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MIT $100K Business Plan Contest

Last night I served as a "VC" judge for a bunch of contestants in the MIT $100K business plan contest in an event hosted by a local lawfirm.  As you'd expect there were some pretty innovative technologies, but I was really surprised at how little effort the teams spent explaining the market opportunity.  Admittedly a 10-minute-pitch format leaves little time for anything, but my advice to the students (and entrepreneurs in general) is to focus on articulating the market opportunity in your elevator pitch.  If you've only got a few minutes, use it to convey the "what" and "why" of your business (and not the "how").

Sitting on the Other Side of the Table

The guys at Softbank have been great giving me full access to all of their internal discussions.  For years and after giving north of a 100 VC pitches as an entrepreneur, I have been fantasizing about what it would be like to be on the other side of the table.  This week I got to see first hand what it's like to be in the shoes of a VC evaluating pitches and deals from the "buy-side" and like all good fantasies, the reality is a lot less satisfying than I imagined.

First off, I have to say that I've gained respect for venture investors (words I confess I never expected to pass my lips...er fingers). 

So hear's what it's like being on the buy-side.  Management comes in and gives a well rehearsed pitch about everything that is good in their business:  huge market, talented team, bullet-proof technology, crappy or non-existent competition, massive sales pipeline...basically free money...are you interested?  And then it starts a game of 21 questions trying to figure out how big is the real opportunity and how big (and where) is the risk.  After sitting through a handful of pitches, I'm surprised at how little time the CEOs spend framing the risk/reward profile (instead choosing to focus 99% of the time on the opportunity).

I think making an investment is the same with a VC as with a CEO.  I don't mind making a bet as long as I have a good idea of the bet I'm making.  Entrepreneurs have to be optimists (who would survive if we weren't!), but one lesson I've learned this week for when I get back to pitching is to spend more time outlining where and how big are the risks rather than leave it up to the VC's imaginations.

I Want That Job!

Good news!  I got the go-ahead from Softbank to blog about my experience as an EIR.  Actually, I'm not surprised at all since I've found Softbank in general and Steve Murray in particular to be very laid-back and open to entrepreneurs.  It is one of the things that attracted me to them as an investor originally and later as an EIR.

One of the things I've been asked most frequently over the past couple of months is, "how did you land your EIR-gig?" usually with the sub-context of, "how can *I* get that job?!?"  Over the past couple of months I have spoken to a bunch of EIRs and to a person they have all came to the role through an existing relationship with the venture fund--which was my experience with Softbank.  I have never heard of a VC advertising a job posting for an EIR.

So what exactly is an EIR?  I have spoken to a number of friends and acquaintances who are or have been EIRs and one consistent theme is that there is very little structure in the role and it is pretty much what you make it.  It reminds me a lot of that initial phase of a startup when you don't have anything except a vague notion that you're going to start a company.  You could work on almost any aspect of the business...what you do is up to you.  I think the main reason behind this is that venture funds are loosly defined startups to begin with.  Aside from a few regualar partnership and investment meetings, most of the folks at VC funds are pretty much working by themselves in an unstructured environment.  In my case, I took it upon myself to write up a "plan" for my EIR stint, but I get the feeling that not much is going to go according to plan.

So what do you do as an EIR?  Like I said, it's pretty much up to you, but it basically falls into five buckets:

1. Sourcing deals.  Every venture fund is continuously on the hunt for good investment opportunities.
2. Helping with diligence.  Having been on the other side of the table and with first hand, recent operating experience, EIRs can add value to the business and technology diligence process.
3. Helping existing portfolio companies. In the case where an EIR has functional or industry expertise or just generally in the process of growing a company, they can help existing portfolio companies.
4. Special projects for the fund.  VC funds always have projects that they wish they could do but don't have the bandwith to pursue.  It could be launching a new investment strategy (I talked with one EIR who was helping a fund evaluate whether they should expand into alternative energy investments) or just changing the way they market and position the fund.
5. Creating a new company.  VCs view this as proprietary deal flow and the EIR gets to use the resources and expertise of the fund (not to mention the inside track for funding).

Usually and EIR will spend 3-12 months and focus on one or two of these areas. 

Entrepreneur-in-Residence

After nearly four years as CEO of Pivot Solutions, a financial services technology startup, and having grown the business from a PowerPoint presentation into a large (#31 largest according to Securities Industry News) and fast growing (#3 fastest) network for front-office traders, I decided to try it all over again and find or create another early stage business.

Now, I have been a part of four startups, including founding or co-founding two, so I have some experience in how hard it is to find the right opportunity--one that I can be incredibly passionate about and one that has a huge potential (the two not being unrelated).  It is very time consuming to do the homework in finding or starting a promising new enterprise and if you rush it (as we did with Petstore.com back in the bubble days) the greatest execution in the world won't make a Dodo fly.  The last time I went through this (in founding Pivot), I was able to launch the startup from within a larger organization and then spin-out the new company by bringing in venture investors. Having the resources and time (almost a year) was vital to our success.  That process (spin-out) was incredibly time consuming and complex, in fact it was so complex that my friend, Prof. Lynda Applegate at Harvard Business School, decided to write a case on the spin-out.

So I was very excited when Steve Murray, a partner at Softbank and board member at Pivot, approached me about joining Softbank as an entrepreneur-in-residence.  It seemed like the perfect opportunity to leverage my experience as founder and CEO by helping existing portfolio companies through the growing pains Pivot had overcome while helping Softbank evaluate new investment opportunities *and* searching for my next gig.

So, assuming I get signoff from Softbank, I'm planning to blog about my experiences and share what this whole EIR thing is like.