EF in the US: 6 months later

Exactly six months ago today EF announced its first westward expansion, with the launch of our US investment office and the founding of a new Funding team. Our team’s mission is simple: the world’s best companies deserve the world’s best capital. For much of our portfolio, that capital has been in our backyard (London). We’re proud to have co-invested with many of Europe’s best investors and will continue to do so for many years to come. But as our founders think more globally, and our footprint expands, so must our funding capabilities.

Achieving that, however, is no easy task. Needless to say. I’ve been busy. In January, at our company retreat, I presented a summary of what we’ve accomplished and learned in the early days of our experiment. I’m proud to say we’ve had some amazing success thus far, but that’s only because of the incredible community of investors and entrepreneurs that have offered their support along the way. In that light, it felt only right that I share some of the highlights:

Venture is a relationship business, so our absolute focus over the past six months has been developing a robust investor network. In that effort, I think we nailed it. We’ve held meetings with 150 investors across 8 US cities. While the lion’s share of those contacts is in the tech hubs of SF, NYC and Boston we’ve also enjoyed engagement from Seattle, LA and even my hometown of Chicago. Angel investors, family offices and VCs all shared their views on the ecosystem and what a good investment looks like to them.

Our traction within venture funds is particularly notable. Despite being incredibly short on time, 61 top quality institutions set aside their schedule to chat. Storied funds like Sequoia and USV have shared their wisdom, having raised multiple funds through booms and busts. Next generation funds like BoxGroup, FirstMark and Thrive Capital explained how they aim to innovate the venture asset class. The kind folks at Flybridge went so far as to open their office so I could work somewhere besides my kitchen table.

But our conversations weren’t one-sided. Investors have displayed a genuine interest in learning how tech and entrepreneurship have taken hold around the world. They recognize that talent is global, even if opportunity isn’t. But is this all lip service? Fortunately, no. The real measure of our experiment is whether our newly-formed network yields measurable results for our portfolio. I’m pleased to say that in our last cohort, which debuted in September (EF6), 50% of the secured rounds include US funding. Most of those deals are actually led by US venture funds (still unannounced though, sorry). The model seems to be working.

These six months have been an amazing learning experience, perhaps the most rapid of my entire career. But those discussions made clear that we still have a lot to do. Below is the list of our top insights thus far:

1. Our portfolio has a discoverability problem: Our brand has been growing steadily over the past 5 years, but our portfolio marketing has not. I’ve been asked “how can I find your companies” far too many times to count, but that ends now. We’re really excited to share our newly-designed Portfolio page and hope you all check it out!
2. European founders have a handicap: I’ve covered this in a previous post but in summary the bar is higher if you’re from outside the States. For too many years, foreign founders have flown to the US seeking capital without the proper narrative to support them. If our teams are going to raise here, they must do it because it makes sense for the business, not because they think investment will come easier. It won’t.
3. There are legal considerations from Day 1: This is something I didn’t really appreciate until a few weeks in. Most investors require/prefer a US flip to a Delaware C-Corp, but this has long-term tax and governance implications. Fortunately I stumbled across Dan Glazer and his treasure trove of guidance. There are pros and cons to both sides and I’ve found myself educating founders and investors alike.
4. US venture is a competitive sport: No single thing exemplifies the difference between the US and European venture markets more than the speed required to get in on a deal. Decisions are made faster. Meetings are more time efficient. Everyone here is on high octane. There’s a reason why the power of relationships are lauded so highly. It’s the one thing that can cut through pricing pressure, exploding offers and inflated valuations. If we want to play in the American market, we need to up our game.
5. Network Health > Network Size: It’s easy to take a meeting and build a CRM profile to optimize KPIs. It’s quite another to actively manage relationships and measure value. Are we increasing valuations at the expense of investor quality? Do I have adequate coverage across stage, sector and experience? If I send a deal to an investor does she respond back within 36 hours? These are important questions but they’re hard to measure without process and discipline. We’ve done a lot to ensure we can answer them. (Full disclosure: this lesson came from my favorite Irishman William McQuillan, but he’s in the US a lot so it still counts)
6. Investors hate Demo Day: See point #3. Demo Days only exacerbate an already competitive market. It was Ty Danco’s insightful post that got me thinking about this idea, but investors quickly confirmed his thoughts. Demo Day is a forcing function that was designed to drive investor interest. In the early days this provided a scalable platform for coverage but as our brand has grown I fear these events create more process than is needed. I can’t promise that we’ll be getting rid of Demo Day right away, but I’m looking forward to trying.
7. Venture is a REALLY small world: We started with a few favors from a handful of London friends but that’s all it took to get the flywheel going. With virtually no press coverage and only warm intros we’ve been able to sit down with almost every top-tier VC in the country. It’s remarkable to see that level of pay-it-forward mentality. It’s also sobering to realize that there is no room for error and one bad decision will reverberate across the country. Reputation is everything.

While we’re only six months in I can say pretty confidently that we’re here to stay.

We couldn’t have accomplished without the support from my London/Venture brain trust. Special thanks to Christian Hernandez, John Henderson, Chrys Chrysanthou, William McQuillan, Harry Stebbings, Alexandre Flamant, Nathan Benaich, and Rodolfo Rosini for all the warm intros.

Matt Wichrowski is Head of Funding at Entrepreneur First (EF.) EF runs full-time programmes that fund the most talented scientists, engineers, developers and industry experts to find a co-founder, then helps those teams grow their businesses and raise funding. We’ve built >100 companies worth >$1B so far.

We currently run programmes in Berlin, Singapore and London, you can apply here or sign up below to get advice from the EF team on your startup journey.

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