This is part three of my experience going through Entrepreneur First. Conventional accelerators follow a process where they accept formed teams, spend 3 months preparing them for the Investor Day, following which the accelerator helps them with fund raising. EF don’t usually accept formed teams. Individuals join the program before they have an idea, form a team, validate an idea and get selected to join the second phase.
EFSG3, EF’s third batch in Singapore had over 100 joining the program. After the first phase, 23 teams comprising of 45 founders were selected to present on Investor Day. That’s a passing rate of less than 45%.
How are teams selected for the second phase
Some context, EF’s program comprises of 2 phases: Form and Launch, both 3 months long. Form is where individuals form teams. At the end of Form, each team goes through a panel. Those who pass, gets investment from EF and goes through Launch, where it ends with the Investor day. There is no official metric for getting through Form, though I’d argue there is one - paying customers in a large market. A panel made up of EF’s management and the venture partners screens the teams. It is modelled after pitching investors. Teams are judged against similar yardsticks. How much customer traction is there? Is there a working prototype? How big is the market? Does the profile of the team fit the business they are trying to build? Where is the defensibility?
Obviously, it is subjective. The panel is trying to guess what can happen in the future, from what little the team has done in 3 months, and from what limited experience or knowledge they may have in that industry. At the 3 month point, the expectation is that the team should have validated the idea. Having a working prototype is good, but if there’s nobody who wants to buy, that is wasted time. My advice is to focus on customer validation. There should be evidence of paying customers. The market size is important. The business must have an addressable market size of at least $10 billion. Remember, they are selecting startups that are suitable for Venture capital and Venture capital needs big winners to return the money to their limited partners. If the market size isn’t big, it won’t produce a big enough win.
It’s not the end of the world for teams that don’t get through. Some try again in the next cohort. Some join another accelerator. Some look for investment elsewhere. Some realise that starting a business is not for them, and go back to the job market.
Preparing to meet the sharks
Launch is structured like an investor deck. Every week, the teams works through a topic the investor deck would address; such as how to write the vision and the mission, how to calculate the market size, the go to market strategy, and so on. EF conducts workshops in small groups where everyone offers feedback for one another. It helps to clarify your thoughts and catch your blind spots. I realised how useful they are when it’s time for fundraising. Investors ask those similar questions, and asks for similar materials. Peer pressure also keeps everyone on their toes. Teams continue to have weekly check ins with the EF team, where we receive feedback and are nudged to get more traction. If you have traction, fund raising will be easy. We are told not to get distracted about funding until after Investor Day.
Investor Day
Investor day is where EF gathers the top investors from the region, sits them in a room and make all of them listen to 3 minute pitches from all the teams. Here is my teams’s pitch, and some behind the scene cuts. We spend the prior 2 weeks preparing for the pitches. Most teams would have gone through 15-20 revisions for their pitches, and practiced at least 50 times or so before an audience. EF organises intensive practice sessions for small groups and for individual teams during those 2 weeks. After that much practice, we all became pretty polished on the actual day. After the pitching, investors would come around to our booths and have a chat with us.
Post Investor Day
Post-investor day is where the teams officially start fund-raising. EF is a great help again. They provide an updated investor database with feedback on investors from previous batches. Those were invaluable. There is an A-list of reputable investors who had recently led seed rounds, followed by the others which they aren’t familiar with. We were told what sort of questions to expect from which investors, what they tend to look for, the particular industries they invest in, and their investment bit-sizes. They will also fix the meetings, make the necessary warm introductions, and get feedback from them, allowing us to fine-tune our pitching. Realistically the whole process would take about 6 months. The hard reality is not all the teams will get institutional funding. Though compared to other accelerators, EF teams has a higher chance of getting seed funding and at higher valuations. Fund raising is another emotional roller coaster that I’d write about when its over.