Matt Clifford – Investing Pre-Company

**Patrick O'Shaughnessy** (0:04)
Hello, and welcome everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:24)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (0:48)
My guest today is Matt Clifford. He's the co-founder of Entrepreneur First, the world's leading talent investor.
Entrepreneur First invests pre-company by helping the best people in cities around the world find a co-founder, develop an idea, and start a company.
So far, they've helped a thousand people start 200 companies worth a combined $1.5 billion. This conversation covers their entire ecosystem and holds lessons for anyone building a business. I especially loved Matt's ideas on the history of ambition. Please enjoy our conversation. Well, Matt, this is going to be really fun, a completely unique conversation relative to a lot of the ones that I've had. Since you're doing something so unusual, maybe you could just start by explaining what it is that you do, and then we've got seven or eight topic areas to cover.

**Matt Clifford** (1:32)
Sure. So Entrepreneur First is a firm that I started with a really good friend of mine, Alice, about eight years ago, to do what we think is a totally new kind of investing. We call it talent investing. What is talent investing? Talent investing is basically the thesis that the world is missing out on some of its best founders. And so our job is to go and find those people before they have a company, pay them to quit whatever they're doing, literally like a salary or a stipend, spend three months working with them, crucially putting them in a group of people like them. So sort of bootstrapping a little bubble of Silicon Valley somewhere else in the world, helping them find a co-founder from within that group, helping them select a high potential idea. And then if there's something at the end of three months that looks promising, investing in that company and then supporting them to receive capital.
We started in 2011 in London.
It was a pretty out there idea, but this year we'll fund a thousand individuals around the world across Europe and Asia.

**Patrick O'Shaughnessy** (2:26)
It's fascinating because it's like an entire funnel that exists prior to the normal funnels that you would consider in investing, even early stage investors, which begs the question, how do you begin to identify the talent? How do you begin to find the right people to convince to quit their jobs?

**Matt Clifford** (2:43)
One of my somewhat controversial beliefs is that there are a lot of vested interests in the world of entrepreneurship about kind of pretending that founders are really, really unusual.
It's a story that founders love. It sort of creates some magic around it. But actually talk to people who've been doing this for a long time. You say, what do you look for in a founder?
And you hear them list things. And then you imagine asking the same question of say a public markets investor about what makes a great CEO. You know what? They're somewhat similar. And there are some differences, and I'm not trying to pretend it's exactly the same, but one of our beliefs is that actually the biggest driver of who becomes an entrepreneur is actually culture.
And so I guess one of our starting points was what should the most ambitious people do with their lives? One of our beliefs is that the reason Silicon Valley is so special is that in Silicon Valley, it's the one place in the world where the obvious answer to that question is, we'll start a company.
Everywhere else, the answer is somewhat different. It's culturally determined, and the answer to that question in each place has a really big impact on what happens to the economy and society of that country. So the reason this is relevant to answering your question is the first thing we do in a new location is we say, well, what do the most ambitious people do now? And then we kind of go to those places. So over time, what we've developed is a methodology for really evaluating ambition, skill, resilience, and sort of intellectual horsepower. And actually, it's somewhat predictable. Why does the UK have such a financial services driven economy? Well, basically, because for about 30 years now, if you walk around Cambridge, Oxford, LSE, and ask the smartest undergraduates, what are you going to do next? They're all like, oh, I'm going to go work at Goldman Sachs, or whatever. And you multiply that out over a country, you get a big financial services industry. Why does Singapore have the world's most effective civil service? Because you walk around the National University of Singapore and say, hey, what are you going to do? And they're like, well, obviously the number one job would be to go and work in the Prime Minister's office. And so one simple answer to your question is, we just look very hard at what ambitious people are doing because they haven't yet thought that starting a company is a normal, legitimate, acceptable, exciting thing to do.