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Rachel Zimmer is the General Manager of Entrepreneur First, a $140M fund that bets on people first, and then coaches them to find their breakthrough ideas. Zimmer understands this process well because it’s exactly how she started her company, 5Crowd (acquired by sgsco).
In this episode, Rachel walks us through her own ideation process, the criteria that she used to filter her business ideas, and the uncomfortable process of leaving her job at Johnson & Johnson to pursue her entrepreneurial dreams with business partner Bram Warshafsky.
Since the acquisition of 5Crowd in 2016, Zimmer has continued to help professionals discover their entrepreneurial potential with the added safety net through her work at Entrepreneur First. She shares what she’s discovered about the qualities, personalities and combinations that make the best entrepreneurial teams.
The Ivey Entrepreneur Podcast is sponsored by Connie Clerici, QS ’08, and Closing the Gap Healthcare Group, Inc.
Transcript
On this new series of the Ivey entrepreneur podcast, you're invited to listen in on the guest visits my Hustle and Grit class taking place virtually at the Ivey Business School, Hustle and Grit is a course that we created to teach you everything that you didn't learn in Business School, in Business School. In it, we invite road class innovators and entrepreneurs to talk about topics like motivation, how to learn what to prioritize, and even how to be happier. In these episodes, you'll hear live audio from my classes, because honestly, there's just something different about the energy, excitement and honesty taking place in a live classroom environment. So get comfortable, grab a seat and don't worry, unlike my real class, I won't cold call you, enjoy. I am excited to have one of the hardest working entrepreneurs I know joining us today. So she's made some time to talk about a bunch of topics, but we're going to focus on ideation as well as making the entrepreneurial leap. Please, everybody put your virtual hands together for one. Rachel Zimmer. Rachel, are you with us?
Rachel Zimmer
Hey, everybody in here. Thanks for having me.
Eric Janssen
Yeah, of course, happy to have you. I'm gonna cancel the spotlight so you don't have to look at me the whole time. Rachel, we got a bunch of questions pouring in. and we will get to a handful of those questions, so keep populating. But I think it would make sense if we started with sort of your entrepreneurial story, and even rewinding back to when you were a student and how you sort of made the decision to do something else before jumping into entrepreneurship. Let's rewind and start with your story.
Rachel Zimmer
Amazing and so I'm happy to be as candidate, and open as I can be. So any questions feel free to throw them my way. Going back to my route, so I was at Queens Commerce grab don't hold it against me Ivey folks and at school, we had a ton of really great opportunities to meet other people that were like minded. In my fourth year of school, I landed a job at J&J. I think it was September, October timing that I had had a job lined up for after school and my friend at the time, Graham Warsofsky, it was like, great, we both landed jobs, and there's always competition, so you want to you maybe answer some of them and so some of them were like top ad exact means Marketing Association Conference amongst a bunch of others. Very lame and nerdy students, we were like, alright, let's take a shot at them. We started entering the competitions and and learned that we had an amazing working dynamic, we challenged each other, we had a ton of fun, we drove each other crazy, and we just push each other to the max and need to walk away. But essentially what we learned was that we were really powerful and winning team. We won cars through top bad we win a bunch of cash, we won the Unilever competition. At a certain point, we're like, there's something here. So went on after queens, and we both landed at Johnson and Johnson and I'll kind of interject with your first question, which was, why did I choose a traditional career path and it was hard. Yeah, Francis, we won, you should all do it top out exact through and through Mac. So there's many different competitions, once you're in fourth year, third year, even you can you can start entering them. That's where we learned we were, really good team. In our fourth year, it was a hard choice to take and to choose to pursue a more traditional path and being a crazy delusional millennial, I wanted to travel and go into more debt, and just go see the world and or do something entrepreneurial. Some really good advice from some alum complains that refusal, or that just said, go get a handful of years and a good traditional, you know, whether it be accounting stream or finance stream or marketing stream, just to learn the basics of the working world. I'm so appreciative that I did that. Because there's things that you just don't realize, you know, how to go on a business trip with your coworkers, how to write a good email, how to fuck up in a meeting, and then how to bounce back from it, all these different nuances that you learn in your first couple years of working and I'm grateful in retrospect that I went to a big company that kind of beat some of that into me, but at the time, it was kind of a, on one hand privilege to have an opportunity, on the other hand, a bit of restlessness, of just wanting to start doing something entrepreneurial, and travel and see the world adventurously and you know, right out. So landed at J&J, and learned a ton. I was fortunate to work on brands like Tylenol, Avino, and Digestive Health Acquisition, soo some very big projects, and but while there what was so great, and in addition to a great training and learning from really brilliant people, was getting exposure to a lot of industry problems. I'd say that was the biggest thing that I took away from that time, which was there were so many interesting problems just waiting to be solved. During that time, Brandon, I would spit ball ideas, weekday evenings, weekends over lunch at work, and we came up with a whole bunch of wacky ideas. We ended up choosing this one idea at 5Crowd that we ended up pursuing. In future questions, I can go into how we landed at 5Crowd, in this business concept, but we ended up deciding to launch this company because we felt the pain ourselves as users at J&J. The pain was that traditional ad agencies were taking a long time, and were very expensive to do really basic, simple things like it would cost 50K, and take two months to modify some banner, now that stuff is ludicrous but back in 2010, when we first entered the working world was just an commonplace. I ended up choosing to launch a premium freelance platform targeted in the marketing and creative space world, we essentially bootstrapped or revenue funded our company, and we scaled it to be 20 people at a certain point between software developers, and customer success and BD. Then we were approached to exit, which we were not for sale that when we learned about the opportunity, we were approached to exit in 2016, so our whole startup startup journey was two years and nine months very, very, very quick and I look back at that time to some of the fondest memories in my life. Then thereafter, I'll be much quicker on this part. Worked for acquiring company for about three years, and in a variety of leadership roles at our parent company. So lead customer service, and 800 customer service folks around the world, lead some of our digital transformation efforts. Then also on the side was an entrepreneur in residence at the DMZ and coaching and mentoring some tech startups across a variety of industries. So that's a bit about me in a nutshell.
Eric Janssen
That is awesome. I do want to rewind, because this class is focusing on ideation. So we are going to get into how you think about it now as an investor, or advisor and entrepreneur first, but if you don't mind spending a little bit more time on how did you identify that 5Crowd was the thing worth leaving a stable job at J&J. Where did the initial like, oh, that's a pain in the butt come from?
Rachel Zimmer
Eric, I flipped you a graphic, if it's not too much trouble to throw it up. I don't think I've shared this graphic with anybody. So guys, it's very embarrassing but it's a fun one. Let me see if I can project it perfectly. So basically, what we did is we were spitballing, over drinks, different ideas and on weekends, and essentially, we had five different business ideas that we thought were really great. Some of them were absolutely terrible. I'll tell you about two of them. On the far right, Dollar Condom Club. It was the rise of Dollar Shave Club, and then the dollarization of everything and we're like, wait a minute, imagine there's a box that shows up at your door. We thought this was brilliant, for a hot minute and thank god, we did not pursue that one. Then crazy 22-year-olds, and the second one ESD is Epic Snack Drawer. We were constantly hungry at work. We're like, imagine there's a driller of snacks, that just automatically refills, which is a great idea. And you know, low and behold, years later, there's been the rise of like the HelloFresh and the Chef's Plates, which are more on the consumer side. At the time, we're like this is everyone's hungry, this is brilliant, we'll sell them to corporate companies. Then the other two, I won't bore you with the details of them but we snip out all these different ideas and then we came up on the left side with our own criteria as to what would make an idea an effective. Now looking back at 22-year-old me I probably critique some of these questions that we had for ourselves. This is the raw, circa 2011, 2012 graphic that I that I pulled. Some of the questions just to double click on them, is it a product instead of a service? Can it scale easily? Do we have a good understanding of what it takes to close the sales funnel? Are we the right people to actually tackle this problem? So when we looked across these questions at the time, we equally weighted all of them and workload on the far left now 5Crowd is what we renamed it to, was the highest scoring points and so once we've gone through this ideation process, rated and discuss them all across our criteria, it was quite methodical, and that's when we landed at workload, slash 5Crowd and we brainstormed on it for about a year before we actually went through and quit our jobs. I had my resignation letter written, fun fact, for almost a year. It was something that I was coming in high and saying, like, we just need to do it full time, we're not making the traction that we need to. There were a couple things that we we continued to push ourselves to say, can we de-risk this just a little bit more while we're working full time? Can we do a little bit more customer discovery to validate the problem? Can we use the competitive platforms like the Fiverr, Springs, 99 designs of the world to figure out what's working on them and not. We did spend quite a bit of time once we've landed on this concept, doing some of that customer discovery, friends and you know, strangers that we asked for interest to in the industry, plus, also, you know, really, really double down on that competitive piece in getting to know those platforms, so hopefully this is helpful because I kind of see you know, it's kind of art with the science, but more just got because you try and apply some things scientific to it and at the end of the day, you need to have crazy conviction around what you're doing and have a passion for what you're solving.
Eric Janssen
Awesome. This is helpful. I want to double click on a few of these specifically. So workload at the time came from presumably you were atJ &J and you were the one actually, that would go back to these agencies to request these small changes. And we're seeing how much you were getting charged for them, is that where workload specifically came in?
Rachel Zimmer
Yeah, you got it and it's specific to my co-founder brand. So he had to edit a 62 second video to 15 seconds. Not too long before we were scrappy students working on, competitions, where we were hiring people on Fiverr and so we knew what was possible there and then to have a quote, to get a video edited from 60 seconds to 15 seconds to take months, instead of hours. Then 10s of 1000s instead of hundreds of dollars. That was where he was head scratching pulled me over, I heah scratched. I at the time, I had like a 12 year-old 13-year-old brother who could use iMovie, I was like, let's just ask my brother Dave, he can do this for us in 20 minutes versus hiring a traditional agency. So exactly to your point, we were the customer. When I look across the other ones, I mean, some of them more so than others, I'll say we were the customer. Epic snapped, right. We were absolutely very hungry. Like that is true by like three o'clock in the afternoon, we were like this is the one, this is the concept, we know that there's something here.
Eric Janssen
Every day at three o'clock, you were like we have to do this is the idea. This is the one
Rachel Zimmer
We just went to Costco and stuffed our doors, but yeah, we felt that. I definitely felt it. I will say since then I've done other customer discovery where I haven't been the customer and since then, and other projects in my life. I don't think you have to be the person that experiences it but I do think having a right to win and why you, from unique exposure or unique learnings is incredibly valuable to actually go to market.
Eric Janssen
Cool. So a few that we just touched on before you join. So does it play in a really big market? We say is it in a big sandbox? So is there a really big opportunity such that if you needed to pivot or change the idea, then it could still be viable, you're still big in the same market so that overlaps what we talked about, does it leverage your networks? So in at Ivey, we talked about the idea of effectuation. So sort of using your assets in order to come up with a business idea that works sort of given your skill set network assets or whatever. So does it leverage your network that's you had an unfair advantage and that you're the right people to do it presumably because you Bram, that was part of his day job. Like he he was seeing it. That's cool.
Rachel Zimmer
So I think you're right to win come in a lot of ways. A right to win can be your ideas yourself, it can be a relationship that you have, it can be a technical skill set that you bring. Interestingly, while at Johnson and Johnson because we felt the pain, and the pain was so big, it went viral throughout the organization and so when we actually chose to leave J&J, they actually became our first customer. That was how we revenue funded it. We had an employer that had such strong conviction in the problem we were solving, which A) validated it was a really big problems, we could solve it. Then secondarily, I mean, that was an unfair advantage, right? Anyone else started didn't have that, significant SAS revenue that was then pulling us forward. I just share that because if anyone enters the workforce has a great full time job, there's no reason why you can't be, hate the term but be an intrapreneur, tested out there and then if it doesn't work internally, bring them along for the journey, have them be a founding client.
Eric Janssen
Yeah, that's great. The last one, before we move on are you passionate about solving the problem? I like your part B, which is, could you see yourselves doing it? 10 years in the future? I think any business that's worth doing, you have to think about yourself being in it for probably a decade. I like to think about even are these customers that I could see myself spending time with for the next 10 years, because realistically, you're going to be serving your customers and you're going to be taking calls from them at 10pm on a Friday or 2am on a Monday. These are the customers that you're going to have to spend a bunch of time with. We'll talk about passion and a future class but I like to also think about are these customers that you could see yourself serving for 10 years. I noticed that you didn't have any threes here but two, is it the market problem a need versus a one? How did you reconcile that one and end up making the leap?
Rachel Zimmer
So there are two things. The need piece was when we started sharing, hey, we're feeling this with other people we knew what other organizations everyone was, having that same aha moment and there was actually a book that came out called Madison Avenue Manslaughter where there were expos days on the ad world and the margins that people were taking, the yacht trips that were happening on weekends. So there was a huge industry recognition, we were just at the cusp of so that was part of the why now, why now was one on the technology side, the rise of the gig economy and then the second piece was, the industry was awakening to it. The relationships that were at the top to top on the agency and the client side, they were being overwritten by the rise of procurement. After the 2008, financial crisis, the rise of procurement has really had a huge, huge impact. I think that's kind of part one to it and I'm trying to think of if there was another part. Oh and then I'd say the second thing for why leave, and then actually take a jump and doing it. So I have my resignation letter for letter written for 12 months on my desktop ready to go. You know what I mean? Like that constant feeling that we were ready, but just not quite ready and I had spoken to a friend mentor at the time, and he had said, Rachel sometimes the riskiest thing to do is actually to stay in your current gig, because you can always go back. And low and behold, when I did resigned from J&J, they were wonderful and supportive, and said, hey, we're going to, you know, we're bought into your problem, we're interested in being a customer, and then secondarily, they cheered if it doesn't work out, you're you're welcome to come back. I think, for people that are high performing, and have a drive to win and have delivered in their roles, and have really shown that and I don't think we were special in that, I know a number of other entrepreneurs were as they were leaving, there was that open door, you know, if it doesn't work, feel free to come back. So I just bring that second point up of sometimes the riskiest thing is not to try because that ladder is always there. You can always keep ascending it but to actually go out, tinker, fail, try and succeed, that's something that as you go on in your career, the opportunity cost just gets larger and larger and larger.
Eric Janssen
You de-risked it, because you knew Bram, you had worked with him before, you'd piloted, you've worked on projects with him, you knew that you worked well together. You validated it, it fit all of your criteria. You just knew at some point you wanted to leave like J&J, you knew in your mind was sort of a shorter term thing, or was there a version of your life where you could have been at J&J for your entire career?
Rachel Zimmer
So no, it's a great question and it's getting a bit personal now. In my life, I always feel like I need to have meaningful relationships and whatever way they come great adventure, and then to feel insanely challenged and those can come in any way shape, or form. So adventure could have come, I was actually trying to go abroad with J&J and working in emerging markets. So I was really interested in India or Brazil. So if I'd say, to J&J and had an incredible adventure, career wise with that, and doing that, that would have been something that would have really appealed to me, or taking the entrepreneurial path, which both of those really would have checked that adventure slash challenge box. So to your question, like, I think, and I'm always been the type of person that kind of planting a bunch of seeds and see which ones sprout and when, and then just being really opportunistic around always saying, yes, listening to different opportunities, putting myself out there to try and stumble into some luck and then, you know, hopefully finding some great adventures along the way.
Eric Janssen
Then you left you said it was revenue funded. So J&J was one of your first customers? Yeah, Awesome. You had your customers lined up, you had your business partner figured out, you said you had started working on it sort of on the side to try to validate it before you ended up leaving, then after you left, how did you know what to do first?There's inevitably this overwhelm of my gosh, now I'm no longer collecting a paycheck. How did you know what to focus on?
Rachel Zimmer
The reality is we didn't, we made a lot of mistakes out the gate. One mistake, fun fact, incorporate ASAP. That's something that's a lot of people wait to do but Canadian banks and our government really value time based and aspects to a company. So grant opportunities, banking opportunities, as soon as the clock starts is really valuable. Feel free to incorporate now, even if you're working on a future idea so you can ride some of those two years here opportunities. What I'd actually say is that J&J taught us a lot about focus, and identifying a problem, building out a plan that's going to solve that problem and I think the biggest thing to know and you know, I working with companies in the DMZ afterwards is time is your most precious resource, and it's not infinite. So how do you really figure out what are your three things you're going to accomplish in a month basis week basis, whatever time frame makes sense for you at that stage of your company? And early days it was what are we doing today? Okay, here are the three things are gonna get done. Over time, it became okay this month, we need to get x, y, & z done, and but I think being focused at a strategic level of what are the three things and then constantly recognizing when you need to iterate on that. So examples with 5Crowd and our three things in your in our first six months, let's say we're 100% customer satisfaction. So we recognize that we only had one one reputation and at the end of the day, you're going to screw stuff up, especially in a new company, but you have to make sure that you make it right and take care of them and learn from it and make sure that their expectations are set that you are new, and you're going to be learning and then as a family clients, there's pros and cons, you can help infuse thoughts and ideas into the product. On the flip side, you're gonna have to fumble with us as we go. I think, one was 100%, customer satisfaction. The second was just getting throughput. So we knew that we just needed to get work to freelancers, so that we could learn what's needed, what features are needed, what features exist in competitor products versus what we think is needed. One example is that, if you looked at the time, Elance, no Upwork and if you factor in an exchange rate, so 25% of a currency exchange rate. So 25% fees charged if we were a Canadian client working with a European freelancer and those are just learnings that we didn't realize until we actually were getting through put onto the platform, so that was number two. Our third one was cash is king dollar sign on the cash and that was this idea, everyone says, and you know, the cash flow is key but like cash flow is really key because you in our world, we were servicing fortune 1000 clients that had net payment terms of 180 days, aka, from when we're done working together, you're gonna pay us in six months, as you're, you know, putting work with our freelancers and our freelancers were paid in 30 days and so we had a huge cash flow, that was like a catastrophic thing, talking to investors, they're like you're doing what would how many people, you're floating, what for who and so, I mean, at the end of the day, the throughput allowed us to learn and iterate and solve that problem in a variety of creative ways. Those three goals, and then figuring out what tactics we needed to do in that first six months, and was really, really valuable. We always have this bucket called operational weeds and there's all this stuff, when you start a company that you don't realize whether it's finding an office, whether it's getting an HST number, whether it's all these ridiculous things that just come up that we just knew, that they're calling the 10 to 20 hours a week that goes to this annoying stuff, but it's gonna have to get done. Hopefully, that sheds a bit of light to the ways we thought about it at the beginning and then over time, those three goals evolved and our team, you know, if we stopped them in the hall, they'd be able to rattle them off whether it was a developer or our customer success person.
Eric Janssen
Correct me if I'm wrong, Rachel, I feel like this was either a dream or a real thing. We shared an office for a while, correct?
Rachel Zimmer
We did. So this is a fun story. Eric and I, we worked out of tangerine bank. I don't know why tangerine did this because they didn't offer business and business accounts but we paid 100 Canadian per month to have our whole team in this office at young shooter. So that's where we got to know each other quite well.
Eric Janssen
It always just struck me that your team seemed so organized. It was very early days for me at Intel etics and I just always looked at your team and thought I had to seems like at least you did a good job of pretending like you knew what you were doing that you had your stuff together. So you did a good job. If you say that you felt disorganized and it was trial and error, at least from an outsider's perspective, it felt like watching you and Bram, that it was very calculated and that you had a very clear plan, very clear goals, and you were executing on it. So I always looked to you as to that seems to have it together even if it didn't feel like that, in your mind, it seemed like that from the outside. Okay, so fast forward company ultimately was acquired by SGS. What was not the plan, you said that, like on your criteria it didn't fit the company that was easy to exit box, what happened there?
Rachel Zimmer
So, again, a personal thing. So fun, profit and scale have always been an impact story. So fun, profit, scale, and impact have all been very big, personal motivators, and Bra and I often would pause and assess, how are we doing on the fun part is this a slog? Are we waking up every day and dragging our feet? Is what we're doing profitable? Is it scalable and then finally, are we having an impact on the world? I've always had that like social impact piece, that's been a huge part of my personal goals. And so we weren't for sale, we were delusional millennials that we're building a billion dollar Silicon Valley company went down to the valley once once a year or so and really immersing ourselves there and essentially, what happened was, as we learned more about SGS, and as they got to know us, we realized how the sum of our parts is greater than the whole. I think that it was very, very clear that if we brought the two together A) we'd be able to access their 3000 clients, which was huge, we'd be able to bring a huge amount of work to meaningful freelancers around the world and that's essentially what happened. Obviously, there were learnings and things that were tapped through an acquisition, but on the flip side, Walmart.com was a huge customer of SGS and I think in our second year, we're writing something like 100,000 copy descriptions for all their products on their site, so when you look back at okay, impact the scale piece, the acquisition definitely check those boxes and was able to bring work to freelancers, which ultimately was our vision and what motivated us. So hopefully that helps to answer it.
Eric Janssen
Fast forward, you are now at entrepreneur first. We know a little bit about the organization, but maybe you can wrap it up a little bit, what does it do? And then the reason why I thought it was super interesting to bring you on is because that you've sort of come up with the idea and executed on the idea from an entrepreneurs perspective. An entrepreneur first, it's different in that you invest in the people and then come up with or help them come up with good ideas so a lot of the questions that I'm seeing from students are around, how do you figure that out? How do you help them coach them to the right idea? So big question, what is entrepreneur first and then we'll talk about how you your process and and how you help them come up with cool ideas.
Rachel Zimmer
Yeah, great question. A lot of people thought, and our founders were crazy back in 2011, when they started, because essentially, their idea was we're going to pay people to quit their jobs, we're going to put them together and then invest in them. Obviously, at the gate, and there was a lot of like, head turns, and but essentially what happened was, they did just that they brought 50 individuals together twice a year and now Toronto is the sixth location and these individuals are truly exceptional. Absolutely extraordinary. I can tell you more about what we look for but this is the best of the best in the country and we look for people that have insane high potential. We look for folks that are, crazy driven, and that have that ability to grow and we can help accelerate it. What we do is we look for those individuals, we bring them together in a cohort, and the cohort is comprised of SEO profiles and CTO profiles and then we essentially let the magic unfold. We help to facilitate through a lot of frameworks, which I can share a bit more about and team building, and then essentially, everyone pairs up in the cohort, at the end of 13 weeks, they then pitch to us very much like Dragon's Den, and then we've made the decision whether or not we invest, and our investment terms are 100K Canadian in exchange for 10% of the company. From the beginning of the program, you don't have a co founder, you don't have an idea, you're getting paid 3500 Canadian per month as a stipend, 13 weeks in, you pitch to us and you basically have a million dollar valuation. Second part of it is at that point, and it's more of a traditional incubator where we help you go to market and raise institutional funding. That's a bit about us. The only other thing I'll share is maybe why I wanted to join entrepreneur first. I definitely have another chapter two of being an entrepreneur, absolutely. Bram and I at some point will join forces again, and be crazy and have a ton of fun having impact in some kind of space but what I loved about EF is that when you look at Toronto in Canada, we have an incredible, incredible pool of talent but we have this profile and stereotype of being a bit more risk averse. Without that structure, it's hard for us to take the leap and so what I love with EF is that we can find the best people that have not yet started companies, and help give them a time boxed and structured way to take a shot on themselves and if it doesn't work, no problem, you go back to a J&J, you go back to a bank, you go back to wherever you were before. I just thought it was perfect for the Canadian profile and it's such an exciting space that we don't really have any other offerings in our market around pre idea, pre company, preco-founder. I just saw the opportunity and how impactful it would be be for Toronto, Canada.
Eric Janssen
Yeah. Awesome. Okay, so then, what is that process? I get how you pick the people you put them together and how the compensation evaluation works, how do you coach them to the right idea? Do you offer them criteria or the boot camps? Give us a peer into the EF program, what do you do to help them come up with the right idea?
Rachel Zimmer
So we believe very strongly in what we've called our edge framework. So essentially, what that is, is we profile for different types of archetypes and we structure our cohorts to have these four profiles. We'll kind of talk through them because it's the way that we approach ideation. The first is a technical edge. So this is someone who's maybe zero to two years out of their PhD, they've got really cutting edge forward thinking research that can game change the industry. That's a pretty typical technical edge that would likely be a CTO. The second technical person is what we call a catalyst doers. This is an individual that can build, they can lead, and they can command followership, and they likely have some work experience, potentially at a startup or a lab and they maybe don't have the same very deep technical expertise, but they've got broad and broad experience from a building perspective and they're the best in their field. The other two are more of our CEO program. One is what we call a catalyst talker. It sounds kind of funny, but it's somebody who can catalyze the business through customer discovery, operation, sales, all that kind of stuff. I'd say almost everyone in the cohort is somewhat technical. The technical could be you just read a ton of stuff in the tech space, it could be you've tinkered on projects outside of work, but there is some or maybe your undergrad was in, and something technical, but usually we find that our CEOs that have a bit of a technical understanding, just perform better from a from an investment in companies standpoint, the final call it edge that we look at is, will be called domain expertise. This can be someone that has years of experience in a specific field, maybe they've worked at all different banks, and they know the ins and outs of the banking system and have the right to win because of their unique domain expertise and so when we look at these edges and the composition within our cohort, we use the analogy of poker and we say everyone probably has a set of different cards that you could play but the key is figuring out what's your highest card, what's your ace? Then what someone else's ace? When you bring them together, you're very, very differentiated and part of what has attracted such great investors to ETFs were backed by some of the world's best investors like Greylock Partners, Reed Hoffman, the co-founder of LinkedIn, our funds, 140 million. Part of what attracted them is that they've said, hi, you take two very strong people that you've pre vetted for crazy drug to achieve their ability to commercialize things, all the personality stuff, and ability stuff. When you bring the two together, and it's almost IP in itself, because the two individuals are so competitive that when that comes together, and you start talking about your interests, we start talking about your experiences and because they're so different, yet, they're your ace and each of the end, quite often, the ideation actually comes quite naturally. We view that ideation and team building are symbiotic, and actually go hand in hand. Final thing I'll share on this is that through our program in the 13 weeks, I'll use a bad term, we believe very strongly in monogamy, like stay with one co-founder, go deep and test that relationship like crazy, and then break up if it's not working. We do not advocate for having like five conversations going on at a time by the end of the first week of the program, but 90% are actually in their co-founder teams and then it usually takes four to five formations and breakups before you actually get to your strong winning team.
Eric Janssen
Interesting, the edge framework, is that something that's unique to you?
Rachel Zimmer
Yeah, so that that is proprietary to EF but I'd say we've got a ton of information out there on it. I think our co-founder, Matt just did something on invest like the best kind of speaking to that framework and how you know those aces and when you look at the cards that you potentially have, how that really becomes the foundation for your skill set. The one thing I'll share is we have had people that have, I'll pick on one specific story, people that have maybe worked in law for 10 years or have worked in a specific industry and they're like, great, I want nothing to do with law, this is going to be my ticket to get out of law and what we'll often say is like you're crazy, your competitive advantage, and your right to win is in the legal space, like you got to double down as much as you might want to leave this is not the avenue to do it and that specific example, ended up being a co-founder that has been one of our most successful companies and he's like, alright, I guess I'll do my legal thing, I guess I know the space. Though we really try and push and encourage folks to think about why then and why now, because really, at the end of the day, that's what investors are going to care about and that's going to be your best chance of success.
Eric Janssen
I do want to leave some time for questions, and I'm looking at the questions that have been up voted the most here. I'm gonna rewind to something towards the beginning. Martina, if you're on sort of me trying to paraphrase your question, do you mind coming off mute and asking Rachel, your question?
Martina
Yeah, sure. Thank you for joining us, Rachel. My question had to do with reading about the entrepreneur first program, it's indicated that the end of week eight of form about 80% of the cohort is already found their co-founder, and then the remaining people that have not been able to find a co-founder, they have to leave the program. I know like looking at the website, it's clear that you select individuals that are highly ambitious, very qualified to be successful in the program but since they had to leave could you comment on what processes differentiates those that are successful in that form part of the program and those that couldn't advance to the next stage?
Rachel Zimmer
For sure, great question and so well researched. So a couple of things you hit on one thing, which is this idea of success, who has been successful or not in the program, and when I first joined def, and to really understand the program, I spoke to a bunch of our past customers or our alumni and both folks that were successful, not successful to use your words and what I learned was that most people actually felt like they were successful, whether they ended up getting funded with the app or not, because it's a transformational life experience, where all of a sudden, maybe you're working in an environment where some people were okay, some people weren't and then all of a sudden what I heard from our alumni was, they got to the app and was like, holy crap, these are my people, you can jam on different things, potentially have a huge, you know, heard right on where you go from your career perspective. I'll just speak to the fact that those that don't end up getting funded or end up having a company that they feel and that they want to pursue, many individuals end up joining our alumni companies. So our alumni actually love our subsequent cohorts, because it ends up being a talent funnel for them. Since we launched in Toronto, we've had recruiters chomping at the bit to say, can we see your talent? Can we see your talent, because we've added the best and brightest in Canada, that want to start companies. So we've already pre-vetted a lot. So I just wanted to hit on that idea of success versus not, because, I'd say the majority of people are not going to be funded, about 40% that end up getting funded by us on our investment committee but that doesn't mean it's unsuccessful. To answer your question of what differentiates the ones that end up getting funding versus not, I'd say, there's a couple things. One big mistake that we see a lot of companies make is they stay in teams way too long. So maybe they got along really well with someone, maybe Martina, you and I were paired up and we had so much fun together but at the end of the day, we didn't have a strong enough rate to win and we didn't actually have some of the tough conversations that were that needed to happen and so what ends up happening is some of that ends up getting back loaded. So you end up realizing that I'll pick on, an example, our values are super misaligned and you realize that two weeks before Investment Committee, and then the team breaks. So that's one example of something that maybe goes wrong. I think another example is people choose not to work on their edge. What ends up happening is you have people pitching and when you ask the question, why you? Why now? Which are not yet questions, those are like very common investor questions and those are tough to answer. I think it's pretty safe to say when you stick to your edge, and when you're really, really honest about pressure testing, the problem that you're working on in a potential solution, we use the term what's your belief based on your edge? And then what's that hunch that you want to lean in and test? When you can do that effectively I'd say most people have been really successful in the program. Great question.
Eric Janssen
I'm going to go to Priya, do you mind asking your question?
Priya
Yeah, for sure. Thank you so much for coming in. I basically just had a question about your experience, being a female entrepreneur, and just understanding how you assert yourself in a field that's just so predominantly male dominated?
Rachel Zimmer
Yeah, great question and I might answer this one in a less politically correct way. So bear with me as I do that. Here's what I'd say. It was never something I thought about. It was something that, I had delusional naivety to, and I think it was about a year into starting 5Crowd. All this buzz about females in tech, what we need to think about at the table, how we need to act in different things. I think once I started getting that, and the voice in my head saying like, okay, I'm the only female here like, who how do I act? What do I need to do? It became a really negative, a imposter syndrome moment, and then be self fulfilling prophecy when I was second guessing myself, then therefore, that's what was happening in those situations and I was brand new was like a month into that phase that I was going through and others said Racheal what's going on? I don't know, I'm a woman and he's like, okay, who cares? Like, oh, good point. Once I got rid of that, and kind of got that voice track off and actually, what we flipped to was the fact that we were co-founders and as a proff that us which we lacked at the time, but it's true. He's like, you guys are very lucky that one of you, as a female, one of you is a male, play to your strengths. What that meant was that there's lots of female and tech experiences that I was able to go and meet and learn from and then there were also lots of boys clubs where I could have gone and I would have been comfortable, but maybe we just said brand, because that's actually probably a better fit. I think whether or not you have a co-founder that's male I think you can manage it, though, but I guess my biggest message is, if you put the spotlight on it, at least in my case, it actually became a self fulfilling prophecy versus just trying to be delusional to it a little bit and have that you know, bright eyed naivety and stumbling into it, as that did really happen. So does make sense?
Priya
Yeah, no, that makes a lot of sense. Thank you.
Rachel Zimmer
That's a good question.
Eric Janssen
All right. Zach has a question related to COVID if you want to go for it, Zach.
Zach
I was just curious in terms of numbers. I think you can make arguments for both sides, I guess but, since COVID started, have you seen maybe an increase or decrease in interest? In entrepreneur first or entrepreneurship in general, if you have any insight on that?
Rachel Zimmer
Great question. So here's how I'll answer it. So first off, on the investor front, I'll start there, and then I'll go to the to the candidate applicant front, on the investor front investments are healthy. What I've been seeing as we've been launching in Canada, as I've been talking to my contacts in the valley, investments are still flowing and so there's obviously industries where that's not true, I'd be a little bit of trepidation around launching something and travel, for example, or retail, for example, maybe you've got a huge game changing solution based on the changes, but there are industries that are talking to my friends that are VCs in the valley, maybe they're writing those things off in their portfolio and doubling down in other areas. So start on that on the investor front. On the flip side, on the founder front, I'd say is that the most ambitious people see opportunity in turbulent times, right, they see the changing, and economy, they see the changing consumer habits. I think that when you see those opportunities, that's when the mind starts racing is like, oh, wow, this shifting behavior is happening, how do I tap into it. To give you some specific numbers, in Canada, we have close to 1000 applications for the 50 spots. I don't have a barometer for previous cohorts but I thought that was quite a lot and we did not have heavy marketing up until we had a little bit of press at the end, right, as we were closing our applications but I was pretty blown away by that, because that's 1000, very strong people that want to take a leap like this. One thing that I was seeing was that some people maybe are a bit more risk averse, by way of looking for leave of absences. In my world could I have left to J&J and taken six months and have that security of going back? But I just came up with a call prayer prior to this talking to someone who's interested in our April cohort and you know, what she had said was, I'm a strong performer, I could take a leave of absence, or I think I'd have an opportunity. I think those that have that performance background, there's a bit of confidence that now is the time if not now, then when and then I should be able to find an opportunity, should I need to go back into the workforce.
Zach
Great, thank you.
Eric Janssen
Any advice to your call it 21, 22-year-old self Rachel? Would you have done it differently? Would you have started earlier? Any advice that you'd give to these, these are arguably the most entrepreneurial students at Ivey who are taking courses and they're sort of self selecting and saying, I'm interested in learning more about entrepreneurship, any advice to either them or to your 21-year-old self?
Rachel Zimmer
Stay in touch with me, that's more me putting that out there because hopefully all of you will go into the workforce and be interested in yes, down the road but that's not your question. Look, I see a couple of things, right, I think and there's no substitute for hard work and I think our generation can get a reputation of like wanting to be the CEO in 12 months. At the end of the day, it takes time to learn stuff. On one hand, have some patience that it's going to take time to learn, be a sponge on everything tech as well as on the commerciality side. On the flip side, I had once been given the feedback, constructive feedback at J&J that I'm impatient and I can see that, I've been like high sense of urgency, we bought the three goals for 5Crowd, why is it taking six minutes? Let's do it tomorrow. On the flip side, one of the things we actually see from an EF perspective is some of our strongest founders have an insane sense of urgency, and they have that impatience. What I'd say is that be a sponge, learn. If I could go back to that advice that I was given, I think I would have said to ignore it, and that impatience is what drives speed, it's what drives impact and then perhaps the last piece to it all is be very, very focused Rachel circa 2011, 2012, I'm just general learning and just always putting myself in situations where you can just soak up a ton and as soon as you feel like you're getting stale, and leave, do something else fight go to Brazil, as I was trying to do with J&J, start something, go to a different company, because our careers are long, but they're not that long. The more tools you can assemble in your toolkit, I think that the better you'll be longer term, but stay in touch. You have circa two years from now.
Introduction/Outro
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