An Entrepreneur in residence (EIR) describes an entrepreneur that is recruited by a Venture Capital Firm to develop a new business.
Understanding entrepreneurs in residence
When a startup company becomes profitable, the Venture Capital firm may decide to sell its investment and nominate the founder as the entrepreneur in residence.
The EIR position is transitional, short-term, and intended to enable the founder to locate their next role while still working for the VC firm.
Over a period of 6 to 12 months, the entrepreneur provides expertise to the company and receives support for their future endeavors in return.
In addition to venture capital situations, many other organizations are now utilizing the entrepreneur in residence concept for advice on business models, company culture, and potential business relationships or partnerships.
This includes educational institutions such as MIT, Cornell, and Harvard which use EIRs in advisory roles to teach students how to turn their innovative ideas into businesses.
Tech companies such as Cisco and some government agencies are also benefitting from the concept.
What is the role of an entrepreneur in residence?
The entrepreneur in residence assists with operational due diligence across one or multiple companies in the VC firm’s portfolio.
They may be tasked with nurturing expansion and new product development or be asked to restructure the company’s ownership or management structure.
Some may also use their time to scrutinize a new business idea or find another start-up they may wish to join.
Whatever the intention, however, it’s important to note that the roles and responsibilities of the EIR are specific to the needs of the firm.
Many entrepreneurs in residence are simply asked to use their nous, expertise, and network to benefit whatever project they are asked to work on.
Benefits of entrepreneurs in residence
Here are some of the obvious and not-so-obvious benefits of EIRs:
Time and flexibility
Investment companies that support successful start-ups naturally want the entrepreneur to create other businesses it can fund.
This process takes time, but an EIR who has access to company funds and influence over the transitional period ensures it has another investment opportunity ready to go when required.
Network expansion
While EIRs have access to the firm’s professional network, they can also offer the firm their network in return.
This is particularly true of those who have founded multiple start-ups.
Investment advice
Related to an entrepreneur’s experience is their knowledge of what a start-up requires to generate profits and gain a competitive advantage.
Some companies consult with EIRs to clarify which start-ups they should work with and which should be sold.
Talent retention and industry influence
Some VC firms may offer successful EIRs a permanent position to limit the competition they would potentially create if working for another company.
Permanent positions allow the firm to retain talent and increase its industry influence.
Key takeaways:
- An entrepreneur in residence (EIR) describes an entrepreneur that is recruited by a venture capital firm to develop a new business.
- In addition to venture capital situations, many other organizations are now utilizing the entrepreneur in residence concept. These include universities, government agencies, and tech companies.
- Entrepreneurs in residence ensure the investment company has a steady stream of promising start-ups to support. These companies can also leverage the EIR’s professional network and ability to recognize profitable investments.
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