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Entrepreneurs-in-residence bring street cred to client counseling

by Corinne Colbert

February 2007

Her obstetrician may have lots of good advice, but when an expectant mother wants guidance from someone who truly understands her feelings, she probably doesn’t talk to her doctor. She talks to her mother, her sisters, her friends – anyone who’s actually had a baby.

The same thing can happen in business incubation. When it comes right down to it, sometimes what the head of a start-up company needs is to talk to someone who’s done the same thing. “They want to see successful entrepreneurs,” says Walter Schulz, director of techcenter@umbc in Baltimore. “That’s who they’re going to listen to.”

While many incubator managers have had firsthand experience in leading a company, sometimes a client needs particular expertise you don’t have. One way to give clients that “been-there” touch is through an entrepreneur-in-residence program, which not only can bring gravitas to client advising, but also offer you an insider’s feedback on your clients’ progress and add to your value proposition.

NBIA talked to four incubator executives whose programs include an entrepreneur-in-residence. Read on to see how they do it – and how you can make it work for your program, too.

What is an entrepreneur-in-residence?

An entrepreneur-in-residence is a current or former CEO of a start-up company who spends a set number of hours or days in the incubator. Most stay a year, although some residencies last longer depending on the EIR’s availability. Some incubators have only one EIR at a time, while others have as many as five at once.

It’s their position as a quasi-staff member that separates an EIR from a mentor. “We have a broader pool of people we call on in a more ad-hoc fashion, depending on what our client companies need,” says Carol Ann Dykes, COO of the University of Central Florida Technology Incubator in Orlando, which has had an EIR program for six years. “The entrepreneur-in-residence status is a little more visible and tangible. It gives them more validity.”

Venture capital firms also offer EIR programs, but their purpose may be quite different. The EIR who works with an investment firm may be more devoted to the firm’s interests than the client’s. Oftentimes, VC firms keep entrepreneurs-in-residence around as CEOs-in-waiting, installing them at the head of a start-up in place of the existing business owner if particular skills are needed.

While an EIR at an incubator may be looking for new opportunities, his or her true purpose is to serve as an on-site advisor. “Entrepreneurs-in-residence [in incubation] don’t have any axe to grind for anybody else,” says Steve Morris, executive director of the Open Technology Business Center in Beaverton, Ore. “You could argue that they are more independent, not swayed by a particular investor, and are more interested in helping other entrepreneurs.”

That’s not to say that an incubator can’t or shouldn’t follow the VC model, particularly if the entrepreneur-in-residence is a good fit with a client company. The difference is that an incubator can only suggest that a client accept the EIR on their management team; a venture capitalist can make it a condition of funding. “If [the client’s] ambitions are beyond their limitations, then you need to try to get them to understand that [moving aside for an EIR] probably does mean a diminished role for them, but if they want to be associated with the larger success and all the things that will bring them, it’s a worthwhile price to pay,” says Dick Reeves, president of the Business Technology Development Center (BizTech) in Huntsville, Ala.

Who makes a good EIR, and how do you find them?

First and foremost, an entrepreneur-in-residence should be someone who has started and led a new company. “They tend to be people who are successful entrepreneurs in their own right,” Reeves says. “Usually they have exited the company for some reason or another – their company was bought and they bailed out, or they sold the company to someone else.”

“It’s great to get people who really have started a company – not just been involved early,” Morris says. “You want to go with somebody who’s been a start-up CEO, not someone who wasn’t there from day one.”

Although a rags-to-riches story may be appealing to clients, success shouldn’t be the only factor in choosing an EIR. “When you’re growing young tech companies, you have CEOs who don’t have experience [in business],” Dykes says. “You have to surround them with a lot of experience, the key being people who have gone down this road already, experienced entrepreneurs who have made a lot of mistakes and learned lessons and are willing to share those lessons with those coming behind them.”

Some EIRs are independently wealthy individuals who can afford to forego a salary or accept the smaller stipend available from an incubator. In other cases, EIRs may have a “day job” but are willing to give their time to help new business owners.

David Reap has been an EIR at the University of Central Florida Technology Incubator since 2004. When he began, he had his own business consulting company; he remains active in the EIR program even though he is now senior director of business planning for Marriott. “You have to find someone who has a passion for [business] growth and an independent source of income,” Reap says.

Often, potential entrepreneurs-in-residence will come to you because they want to stay active in the start-up world and want to pass their knowledge on to others. “I get three or four resumes a week from someone looking for something new to do,” Reeves says.

In the five years that he’s offered an EIR program, Schulz has often had referrals of potential EIRs from members of his advisory board, who include venture capitalists, angel investors, lawyers, accountants, and others who encounter high-quality entrepreneurs. “They know people who might have a break in the action,” he says.

Don’t get too swayed by a strong track record and a willingness to work, warns Dykes. An EIR who doesn’t relate well to others or whose skill set doesn’t mesh with your clients’ needs is just dead weight. “If they fit the profile of someone we’re looking for and are the sort of entrepreneur that’s good at interacting with young CEOs, we might talk with them about becoming an entrepreneur-in-residence,” she says.

What do you expect from your EIR?

These incubator managers ask their EIRs to commit to anywhere from a few days a month to 20 hours a week. Much of it depends on the entrepreneur’s status and availability, as does their tenure at the incubator. “It’s only reasonable to expect people to stay involved for six months to a year,” Reeves says.

Reeves’ current EIR is a serial entrepreneur who quit his job to spend more time with his son, who has a chronic medical condition. He had been a member of the incubator’s advisory board, but “he was bored and I knew it,” Reeves says. As BizTech’s entrepreneur-in-residence, he works half-time at the incubator and spends the other half of his time at home.

Morris, on the other hand, requires only about four hours a week from each of his four EIRs. “It’s enough to be able to make a difference,” he says. The EIRs commit to a weekly one-on-one meeting with two clients, as well as a meeting with Morris to report on their activities and the clients’ progress. “It’s a relatively high commitment compared to being on an advisory board,” he says.

If you have only one or two EIRs, then clients share their time. “[The EIR] meet[s] with our companies on a regular basis to come up with ideas on what the company really needs and give advice,” says Schulz, who has two EIRs. The EIRs also report back to incubator management about the companies’ status.

Incubators with a larger complement of EIRs, on the other hand, can match each entrepreneur’s skills with clients’ particular needs. “There is definitely an advantage to having more than one because they each bring different experiences and industry knowledge to us,” says Dykes, who currently has five EIRs. “With a program the size of ours, it would be difficult for just one to assist those clients that can benefit from [EIR] guidance.”

When a new EIR comes on board, Dykes introduces him or her to clients she thinks could benefit from that individual’s unique skills. “The EIR will end up gravitating to one or two clients that they get substantially involved with – helping with their business plan, marketing and sales, strategic partnerships, going after capital, helping with investor presentations – depending on what the company needs and the entrepreneur’s skill set,” she says.

Morris, who has four EIRs, takes a different approach. One of his EIRs is an experienced technology entrepreneur, who can help his clients with their own tech-venture challenges. A second is an angel investor; a third has extensive experience in market research and product development. And Morris considers himself to be the fourth EIR, the role that originally brought him to the incubator in 2005 as managing director of OregonStartups.com, a consulting firm for entrepreneurs. A veteran of the software and semiconductor industries, he has experience in marketing, business planning, partnerships and gaining venture capital funding.

“When you have multiple EIRs, you have a broader set of backgrounds, which increases the odds that you can find a good EIR match for each start-up,” Morris says.

For his part, Reap prefers spreading himself around. His experience is in sales and marketing, so he helps UCF clients focus on identifying their markets. “It’s important that they think about who is their target and understand the basics of marketing,” he says.

And because he sees his role as a teacher, not a hired hand, he keeps his advice general. “It’s rare that I give them an answer or a road map,” he says. “I try to make it a collaborative process and give them options.”

Lamine Ba, a UCF client who worked with Reap, appreciated that approach. He’s the founder of Real Basis, a Web-based management tool for the real estate industry. “It was very useful,” he says. “Using [an EIR’s] advice allows you to not reinvent the wheel.”

He compares an EIR’s role to that of a bystander in a checkers game. “Because they’re not playing the game, they sometimes can see opportunities better than the one who’s playing it,” Ba says.

What’s the cost?

Ah, the big question: Do you pay your entrepreneur-in-residence?

Reeves does; his current EIR makes $50,000. While that’s a rather hefty sum, BizTech takes equity in its clients and Reeves is optimistic that those transactions will eventually pay for his EIR, who works with clients who hope to sell their companies soon. “He’s helping to increase the value of their company and prepare to convey the company in a transaction,” Reeves says. The more successful the company’s sale or merger, the more BizTech will see in equity returns. (For now, Reeves pays the EIR out of his operating budget.)

Schulz pays his EIRs $20,000 to $25,000, which he usually gets funded by a sponsor, for one or two days of work a week. “We would probably have them on a more full-time basis if we could afford it,” he says.

But Dykes and Morris don’t pay their EIRs. Like their counterparts, though, they do provide office space and administrative support. “Mainly, [what they get are] more intangible benefits,” Dykes says. “It’s the fun they have in helping a lot of young entrepreneurs, things they learn about other industries, opportunities to apply their skills and experience, and getting the chance to be an entrepreneur without having to deal with all the stuff they had to when they were running a company.”

Keywords: business assistance provider, coaching clients, incubator management -- general, leadership development, mentoring program

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