Entrepreneur First versus business schools

Benedict Evans joins EF as a Venture Partner. Kind of a big deal as the guy, who got his rep as a fine research analyst, just returned to the UK after 7 years spent at a16z, probably the best VC company in the world.

Benedict’s hire is a good indicator about EF’s ambitions to play at bigger levels.

Reminder: EF raised $115 million in 2019 to fund roughly 300 companies expected to emerge from schooling 2200 people.

For newbies who have no idea how this works:
- they recruit young people working for other companies
- teach them entrepreneurship fundamentals
- match them with like-minded people
- invest in whatever business concept the newly formed teams come up with. If it makes venture sense.

All this in a 3 months program. EF stands for Entrepreneur First.

This is an intriguing opportunity in a space that is at the intersection of two markets: investment and education.

On one hand, at the preseed levels, where EF operates, Europe and Asia are quasi empty. Both geographies are full of talent but lack capital - there’s no standard brand name, multi-recognized across geographies that invests at preseed levels - both in Europe or in Asia. Well, you still have YC while Techstars used to be cool for a while but that’s about it - most of preseed investors are simply local players or lousy accelerators.


On the other hand, education as a business is on the edge of bankruptcy - not only it is expensive, inertial and dependent of huge fixed costs, but also there’s a big gap between their product (i.e education) and what is actually required in the market.

The value proposition

Think about the business school model for a moment - they ask you for $100k+ and two years of your life at the end of which presumably you will get a marginally better job with hopefully a 50% salary bump.

At EF (and Antler for that matter) you don’t have upfront expenses, just opportunity costs. You are recruited based on the same credentials like in grad school (good grades in uni, some work experience and essay questions), get schooled for only 3 months, and at the end of it, also presumably, you get to run your own show as a co founder, with some initial money to test it out.

I’d say the latter is a compelling value proposition, wouldn’t you?

Moreover, EF’s model seems more fair to the customer - they share the risk with the people they educate, getting their proceeds based on the success of their program and post graduate performance.

Schools share zero risks with you as a student - if you have just graduated and the job market is tough, then tough luck for you mate, figure it out on your own.

Correlate this with the fact that the MBA market was already going down pre covid - we have a business opportunity here.

Now, EF-like programs will not work out for everyone - if you aim to be an exec in FMCG, pharma, advertising or investment banking, you probably should follow a more conventional path, which values formal signals such as school degrees.

But, generally speaking, if you’re in your late 20s and think about what your life will look like in your 30s and 40s, considering either a career or running your own thing, this looks like a good moment to check whether you are entrepreneurial material. With not that much financial risks either.

And so EF is uniquely positioned to take the best from both worlds. Investors will see them as a sophisticated startup incubator while their advantage is the educational part. The schools perceive them as a post grad educational program while their core advantage is that they are actually investors.

It is a beautiful strategy play.

The opportunity

As an investor you have a very different business model than as a school - high upfront costs (operational and the funds deployed) and proceeds late in the cycle, at liquidity events. Their fixed expenses are budgeted for and covered by this model.

However, in the grand scheme of things, investors as a genre will transition from a bunch of consultants buying into a specific class of assets and waiting 5-10 years to flip them, to adding a modern digital product that would reflect the value they create, such as knowledge and network access. The investor market is getting crowded by day and access to this product (which now is in a disorganised form of blog posts or NLs) will become their differentiator and part of their business model, it is a matter of time.

Coincidentally, knowledge and network are exactly what a school’s business relies on and should provide.

So, ultimately, winners will go in that space and build that digital platform too as both differentiator and long term market position consolidation with reinforcing competitive advantages.

Also, compared to business schools what EF is doing is still very tiny and more elitist. This is what usually happens with a product ready to disrupt a market - you test out a subset of it and when you have PMF you move up and down the value chain to reap the economies of scale and scope - remember Uber launching as a limo service and now they’re cheaper than a taxi ride is and deliver food too…

I simply believe that EF and Antler are just pioneers working with a subset of a market that could be further unlocked. They probably do not have everything figured out but my gut tells me this is one emerging vertical that will look very different very soon.

I also believe that, rather than a pure investor or an educator play, a hybrid model could be more rewarding both strategically and economically.

Will EF and Antler stay as investors only and compete with other investors?

The answer is kind of tied to the vision - i.e. what is the contribution to the society and our stakeholders? EF, for example, claims to be a leading talent investor but so do a dozen of other investors. And so the answer can be presumed from the modus operandi: preserving the market position, scaling model or building competitive advantages.

History shows us that YC remained vanilla investors and raised later stage funds for followons, in addition to their accelerator money. And thusly give the knowledge access for free, as marketing.

Also, important, YC invests in teams who already took risks and built companies, doesnot recruit people looking to switch careers, and is strategically located in Silicon Valley, where investors have a different DNA than in Europe.

The real question is: are you copying YC’s playbook or are you writing your own?

There’s been many YC imitators over the years and one of their problems was scaling. Why - they tried to replicate a local offline experience, in one way or another, and since this is a people business it is more difficult than it seems. Even YC tried with an office China and tours in Europe, which didn’t work out.

And, fwiw, Antler already positions itself as an early-stage VC investor, so there’s that. (invested in Leetify)

Will they put to work their knowledge and network resources to build another leg that competes with the business schools?

They already kind of do that but to a different purpose. A back on the envelope calculation indicates that there is a business case, especially when scaling.

EF has $115M that needs to be returned to their LPs in a timespan of 8-10 years.


The very rough calculation from above indicate that, on top of their investors model, if they repackage their proposition following Lambda’s model, and charge their 2000 founders a $10k enrolment fee - that would cover 17% of their fund, or almost as much as a conservative mortality rate. Lambda charges 30k per program and On Deck charges $1.5k - think about the model not the numbers.

Or here’s a different model - a membership-based access to utility/resources via a platform that would actually constitute a pre-qualifying lead driver of getting to their 2000 candidates. Let’s say a 1:10 ratio - $100 a pop a year x 20k = $2M. 20k is a rather small number because of geographies, everything online, local franchises etc. And can be multi-tier and recurring but you get the idea, right?

Just as well as an investor could simply use said digital platform in a better scalable way than, say, a demo day in a 500-people crammed room, twice a year in 6 cities. If you’re in preseed business that is.

There’s lots of tactical plays around turning a fixed cost into a competitive advantage. Please note that I’m writing from the investor’s perspective here - I highly doubt that schools will be able to think and move this strategically very soon. Sure, there’s some digital learning initiatives (i.e. 1, 2) and unis will gradually move towards zoom classes and all… but that’s just marginal, not really altering the end product.

The moment is now

The disconnect between what is taught in school and what you can gain monetarily and intellectually in life is very real. The big picture looks full of opportunities, this recession just augments market shortcomings and accelerates paradigm shifts.

A pitfall to my whole theory is that a program made for entrepreneurs wannabes such as EF is not scalable for people looking for different career paths. Sure, but most of the business fundamentals are the same, and a smart platform can easily accommodate a fitting solution.

Now - anything seems easy when you just have opinions and don’t have to do it. But I’m certain that building something along the lines would give those guys a run for their money.

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