Becoming an Entrepreneur in Residence

I had the pleasure of meeting up with Oren Jacob, formerly of Pixar, now CEO of his own startup, and fellow 500startups mentor. The valley is filled with interesting individuals who have done some amazing things, and I always try to seek them out to hear a little about what they’ve done, assuming they have the time or openness to meet up with a total cold call!
We spoke about a lot of things but one thing we talked about encouraged me to get going on this post, which was about becoming an Entrepreneur In Residence, or EIR at a venture fund. Oren related to me how that, before starting his startup, that he went through an interesting process to become an EIR. My conversation with him allowed me to fill in some needed information about what I had already observed with EIRs. Also, I thought that this would be a perfect follow on to a recent post by Rob Go of Nextview Ventures titled So You Want to be a VC… and my resultant post The Path to Becoming a VC. After all, becoming an EIR is yet another way to get hired by a venture fund right?
What is an EIR?
First, what does that E stand for? I have seen E to stand for Entrepreneur, which seems the most popular. However, I have seen E stand for Executive (ie. “Executive in Residence”) and also the E has turned to D, standing for Designer (ie. “Designer in Residence” – see Jason Putorti who is most likely the person who became the first ever DIR at Bessemer). This does suggest some different functions that these folks do. So let’s discuss them first as xIRs, where x can equal any of the 3 meanings.
What does an xIR do?
There are many things that a venture fund might expect an xIR to do:
1. Discover/experiment/develop some next big idea for a startup – You are given an office space, phone, internet, maybe even a computer and then you spend time thinking up new business ideas. You then are given some time to work on them, and hopefully one of those develops into something that the venture fund will invest in.
2. You park until you find your next gig – Venture funds like to have smart people around. You might not have any real expectations although there may be some underlying ones, like they hope that you might join one of their existing portfolio companies and leverage your talent. So you becoming an xIR may actually be a recruiting tool. Or not – you might find a job elsewhere, but hopefully there was some goodwill generated for the venture fund by letting you park there for a while.
3. Due diligence help – Your areas of expertise may be of great help to the venture fund in helping to look at deals. You may be able to help them with due diligence and evaluating whether something is a great opportunity or not. .
4. Help their existing portfolio companies – You may be asked to go around to all their portfolio companies and help them if possible in your areas of expertise. I’ve known at least one Executive in Residence whose role was chiefly to help portfolio companies.
5. Sourcing more deal flow – It is well known that entrepreneurs hang out with other entrepreneurs. It may be hoped that you will bring some deal flow to the venture fund.
6. Any combination of the above.
What are the terms?
1. Compensation ranges from zero dollars to up to $250K/year.
2. Carry in the fund’s returns doesn’t seem to be something that is offered.
3. This arrangement can last from about 6 months to 1-2 years to until they let you go or as long as you need.
What else do you get?
1. You get to see the inner workings of a venture fund. Often you will get invited to sit in on deal meetings and board meetings.
2. Hang out in a posh Sand Hill Road office, or hopefully still posh but in a different location.
3. Get an office, phone, maybe computer in addition to pay. You will probably get business cards which improves your notoriety.
4. You get to attend firm events and parties, perhaps even speaking engagements.
How does the process start?
Venture funds are a highly relationship driven business (see Christine Tsai’s comment and my reply on my Path to Becoming a VC post). The probability of you getting an EIR job without knowing the VC beforehand is pretty low. So getting to know some folks in venture funds makes the process a lot easier than if you didn’t know any. They will want to have the most confidence that you can be valuable to the fund. Knowing you beforehand helps with that.
Part of knowing you is about what you have done, how well you have done it, and your expertise. I have never heard of someone coming out of college to become an EIR. Perhaps it has happened but I think very rarely. You don’t have enough experience or a track record behind you yet. I could see it happening from a Ph.D program where someone may have been working on something while at school and then is ready to commercialize it. More likely, you will be known to the venture fund through a portfolio company or through your notoriety in another company.
If you get noticed by a venture fund, you’ll probably get invited to come in for an interview. Most likely these positions aren’t advertised so venture funds tend to be able to choose the candidates; it would be a rare circumstance if you were able to interview for EIR positions at multiple venture funds.
How do you make a decision?
There are the usual considerations like compensation and health insurance, the poshness of the office, the reputation of the fund as you leverage it, and fringe benefits like free food in their fridge. However, the most important considerations are:
1. You like the people you will be working with, and they like you. Relationship is everything. If they offer you a job, obviously they like you, but do you like them?
2. The expectations and goals of the venture fund in your role as EIR match yours. If you are thinking that you just want to park somewhere until your next gig shows up and the venture fund is expecting you to build something so they can fund it, that’s bad! You could leave the fund with them thinking you’re not able to execute or are just a slacker. Make sure the reasons for you becoming an EIR there match theirs as closely as possible.
By the way, it does not appear that becoming an EIR is a good way to becoming an investor. Yes you’ll be working for a venture fund and see a lot of the inner workings of one; however, the expectation is not to train you to become an investor but rather to work on startups and startup ideas. That does not mean that you could not jump on the path to becoming a VC later on (see my post, 3 effective ways to jumping on the path, especially path 3).