This March marked my emancipation from the world of ABS. Not the well-defined muscle group we all suffer for in vain, rather Asset-Backed Securities. The business of financially engineering a security backed by a pool of assets (e.g. mortgage loans) and selling these on to investors.
Lost? Good, that makes two of us. Fast forward to October and my new title abbreviates to another three letter acronym that is equally nebulous; I am an EIR! In my short time within the startup ecosystem, I have encountered many dubious job titles, yet that of Entrepreneur In Residence seems to have raised the most eyebrows.
Brad Feld defines an EIR as a ‘seasoned entrepreneur who parks themselves at a VC firm, whilst working on figuring out their next company’. Other commentators note their defining traits to be occupying a part-time role and consuming free office space, in exchange for introductions, networking and experience.
As an Investment Banking Analyst, my value was derived from producing on-demand pitch books, scheduled delivery of financial models and building infrastructure to programmatically source macroeconomic data. My engine was a hybrid of Bloomberg, Powerpoint and Excel. My fuel came from an injection of coffee and the culture, and my achievements each year were quantified in the February bonus.
12 months of work, a 5-minute chat around the numeric contents of an A4 envelope, and we’re off again! One annual sprint at a time.
An EIR fulfils a loosely defined role, which takes getting used to. In my case, it was largely self-defined and I thank Playfair Capital for their flexibility here. I can’t call myself a seasoned entrepreneur, nor would I want to. I’m learning as I hustle. I can’t claim the powerful network of an industry heavyweight. And experience running companies? Well, given my role at the bank, I’ll leave it to you to guess how transferable my securitisation skills are to tech startups. Where my circumstance aligned to that of an EIR however, was in figuring out my next, or indeed first company.
Between Banking and Venture Capital, I spent 3 months as an Associate at Techstars. The program, based in Warner Yard (the home of Playfair), is mentor-driven by design and grants unfair advantages to accelerate the growth of 11 teams, selected from over one thousand applications. While the startups received their fair share of acceleration, they weren’t alone. My education into the challenges faced by early-stage companies was also catalysed, and it was in such an environment that I learned just how delicate a balance of science and art there is to entrepreneurship.
Despite what many say, there is no ‘one size fits all’ methodology for building companies. Nor are there startups steered towards billion dollar valuations on a series of gut instincts alone. Developing my own methodical approach through which to analyse companies while at Techstars, would later serve me well when working with, for, and investing in such companies — the day-to-day of an EIR. In fact, commonly used amongst VCs is the phrase ‘Pattern Recognition’ — implicit evidence of some framework being applied. As much as investors may claim to act on their instincts, subconsciously there is some data-driven processing of information leading to a decision being made. It is this, meshed with experience, that builds and refines an investor’s pattern recognition. It is this optimised blend of science and art that separates the true unicorn hunters from the ‘wannabes’.
Although the hypothesis of the greatest sportsmen going on to be the greatest coaches does not necessarily hold, there seems to be more validity when applying this to the relationship between entrepreneurs and venture capitalists. Peter Thiel (PayPal), Reid Hoffman (LinkedIn), Vinod Khosla (Sun Microsystems) and both Marc Andreessen and Ben Horowitz (Opsware) share something in common. They have all founded and successfully exited companies before becoming prolific venture capitalists. Whilst this isn’t entirely causal — a successful entrepreneur won’t become a successful investor by default — there is something to be said of the pattern recognition of an entrepreneur-turned-VC. However, the reverse, a VC-turned-entrepreneur, has yet to reach similar heights of success.
My interpretation of an EIR has enabled me to perform roles on both sides of the table, and simultaneously leverage these off each other. You are led to walk a mile in the shoes of both coach and player, teacher and student, master and apprentice, at the same time. My role at Playfair Capital has indeed taken this mould, working Monday — Wednesday with the VC and the remainder of the week (Thursday — Sunday) in ‘figuring out my next company’. 50% investor, 50% entrepreneur.
Theoretically, there is a strong argument to be made that the best investors have the pattern recognition to finance the best entrepreneurs. A similar assumption holds that the best entrepreneurs know just how to entice the best investors. Over this 3 month sprint as an EIR, I have been fortunate to attend countless pitches, learning what works and what doesn’t and the do’s and dont’s; my very own pattern recognition.
Coming into the final week of this 50/50 arrangement and I am heading out to Cairo for RiseUP Summit; an annual event to promote the startup ecosystem in the Middle East and North Africa (MENA). Amongst other sessions, I was asked to participate in an Investor Lounge, where I will join a panel of some of the largest European VCs in selecting the winning pitch for a cash reward. The irony still surprises me — are students essentially presenting to a student-teacher? However, the constant to and fro between my role as a founder and investor has given me great perspective for analysing companies. Whether working with, for or investing in, the role of EIR has enabled me with the right mesh of science and art in my eyes.
I am yet to formally pitch investors for my (still) unnamed startup, yet when the time comes I believe this experience and framework will help in running the business. Then who knows, when we reach our desired outcome, the foundations may be there to join the list of prolific venture investors above. Like the most uncertain of unknowns however, only time will tell…
Reach out @ishaanmalhi with any comments, feedback or criticisms ☺