Octopus Ventures, which has been inside a number of early stage tech deals in the UK in recent times, has created a new position of entrepreneur-in-residence and appointed Peter Bance. Bance was formerly Group CEO at fuel cell technology provider, Ceres Power. In this guest post he argues more VCs should have EiRs.
Venture capitalists are great financial engineers. What they don’t know about preference shares probably isn’t worth knowing – and so it should be. Yet it strikes me that this trend for VC houses to be dominated by finance guys is a peculiarly UK and European phenomenon.
In North America, VC firms have a diversity of talent split fairly equally across finance, entrepreneurial and industry backgrounds – i.e. people who can do deals (the easy bit!), people who can build successful businesses and people who can create new markets. If the UK wants to replicate the successes seen in the US, perhaps now is the time to accept that VC houses need to be providing more.
This is why VC firms seriously benefit from embedding entrepreneurial talent on the inside, not just backing top talent externally. Being an entrepreneur is about more than just raising the capital. For example, one particular resource that VCs would do well to have on tap is access to entrepreneurs and individuals who know how to successfully navigate the minefield of dealing with multinational companies. For the growing business it is essential that the CEO can do this well. Entrepreneurs-in-Residence can help VCs fill these gaps in their expertise. EiR is a term which I personally hate, but it does go a long way to describing the role an entrepreneur can play within a VC firm.
The truth is that VCs often don’t know about the realities of running a business. For the long-suffering start-up CEO, it may appear that VCs have no idea what it feels like for a CEO with all the tanks on the battlefield aimed at you when all you’ve got is a slightly worn out slingshot.
Entrepreneurs-in-Residence allow VC houses to provide a wealth of resources, both financial and advisory, which is essential to building a successful business. What does the EiR get out of it? Well I have the luxury of being able to be totally and brutally frank with both the VC and the portfolio CEO and just say like it is. And that freedom will hopefully help the wider team.