Insights from doing Entrepreneur First (EF)

EF has recently updated its terms, making it a no-downside choice for those wanting to go through an accelerator. Regardless, I get often asked how my experience was, especially as I haven’t found a cofounder. So here are some learnings and thoughts from the program.

Should you do it?

• YC has normalized giving a big chunk of equity to accelerators, so going through one can seem an obvious first step (it’s not). Use it only if you can’t go the natural route (ie. talk to the market, build a prototype, and sell it).

• EF’s 99% value is finding you a cofounder in 2 months while zeroing the financial risk and, with the latest deal update, giving you similar YC terms.

• Most of the reluctance to apply to EF comes from the wrong question: “Is it worth leaving my job?”. Do not quit your job because of EF. Decide you want to build, be ready to leave your job, and then assess if EF is the next step for you.

• Intentional or forced, urgency matters. If you want (or must) start building in a short window of time, EF is a 2/3 months closed-loop experiment. If you’re able to build the standard way (ie. stay in a job, find a problem, find a cofounder, with no technical rush), then don’t bother. Before EF I had 4 months of runway, so without the program, I would have opted to find a job first.

• What you want to work matters. Matt Clifford stated it’s weird to go through EF if you want to make a pure SaaS business as it’s the most accessible model you can build and it’s relatively easy to find people willing to go for SaaS. With the new terms, I believe that if you’re open to going through YC, then you’re pretty much likely to be open for EF too. But I still agree that EF value is particularly relevant if you want to work on hard/deep tech (or someone could argue, if you miss the counterpart network, ie. been in academia for your whole life and want to find a business-oriented cofounder).

Is the value/terms ratio proportional to YC? What can be improved?

YC invests $500K on 2 separate safes at the same time ($125K for 7% + $375K on an uncapped MFN safe). In the most founder-friendly scenario, you get in with an idea and a team.

EF invests $125K for 8%, plus $7.5K (converted from £ to $) per person to participate in the program. The founding team thus gets a total of $140K for 8%. In the most founder-friendly scenario, you get the big-chunk investment with a strong idea direction and a very short track record of working well with a recently met stranger (which they helped you find).

Compared to YC, you pretty much get the same implied valuation without the $375K cash flow but with a cofounder. Considering the risk EF takes on (which is, that the founding team didn’t know each other three months before), the updated terms are incredibly fair. If you want more, feel free to apply to SPC.

I anyway see reasonable yet big margins for improvement:

• Investment: offering a YC-like second safe, perhaps optional, perhaps at a later stage (ie. 2° IC after N months or if an investor is leading the round), perhaps at less founder-friendly conditions.EF would be well positioned to properly evaluate the progress since by then it would have been watching the company very closely. It’s kinda clear why having more cash is good but I’ll copy-translate-paraphrase-paste these points from Lombardstreet Ventures:

  • By removing the pressure of fundraising, founders are allowed to be more selective and therefore accept only strictly necessary investments and strictly selected investors;

  • With this significant investment, EF largely alleviates the fundraising pressure from the founders' shoulders: even if they didn't find any investor at all, they would still have a decent runway to achieve some traction and validation, and then, with that, proceed to raise funds at a later time if needed;

  • It becomes even easier for founders to decide to leave their day jobs as the 15K+125K+375K can comfortably sustain 2-3 cofounders for a while;

  • Founders can also make capital-intensive moves they otherwise would have waited to do;

• Program: the physical platform they provide is not at all fully leveraged. Even if 99% of the value is providing you with a cofounder (first phase) and money (second phase), EF could easily add at a light operational cost:

  • more events (ie. evening socials. This would enable better relationship dynamics inside the cohort by naturally prompting random conversations, I’d argue increasing the likelihood of knowing a potential match);

  • more people (ie. VP of BD from Company X);

  • more debunking talks (ie. DeepTech VC partner discussing what you need to have for successful fundraising in biotech. Cohort members are somehow skeptical about everything EF says, so having an independent third party would accelerate the learning path);

  • more roundtables (ie. how to ideate in hard tech, 10 people max).

Insights and learnings (anecdotal)

• As you are surrounded by great people who are now your peers, you get a new sense of what normal is. Your average baseline goes up.

• Unless you live in a hacker house, it’s very hard to assess how well you’re working. Here you get a new benchmark for how and how quickly the -1 to 0 process can go (in fact, you can indirectly see it 50+ times from other pairs building and breaking up and building again). Before EF I assumed you could reasonably test a problem in 2/3 weeks. Now it’s about having 10 customer interviews and ruling out options in 1 day.

• Diversity of thought: hard to be again in a room with 80 people for weeks at a time and constantly be challenged.

• You overestimate what you can do alone without an overhead structure in three months. There is no way you can get more insights on the -1 to 0 journey than at EF.

• You peel layers off your identity and get closer to your inner truth. It’s a special situation where everybody wants to get the best out of the experience so everybody tries new stuff as they go. But as you go very deeply into everything, you rule out options quickly and discover things you like and don’t like at a very fast pace.

• An accurate representation of what happens:

  • Week 1: everybody takes too much time trying the first cofounder

  • Week 2-3: everybody is in a pair

  • Week 4: partial reshuffle

  • Week 5: mid-program existential crisis, personal reassessment

  • Week 6: everybody is in a pair

  • Week 7: many breakups, people freak out

  • Week 8: everybody is in a pair

• I didn’t find the “Silicon Valley Hustle Environment”. We were always the same 5-10 people in the office on weekends, most people left at 6/7, and the office rarely felt bustling. This is purely a vibe remark: we lacked enough meeting rooms and if you can skip commuting 50 minutes in London you do.

• I was expecting many more people willing to work on hard/deep tech stuff (Paris had way more). Surprisingly (see point at the beginning), many people wanted to work on SaaS.

• CEO people wanted to be CEO. Not many technical people were 100% sure they wanted to be CTO.

Tips

• Maximize false positives, not false negatives.

• Trust the process and don’t look back for three months (ie. don’t question if the model works once a week).

• Write your constitution with all of your preferences, keep it updated, and share it before working with someone. Be brutally honest and specific: I expect my cofounder to be in the office on weekends, I don’t want to live in London, talk SaaS and I’ll die inside, etc.

• You will constantly overengineer if to work with someone. I used this framework (thanks Max!): if you think it has a 70% chance of working, give it a try, and work for 1 day. By default break up unless there are good reasons to move on. After a couple of days, if the 70% has not moved up to 80%, then break up. Do not even start at 60%.

• Do not overthink whether to join EF (I did): you get paid to find a cofounder and launch a company, EF is highly respected, the terms are similar to YC, and if you don’t like it you leave it.

• Explore. Even if you’re working with someone, commit to having a coffee with someone different every day, you’ll never know. After that, restart the cycle with the ones you liked the most. Put yourself in a place where if you want to work with X after your latest breakup, X knows you already.

• Make the best out of the EF team. Great soccer coaches were not necessarily great soccer players, great directors were not necessarily even actors.Their job is to find patterns and guide you through the same doubts they have seen countless times. I found the common criticism of their role and guidance (ie. they never built a company) quite pointless. It’s your job anyway to filter out what you think is wrong.

• Sooner or later, someone will tell you that EF will play games with you to test you out and see how you behave under pressure. Even if true, if this bothers you, good luck with all the rest!