Entrepreneur First builds teams that wouldn’t exist otherwise. Why is this?
Traditional team building has high transaction costs, particularly outside established startup ecosystems. These costs are so high that it reduces the number of founding teams and the number of startups.
Finding a cofounder in ‘the wild’ is expensive
We all have heard the typical ‘cofounding story’.
You meet a friend of a friend, who’s come recommended. You are unsure about them, but have been looking for a cofounder for so long that you’re willing to take the risk.
You spend a couple of weeks agreeing on the vision and deciding how you will split the company. The discussions are fraught, but you both want to found a startup so are willing to settle.
You think that this person isn’t right for you — you don’t want to spend the next 5–10 years working with them. But, you’re not 100% sure and it’s really hard to tell them that. It would be an awkward conversation and you keep on avoiding it — weeks and weeks pass.
When you do split up, you have a protracted negotiation over the assets of the company. In fact, the negotiation is so long that you decide to walk away, leaving six months of work and effort behind you
There are three transaction costs at play here which delay the founding of your startup:
- Search and information costs: Finding a potential co-founder and then screening them for their technical skills and founder potential. This takes both time. experience and skill to do properly.
- Bargaining costs: Once you have found a potential cofounder, you then need to agree vision, roles, equity split etc.
- Policing and enforcement costs: Once you start working together, you need to evaluate your team’s performance. This can take months . This allows you to gather more data on each other, but it also means you build more joint assets. The break up costs scale linearly and soon become unreasonably high. If you do break up with your cofounder it can take weeks, if not months. It takes time to unravel what you have created in a way that seems fair to both parties.
Entrepreneur First builds strong teams fast
Entrepreneur First removes and reduces the transaction costs associated with building a team. We build teams that wouldn’t have existed otherwise.
For example, the co-founders of Magic Pony Technology were both at the same university, both studying technical courses, both ambitious and interested in startups. But, they didn’t meet until they joined EF.
What’s more, we build teams within 8 weeks. Each cohort member will try out between 1–4 teams, with the average person trying 2.13 teams during the EF Fellowship. How does this work?
- Search and information costs: Our Talent team finds and screens thousands of potential founders each year. Over the last 5 years, we have screened more than 5,000 individuals. We know what a founder looks like even before they have thought about starting a company. We screen each individual for their founder potential. This provides a group of potential co-founders for each individual that joins EF and reduces the uncertainty associated with building a team. Instead of focusing on whether the individual is skilled and motivated, you can test whether they are the right co-founder for you. We also increase the number of potential exchange partners, so there is no need to settle.
- Bargaining costs: At EF we provide frameworks to help you decide on roles and equity split. We also support you to develop your vision and highlight where you might be misaligned. You can then focus on building your startup, rather than the mechanics of your relationship.
- Policing and enforcement costs: The EF team will help you understand whether you are in a strong team. We will recommend that you break up if we believe you are in the wrong team. What’s more, there is a cultural norm at EF that allows you to get out of the wrong team within hours, rather than weeks.
From months, to days…
Our structured team building process reduces the transaction costs of building a cofounding team. We see individuals go through the process of testing and evaluating a potential cofounder in a matter of days, rather than weeks.
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Alice Bentinck is Co-Founder of 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 applyhere or sign up below to get advice from the EF team on your startup journey.