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| Venture funds turn to entrepreneurs-in-residence |
| Shivani Shinde / Mumbai Nov 25, 2009, 00:26 IST |
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What do Cannan Partners and Indian Institute of Management-Ahmedabad have in common? They have both appointed an entrepreneur-in-residence (EIR).
For Canaan, former Yahoo Research Head Sharad Sharma will work on cloud computing. In contrast, IIM-Ahmedabad’s Centre for Innovation, Incubation and Entrepreneurship (CIIE) has chosen 16 individuals to work on renewable energy search or Re-Search.
While globally, many individuals have held the position of an EIR, it is still a relatively new concept in India with only a handful of individuals having been part of such programmes. The list includes Neeraj Bhargava, the chief executive officer of business process outsourcing firm WNS. Besides, venture capital firm Artiman has started an EIR programme.
What’s an EIR? Basically, this system allows a venture capital firm to support a senior executive, who has had significant experience in executing programmes in a certain segment or has been an entrepreneur and can build a team around a technology or a vertical. Typically, an EIR will be on a VC’s payroll for a defined period, and will also help the VC in other areas his expertise.
“The idea is to back a person with whom we are extremely comfortable... In the US, it is a fairly usual practice, even in India, this is not new. Seed funding is a similar model. It’s an opportunity to engage with high-quality people, and participate in their businesses,” said Canaan Partners Managing Director Alok Mittal.
He said that over the next six to nine months, Cannan would help Sharma start the cloud computing business.
While Sharma was known to the venture fund that helped Canaan decide on his case, in case of Re-Search, CIIE shortlisted candidates with experience in clean tech and took them through different types of deals, technology being used and research labs to help them develop a viable business model.
CIIE Chief Executive Officer Kunal Upadhyay said over the last three months or so, the 16 selected members have formed five teams. Of this, three have finalised a business plan and were now pitching for funds from the committee. The others are still refining their business plans.
But why have few venture funds opted for EIRs?
Upadhyay said that EIR is a riskier proposition than funding a start-up. “It is risky, but in our case, the stake involved is still less. Our investment in any firm will be up to Rs 25-50 lakh. It is more to do with working with these firms closely and leading them to a point where they can approach VCs for funding,” he added.
Agrees Avnish Bajaj, managing director of Matrix Partners India. “It’s a larger issue. EIR is a concept that works very well, in our view, when the venture asset class is highly scalable in that geography.”
Unlike the US, where there is the Silicon Valley and a strong venture capital community, in India, Bajaj said, the market was not very deep. “The market is weak, entrepreneurial ecosystem is weak and building businesses is harder. All the characteristic of venture that works well globally, are not in India,” he added.
Besides, Nexus Venture Partners’ Sandeep Singhal said the seasoned entrepreneur community was smaller in India. “Also, unlike the US, where even wealthy entrepreneurs take venture money to bring a certain level of external discipline, Indian entrepreneurs prefer to dilute as late as possible. Finally, there are only a handful true early-stage VCs in India who would benefit from an EIR programme,” said Singhal.
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