How to Raise a Venture Fund | Alice Bentinck (Entrepreneur First)
Jun 15, 2023
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Alice Bentinck, co-founder of Entrepreneur First, discusses the genesis of EF, challenges in identifying talent investors, and the importance of social capital in fundraising. She explores the evolution of a venture fund, navigating the investor landscape, and shifting cultural norms in entrepreneurship. The podcast touches on legal innovations in venture fundraising and emphasizes the significance of differentiation and investment thesis in venture capital.
Entrepreneur First (EF) focuses on investing in exceptional talent at the pre-ideation stage to build billion-dollar businesses.
EF's fundraising success was driven by a unique strategy of balancing equity on the balance sheet for long-term growth and aligning investment returns.
Leveraging social capital was crucial for EF's fundraising efforts, connecting with influential partners like Charlie Songhurst to secure investments and drive business growth.
Deep dives
Unique Business Model and Growth of Entrepreneur First (EF)
Entrepreneur First (EF) was founded by Alice Bentick and Matt with a unique approach to invest in exceptional talent before they have a team, idea, or company. Over the years, EF has expanded across Europe, Asia, and North America, raising $400 million and building a diversified portfolio of about 350 companies. The episode delves into the genesis of EF, highlighting the challenges faced in identifying talent and investors capable of building billion-dollar businesses.
Transition to For-Profit Structure and Fundraising Strategy
In the early days, EF operated as a not-for-profit, relying on corporate donations and struggling financially. Transitioning to a for-profit company allowed them to raise funds more effectively. They gradually raised capital through angel funds, series A, B, and C investments, and a balance sheet round. The unique fundraising strategy involved taking a portion of equity onto the balance sheet, aligning investment returns with the company's long-term growth and sustainability.
Significance of Social Capital in Investment Success
The success of EF in fundraising and building a strong portfolio was attributed to leveraging social capital. Partners like Charlie Songhurst played a crucial role in connecting EF founders with prominent investors like Reed Hoffman. The episode emphasizes the importance of social connections in the investment world, highlighting how social capital can facilitate deal-making. It underscores the value of using personal networks to secure investments and drive business growth.
Challenges in Shaping and Selling EF's Story to VCs and LPs
Pitching EF's story to VCs required emphasizing the intricate process and unique value proposition, catering to their appetite for high-risk, innovative ventures. In contrast, presenting EF to LPs necessitated downplaying the risks, highlighting differentiated deal flow, and showcasing favorable terms. The strategy involved making EF seem vanilla for LPs but complex and groundbreaking for VCs, tailoring pitches to appeal to each group's investment preferences and risk profiles.
Importance of Differentiation and Investor Selection for Emerging Managers
For emerging fund managers, emphasizing differentiation is crucial in a competitive VC landscape. Establishing a clear and compelling investment thesis is essential to stand out and attract top-tier LPs. Differentiation not only sets a fund apart but also signals confidence in the vision and strategy, highlighting the need for emerging managers to articulate a unique value proposition to secure investor interest and drive successful outcomes.
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Description: In the penultimate episode of Season 8, Danielle and Tunde interview Alice Bentinck, one of the co-founders of Entrepreneur First. Fresh out of a grad program at McKinsey and Co, Alice and her co-founder Matt felt that there was an opportunity to shake up the early stage VC scene and founded Entrepreneur First (EF). Fast forward 12 years, EF has built more than 600 startups across 6 countries that are collectively worth more than US$10B. In this episode, Alice dives deeper into the genesis of EF and the complexities of their business model, unraveling some fascinating twists and turns along the way. She also outlines some of the unique challenges the EF team face such as identifying 'talent investors' as well as exceptional potential founder profiles at pre-ideation stage. A favourite discussion topic of ours is when Alice talks about the importance of social capital during fundraising, so keep your ears pricked for that golden nugget of wisdom!
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