Matt Clifford is the co-founder and CEO of Entrepreneur First, one of Europe’s leading talent investors. Along with his co-founder Alice Bentinck, he is the author of the new book How to be a Founder (Bloomsbury, 2022). He is also the Chair of the UK Government’s Advanced Research and Invention Agency (ARIA). Matt recently joined McKinsey senior partner Andrew Goodman to share his perspectives on building Entrepreneur First, what it takes to be a successful founder, and how the European start-up ecosystem is evolving. Their edited conversation appears below:

Investing in start-up talent more than ideas

McKinsey: Tell us about Entrepreneur First. What does EF do?

Matt Clifford: Entrepreneur First (EF) is a new kind of organization trying to increase the supply of great entrepreneurs globally. Our starting point is that the world is missing out on some of its best founders, and there are lots of places where there are brilliant people who could and maybe should be entrepreneurs, but the path into entrepreneurship in a lot of the world is not straightforward. There are cultural barriers, there are practical barriers, and there are financial barriers.

At EF, we try and remove all those barriers by finding great people before they have a company. We’re not a traditional VC, where we take pitches from start-ups that have a team and an idea. We start with the individual—we call it “talent investing.” We run a structured program for individuals to come together, find a co-founder, test, and validate an idea, take some money from us, and then go out into the world, ideally to build big and important companies.

McKinsey: The start-up and investing landscape has evolved significantly since EF launched in 2011. How do you distinguish yourselves in an increasingly crowded market?

Matt Clifford: It’s fantastic that there’s been this explosion of options for entrepreneurs. But most of the infrastructure for entrepreneurs—incubators, accelerators, venture funds—all assumes that the company already exists. It is almost as if they believe the supply of entrepreneurs and companies is fixed. At Entrepreneur First, we don’t think the supply of entrepreneurs is fixed. We don’t think the supply of great companies is fixed. The point of EF is not to fund things that already exist. It’s to go from zero to one. We like to say that our mission is to make companies happen that otherwise wouldn’t exist.

The people that EF is right for are very ambitious and talented, and they know they want to have impact through entrepreneurship, but they still need to get someone in their network who’s the right co-founder. They have an idea but are unsure whether it’s the right idea or even a good one. All these things are yet to be crystallized. So, you can think of EF as catalyzing entrepreneurship right at the beginning rather than taking something already working and giving it rocket fuel.

People choose EF to join a peer group of people that do want to go on that journey. Over the last decade, we have devised a methodology for helping people start companies with strangers. That’s the core value proposition of EF.

McKinsey: Tell us more about that journey to building EF and what you have learned.

Matt Clifford: When Alice Bentinck and I started Entrepreneur First, one of the guiding principles was that betting on talent early was not just an important thing to do but the foundation of an entire ecosystem.

We probably didn’t realize how contrarian the idea was at the time. We didn’t know that one of the mantras of Silicon Valley was, “Don’t start a company with a stranger.” And so, building EF has been a journey of gradually producing proof points to show that this was not only possible but perhaps a better way of building companies.

We started with very little funding. We then built a first cohort. It looked quite promising, and so we raised a small amount of money and ballooned from there. Today EF has raised close to half a billion dollars. Our companies have raised over a billion dollars of venture capital. And in that time, we scaled a lot. Today Entrepreneur First is 120 people across six countries, producing about 120 companies a year. And one of the great things is that the journey Alice and I have been on as founders very much mirrors the process that entrepreneurs we back go through as well.

Looking for ‘edge’ in a future founder

McKinsey: You and Alice have just written a book, How to be a Founder. What does it take to be a great founder?

Matt Clifford: The first thing I always think about when asked what a great founder looks like is to start from the opposite perspective and say, “What isn’t it?”

One of the big myths is that great founders are genetically different, some breed apart, and it’s so obvious to them that they should be an entrepreneur that they don’t consider anything else. That’s not true at all. A lot of the things that you would look for in a great founder are like what you would look for in a great executive in a bigger company, a great consultant, or really a great anything.

The main things we look for are, “Can this person be a highly effective leader? Are they determined and resilient? Are they a great problem-solver?” These things are quite relevant across domains.

Now, what makes a founder a founder as opposed to being an executive at a larger company? Well, again, a few things that it’s not. I don’t think it’s risk appetite. It’s hard to be a great exec if you don’t have risk appetite.

But one thing that great founders do have is a desire to create something from nothing. There are different phases that founders go through, and the phase we specialize in at EF is the zero-to-one phase. We are looking for very smart people, who have a natural bias to action, are very determined, and have a track record of making things happen. But we’re asking, “Can they make things happen in conditions of A, uncertainty, and B, almost no resources?” Some people are wildly successful but need certain resources and clarity about what they’re doing. Entrepreneurs must be able to thrive without either of those.

McKinsey: In the book, you discuss the idea of ‘edge’ in founders. What is ‘edge,’ how do people develop it, and how do you assess it?

Matt Clifford: Because EF has to make an investment decision ‘pre-company’ before we know what the founders will work on, we have to approach selection differently from a typical VC firm. Most VC firms are assessing the founder, but they’re also asking, “How big is this market?”, “What are the margins likely to be?”, “What is the competitive environment?”. We don’t know any of that. We select people before they have an idea, which means we have to try and find some signal of what sorts of ideas they might be well-suited to work on.

As a result, when assessing people, we look for what we call ‘edge.’ And by edge, we mean a personal competitive advantage. We are fast forwarding six months and saying, “What in this person’s background, skills, experience, maybe even hobbies and interests, could six months from now be the foundation of a plausible story about building a big company?”

An edge might be that you understand a particular technology well. For example, some of EF’s most prominent companies are built on a very deep understanding of machine learning and how to apply that knowledge. Edge can also come from domain experience. An individual has come out of a particular industry, for instance, where they’ve observed a big problem for which they think technology provides an answer.