??Rethinking the innovation ecosystem

On this week’s episode of my Exponential View podcast, I spoke to Matt Clifford, who co-founded Entrepreneur First, the world's leading talent investor, in 2011. Clifford and his co founder, Alice Bentinck, have helped form over 200 companies in the last decade by deploying unusual practice of helping people form startups with strangers. "We front-loads the failure," Matt tells me.

Below are some highlights from our conversation. You can listen to our conversation in full here.

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Azeem Azhar: "What have been the most surprising things you've learned about what it takes to take complete strangers and turn them into a functioning team that can build a company?"

Matt Clifford: “There were many skeptics at the beginning. I suppose what it's really made me reflect on is how much of our "knowledge" about innovation and about startups actually comes from a very narrow sample of experiences. So why do people say, "Don't start a company with a stranger?" Well, it's never been tried at scale, in a systematic and deliberate way. That's made me think quite a lot about how many other golden rules of startups actually just come from the fact that it's a small corner of the world that has most of the experience. There are many processes that happen organically in nature that, over time, humans have come to do better artificially. I've come to believe that one of them is helping people find co-founding teams."

Azeem Azhar: "How about the raw numbers? How many companies have you created through these programs, how much additional capital have you attracted over the last decade?"

Matt Clifford: “We're running now something like 250 companies that have gone on to raise seed or beyond. We changed our own model a lot. It took us three goes to find what we do now. We date our oldest companies in the portfolio to the third cohort, which is now about five years old. If that's a sign of things to come, then I think we'll do very well. That cohort – we graduated 14 companies, nine raised seed, six raised further around A or beyond, one nine figure exit, two series B and one series C in that group.”

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Azeem Azhar: "It seems to me that we're coming around to a point, especially as entrepreneurship spreads across Europe, that the state has an increasingly important role to play in this overall ecosystem."

Matt Clifford: “It plays a huge role, particularly in some of these areas that are actually less familiar territory for VC and for entrepreneurs. One thing I'm really obsessed with at the moment is the idea of the venture customer as being a key player in the innovation ecosystem. What I mean by venture customer, the organization is actually willing to express demand early for a product or technology that is sort of not quite ready for the mainstream market. Actually, if you look at the history of some of the big breakthroughs, if you look at the success of DARPA in the U.S. we talk a lot about the money and we talk a lot about the institutional freedom. But the bit that gets obscured is the role that the state played as customers. And actually, one of the realities is that most corporates are very bad venture customers. It's actually something that the state is well suited to do.”

Our full conversation is here, available to listen.