This is the third and final post on dealing with a VC’s entrepreneur in residence during your venture capital fund raise. The first discussed the EIR’s role at a venture firm and the second had suggestions for how to prepare for a meeting with an entrepreneur in residence. In this post I will discuss a few tactics for getting the most out of the EIR - as in increasing your chances of getting funding from the venture capitalist and getting the EIR to help you on other fronts.
Tips for your interactions with a VC’s EIR
- During your meetings with the entrepreneur in residence take notes of big questions that you can’t answer. Try to have a follow up meeting to discuss these issues, or even better a working session where the EIR can help you come up with ways to improve your business plan. You are basically trying to prove to the EIR that you are taking their questions seriously and are also trying to use their experience to come up with answers.
- Be someone who the EIR would want to work with. I know I’ve mentioned this a few times, but if you can get the entrepreneur in residence excited enough to consider joining your startup you are much more likely to get funding from that particular. A big part of this excitement is wanting to work with YOU.
- Be prepared for the “I want to be your company’s CEO” discussion. If the EIR program at the VC you are talking to is like most then this discussion is super positive - it means that you are much more likely to get funded. But… you need to be ready for your response. Do you like this person enough/are you desperate enough for funding that you are OK giving the EIR a key role (and good salary and some serious stock options and real decision making authority at the company too!)? If not you need to have a way to try to keep the EIR interested and not lose the traction you are getting at the VC; perhaps offering a board seat or a SVP of Something will do - but likely not. If you are open to the EIR joining you ought to be ready to discuss: when will they join, what role, how much pay, how much equity + salary, etc. BEFORE this issue comes up you should have used your network to reference the EIR and have made sure this person is someone with whom you want to work.
- Be ready to hand over the keys if you answer the above question affirmatively. You will need to show the VC that you are actually going to be able to work with the EIR and that you will allow them to make decisions as your company’s CEO. This is critical. You will likely need the EIR to formally pitch the venture capital firm, with you sitting closely by, and allow them to run the show. Don’t cut them off, interrupt, shout over them, etc. Instead, you’ll need to run your portion of the presentation and let the EIR handle the rest. You should probably carefully work out with the EIR in advance when it’s ok for you to jump in and when you should let them answer the questions. This is part of the game of raising funding. I understand if it seems… demeaning or something. Sorry; I’m only trying to provide some guidance that might help you get funded.
- Get introductions! The entrepreneur in residence probably has solid contacts with people who can help your startup. These may be potential advisers, team members or introductions to people who might one day be customers. Get the intros!
- Acknowledge your weaknesses if the EIR is picking at them. If you knew that your sales plan was weak or the development timeline for your feature releases was not yet fully baked, and if the EIR is spending a lot of time poking at these points, ask for help. Let the EIR know that you are open to suggestions and that you want to make these areas stronger. Ask what worked for them in their previous business. You may learn something, and hopefully you will come across as easy to work with.
- Realize that the EIR is probably not the ultimate decision maker at the venture capital firm and may not know how to run the process. While I can not speak for all funds’ EIR programs, I do know that at many the partner/investment committee at the fund makes the investment ultimate investment decision, not the entrepreneur in residence. Don’t forget that you need to woo the investment professional(s) at the venture capital firm. While spending a ton of time with the EIR can seriously help advance the funding discussions you probably also need to keep front and center with the partners at the fund. You need to be sure that the EIR is moving the process along. This may be difficult as it is likely the EIR hasn’t really ever run an investment process at the venture firm and may never have actually “invested” as a real VC fund before.
- Watch for signs that the EIR is liking your idea more than your startup. As I mentioned in my first post on EIR’s, there is a chance that the EIR could start a competitor to your company. While I haven’t actually seen this happen, I did get an email from one of my readers suggesting that this has occasionally happened (this reader is from the SF area, maybe it is more common out there.) While working with really reputable venture firms likely mitigates this risk a ton you should watch for signs that you are being used for diligencing the space. If you are not getting introduced to potential customers/team members/potential partners from the VC/EIR’s network during the advanced stages of the diligence process this is a bad sign. If the VC isn’t asking for personal references this could be a bad sign. If they are spending more time with potential customers for your startup that YOU introduced to them as business references this could be a bad sign. Anything else that I’m missing? I hope that this is very rare.
The entrepreneur in residence can be a strong ally in your search for venture capital financing. By getting the EIR on the side of your startup you greatly increase the chances of getting venture financing. I hope that you found these posts helpful, and welcome your feedback.
