EIR programs are all different, and with Foundation Raj was able to come in based on the recommendation of a personal acquaintance. Accordingly, there was not much in the way of a formalized agreement, rather it was a working arrangement which benefited all parties.
SM: What were the formal vs. informal parts of the EIR agreement? RV: There doesn’t seem to me to be a great deal of formality in the EIR process, at least there wasn’t for me. The whole thing is really about relationships. You get some benefits from your relationship with the firm, and the firm gets benefits from their relationship with you. You advise their companies; you help them evaluate deals; you come up with something they have helped form, so it’s more easily separated from the plethora of other deals to consider.
All of this really means that both sides are motivated to keep the relationship friendly. If your idea isn’t something your firm wants to fund, it doesn’t mean it’s a bad idea; it just may be a better fit for a different firm. Perhaps it’s the kind of thing with which your firm has no experience in; maybe this means they’d prefer to syndicate the deal with another firm that does or maybe it’s an idea that’s too short-term / long-term for your firm and may be better suited for someone who likes a different type of investment.
There’s no explicit requirement to fund, but conversely there’s no formal “right of first refusal” on the deal. If you are convinced, and you can convince your firm, everything flows easily. If you can’t convince them, or you feel that you can get a better valuation elsewhere, or any of a hundred other reasons not to “consummate”, that’s just business.
SM: Where should you go to be an EIR, what firms? This is both a question of where you can be an EIR, and a question of personal taste. For me it wasn’t a deep or structured process; someone I knew and trusted offered me an opportunity, and it made sense to me. However, I think the “knew” and “trusted” elements had a lot to do with my decision to become an EIR. It helps a lot to have those two things going for you in the relationship.
Now, that being said, during my time at Foundation I found several other reasons to be happy with my choice. That leads me to suggest several other criteria which would make sense for me to use, were I to do another EIR. Your mileage may vary, but what I immediately realized I liked about being at Foundation was an aligned philosophy which we shared. Foundation is small and focused, the partners had a broad level of experience and their personalities were amiable to my own.