe entrepreneurs in EF’s program are pre-selected while still at university, where EF has close contacts with professors to spot the students with the best academic records, science projects, internships or publications. Two academics even hold equity in the company. “We spent a lot of time on campuses,” said Zoe Jervier, a member of EF’s recruiting team, said.
As money pours into equity and venture capital firms, “pre-acceleration” programs are flourishing for those interested in entrepreneurship but who don’t know where to start. It’s a risky, long-term bet on untested entrepreneurs with no real product or business plan.
“We are probably the most risk-seeking investors in the world,” said Matt Clifford, EF’s co-founder.
Despite the seemingly wide-open “pre-team, pre-idea” pitch, EF has a tough selection process: 10% of applicants are accepted after multiple rounds of interviews and even a logics and computing test. EF gives startups access to funding, investors, connections and commercial support. Its “members” receive a £3,500 stipend for three months, an amount that is “small enough to deter those who are attracted by money, but big enough to live on in London,” Mr. Clifford said. They are encouraged to find co-founders and if they can show a product that gets positive reviews after the first tests, they are incorporated as a company and given £10,000 for an 8%-equity stake.
This is standard for each company, and there’s no negotiating terms.
EF says it has 100 entrepreneurs in its program, up from 33 people when it started in 2012.
Despite the risk-�C30% of the entrepreneurs EF funds drop out without ever creating a company �CClifford said he has no difficulty finding investors for his venture firm. Next week, EF plans to announce it has raised new funding of “many millions.” He would not disclose who the funders are. Five sponsors, including Microsoft MSFT -1.01%, the City of London Corporation and KPMG, cover 10% of EF’s costs in cash and services. In return, they get a chance to poach EF “students” and their ideas before anyone else.
“We’ll see if EF is a success in ten years,” said Toby Coppel, an investor and co-founder of London-based Mosaic Ventures, a $140 million fund. “The startups themselves can take 5-10 years to mature into big hits,” he added. In the interim, “they recruit the top computer science and engineering graduates, which are a key ingredient to any new disruptive startup.”
Entrepreneur First is not the only program that recruits entrepreneurs “talent only.” Silicon Valley-based Founder Institute also accepts applicants without a team or a project. This March, it launched a 4-month program in London. It costs wannabe entrepreneurs almost £1,000 and a 3.5% equity stake to participate.
Among the 32 who joined, two-thirds have already quit. “It is really hard to evaluate early stage startups on their idea,” the Institute’s co-founder Jonathan Greechan said.
After 3 years, 70 people have graduated from EF’s program, including Emily Brooke, the founder of Blaze, a bike laser projection light for cyclists. Brooke expects to generate more than £1 million in revenue this year. Before meeting Mr. Clifford, she had “never heard of a start-up,” she said.
Corrections and Amplifications:
EF says it had 33 participants when it started its program in 2012. An earlier version of this post incorrectly said there were 12 people that started in 2012. Also, 70 people have graduated from EF’s program over the past three years. An earlier version of this post incorrectly said there had been 83 graduates. (June 12, 2015)
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