27 October 2015

How Entrepreneur First plans to make London Europe’s Silicon Valley


“We invest in individuals, which I don’t think anyone else in the world does,” says Alice Bentinck, co-founder of start-up accelerator Entrepreneur First.

We’re sitting in one of the co-working spaces that play host to the programme’s young developers. Around us, German and Spanish speakers discuss ideas over laptop-strewn desks. Some of them, I’m told, are members of Entrepreneur First.

Bentinck founded EF in 2011 with Matt Clifford, when they had recently left their jobs at consulting firm McKinsey. The idea was simple: give young, technically gifted graduates the opportunities and support to start companies instead of join them.

This is what sets EF apart. Most accelerators tend to provide ready-made start-ups with so-called ‘seed funding’ to accelerate growth and tap into the potential of a small company.

Members of the new EF cohort, however, arrived a few weeks ago with substantial technical expertise – but no real idea of what they wanted to do with it. EF has come to serve as the meeting of very brilliant minds.

“You come to EF to find like-minded people who probably have very different ideas and very different technical skills. And the creative genius comes from the combination of those skills, ideas and backgrounds,” says Bentinck.

And those like-minded people largely consist of the top graduates from Europe’s top universities. In the last round of, 1/5 of Cambridge Computer Science graduates applied. Others come from Imperial, Oxford and their competitors on the continent. With over 800 applications for about 40 places, EF has a daunting acceptance rate of 3%.

Once on the programme, the select few have three months to develop their start-up ideas before they come up for a round of funding. EF provides support, investment and a living stipend – in exchange for an 8% cut.

The model has been successful, though perhaps not as wildly successful as Bentinck would have us believe. EF makes the admirable commitment to invest in ‘deep tech’ – the kind of patentable technology that will stand out from the endless call of social media start-ups. External investment has been strong, if unspectacular.

The inevitable comparisons with Silicon Valley titan Y-Combinator are perhaps unfair. But EF has set itself up to rival the very best and in doing so offers a stark indication of how far Europe’s start-up scene has to go.

The 50 companies that have emerged from Entrepreneur First have an average valuation of just over $5 million. But Y-Combinator boasts 800 alumni companies with an average worth of $37.5 million.

California does have a head-start, but London’s tech scene has been substantial for some time now. And yet it still struggles to produce so-called ‘unicorns’ – privately listed start-ups with valuations over $1bn. Scanning down a list of 140 unicorns, only a handful hail from the UK. And most of them, like Shazam or Transferwise, barely qualify.

A stark depiction is provided by the Wall Street Journal, which shows American and Asian start-up scenes dwarfing Europe. While the global number of unicorns has tripled since the beginning of 2014, Europe accounts for only 11 of those 81 new billion dollar companies.

In part, it’s due to the problem EF have been trying to address.  “For young Europeans considering their first career there aren’t the structures or the expectations to encourage them to build their own start-up. Our careers are still set up to help people become consultants and bankers and lawyers,” says Bentinck. In Stanford, meanwhile, every bright graduate wants to build a start-up.

And Bentinck is confident that London is well placed to become a serious global player in the near future. “If you think about the start-up ecosystem in London, it’s by far the strongest in Europe. It has more investors, more cash to invest – it also has more experienced founders than anywhere else across Europe. And so much of a start-up is about being part of an ecosystem and you can draw in expertise and the right kind of money,” says Bentinck.

But if London is to stay ahead of the other European contender, Berlin, it will have to get better at retaining its talent.

“We are always looking to attract the best technical individuals to the programme and increasingly, these technologists are from outside the EU.  Even though we have the ability to sponsor visas, getting them approved is a long and nerve wrecking process for those who apply, often with a wait of up to two months to even hear anything about application status, or funding deadlines to hit soon after arrival,” says co-founder and CEO Matt Clifford.

“If London wants to continue being recognised as a world-leading tech hub, applying for visas, particularly if you have proven technical skills, should be more seamless and transparent process.”

The UK granted 20,700 visas to skilled non-EU workers last year. But US authorities granted over 160,000. And that willingness to embrace talent from overseas helps drive innovation in Silicon Valley, where 44% of all start-ups have at least one immigrant founder.

Douglas Grant is a CapX contributor, based in London