I am pleased to have as a guest blogger, Nitzan Shaer, who was an Entrepreneur in Residence (EIR) with us at IDG Ventures for the first half of this year.  Nitzan had previously started Skype Mobile and prior to that worked at Microsoft Mobile.  Nitzan recently left us to take the COO position at Mobivox, a mobile voice-over-IP start-up (sound familiar?) we funded a few months ago with Nitzan’s involvement in the company.  Since serving as an EIR is becoming a more common occurrence in the VC and entrepreneur community, I asked Nitzan to share some of his observations on the pros and cons of the job.

Nitzan’s submission:

The opportunity to explore your own business ideas, to gain access to top minds in the industry and to get paid for it all, sounds to many like a dream job. The truth is, if it plays out well, it probably is. However, not all EIR’s feel they spent their time wisely. Based on my personal experience as an EIR, and reflecting on talks with other VC’s and five EIR’s, I assembled my observations into a short 10 step guide for ‘would be’ EIR’s. Or in short, Shaer’s 10 points on becoming a successful EIR. Disclaimer: success is not guaranteed, but at the very least, I hope it will make for a good read. Advance at your own risk. 

The idea of becoming an EIR was introduced to me after I started considering my next steps at Skype. Following two adrenaline packed years at Skype (at the time the company stood for “The Whole World Can Talk for Free”), and almost a year post the acquisition by eBay, I decided it was time for me to jump on, yet again, to an early stage opportunity and help grow it to be mega big.

Three options were on the table: join an early stage startup, start a company of my own, or become an EIR. Honestly, there was no start up I found that excited me, but there were a bunch of ideas that I wanted to pursue – not all of them in my direct area of expertise, so I knew I would need time and advice. After living in London and Seattle, my network in Boston was limited so I set up meetings with Boston VC’s and listened to what they had to say.

The first thing I learned from meeting eight VC’s was that there were nine different definitions to the term EIR. Boiling it down, there are three areas EIR’s typically focus on: identifying new investment opportunities, helping portfolio companies, and ultimately launching or joining a new investment (the ‘Exit’ even for an EIR). Some VC’s expect you to bring your own ideas for a company, dig into it, and launch it. Other VCs have an idea they have been seeking to pursue and ask you to join up and build it out. Most, but not all, will offer a salary. Some will want the right of first refusal to invest in your idea if they like it. Others will let you do your own thing, even if they don’t like it (just for the benefit of having you hang your hat in their office and engage in constructive exchange of ideas). To succeed in the eyes of the VC, you would need to bring at least one investment into the company which they would not have made otherwise. [Point 1: whatever you do, be sure to bring at least one great investment to your host VC – that is what they live for]. If you think about it, with today’s competition on good teams intensifying EIR’s are a great way for VC’s to get first dibs into a great team and for that team to get to know, and trust their VC.  [Point 2: Be sure to meet A LOT of people. Soon you will be back in the trenches building a business, and times like this will be a vague memory].

However, the EIR role is not for everyone. Risk #1 is stagnation – after 12 or 18 months you may be empty handed and start to overstay your welcome. You will not have much to show for your time as you were not actually in a start up gaining experience. Even worse you may feel pressure to jump onto a company that you are not in love with. [Point 3: At any given moment, you should be working on at least two backup plans so you don’t have to start from ground zero if you hit a dead end]. [Point 4: have the drive to define your own path and the conviction to know what the right business is for you, even if your hosts do not want to invest in it].  If all does go well, chances are you are not only choosing an employer for six month, but also an investor and board which will be with you for years to come. [Point 5: Choose your host VC with the assumption you are entering a marriage – most likely they will be there for key decisions in your life for years to come]

I was fortunate to be introduced to IDG Ventures by two HBS classmates – one of which IDG invested in and the other who co-invested with them. After meeting all the partners, talking to their CEO’s and cross referencing them with other local investment professionals, I concluded that this was the perfect match for me. They had deep operational experience (i.e. they knew in practice rather than in theory how to build a company). Second, they took the approach of mentoring rather than instructing their portfolio CEO’s (not typical in VC land unfortunately). And third, they knew what seed investments were all about, and did not have such a large fund that a small investment would make no difference to them in the grand scheme. [Point 6: Find a VC that matches your personal and business goals: small vs large investments, involved vs. unengaged board members, expertise and connections in the industry you are seeking].   

For me personally, the EIR experience played off extremely well. As in any business, the outcome is defined by the people, the timing and a healthy dose of luck. During a period of six months I spent around half of my time sourcing investment opportunities (which means getting to know all the restaurants in Boston up close), [Point 7: keep close track of who you met and how they can help out in your new venture. You will rely on these meetings for years into the future]. The other half of my time, I spent working on three business plans which I was passionate about. I was privilege to get a look at inner workings of a highly talented investment team and at the same time spend quality time investigating some business plans. The GP’s opened up their personal network to me and helped set up meetings with the movers and shakers of the ‘direct to consumer’ market which I was after. [Point 8: Keep an open dialog on going with the GP’s. Meet frequently, solicit their advice, and update them on your observations. The last thing you want if for someone to ask ‘remind me again, what is that guy doing in our office’?)] [Point 9: Before you get started, have a clear definition of what mutual expectations are and how success is defined].

During those six months, IDG invested in two companies which I played a primary role in identifying and qualifying (for every two completed deals, I don’t have to tell you how many ‘almost’ make it to the finish line). The second of the two investments, was MOBIVOX, a company that provides free international calls from any phone. After the first few hours with Stephane (CEO), I realized this is one of those companies that does not come round the block every day. It has a practically unbound market potential, given the fact that it works from any phone – landline or mobile, globally, with no need for download of applications. People finally have the opportunity to make international calls from wherever they are no need for a PC or calling cards. After two months of detailed due diligence, both the partners and I decided we could not pass on this one. I joined as COO and board member and IDG Ventures brought in the rest of the family too. IDG China, IDG Vietnam and IDG Boston joined together to invest in a global opportunity which they all felt passionate about. Chapter one ended very happily for IDG Ventures and me. Now, we all have our eyes (and hearts) on making MOBIVOX a global success !

In conclusion:
1. EIR can be a dream job, but it is not for everyone. You need to set and adhere to your agenda. It could end up great, but it could also end with nothing much to show for.
2. Choose your VC firm well – they will most likely be your investors and partners for years to come.
3. And finally, Point 10: Have fun! If you do decide to do it, relish every minute. When else in life to you get an opportunity to work on your own ideas in such an environment?