By Tom Ballard, Chief Alliance Officer, PYA
“We’re flipping the EIR program on its head,” Tony Lettich of The Angel Roundtable says of a new initiative underway in Northeast Tennessee.
Unlike the traditional Entrepreneur-in-Residence program where an angel or venture fund brings in an entrepreneur with the goal of starting a new company, The Roundtable is embedding two entrepreneurs who have already started companies in its organization, providing a 12- to 18-month educational experience.
“Our infrastructure here is in its infancy at best,” Lettich says of the region. “We don’t have a formal accelerator program for potential entrepreneurs to go through.”
The result is what Lettich and his Roundtable colleagues believe are lost opportunities to help very early stage companies grow in the region.
So, instead of lamenting what they don’t have, board members of The Roundtable decided to create something they could support. It is what the organization’s Managing Director describes as a reverse EIR.
“We are looking for passionate leaders with good ideas but at an earlier stage in the start-up process than where we traditionally invest,” Lettich explains. Two entrepreneurs were selected about three months ago for the initial undertaking. Over the next year or so, they will attend all of The Roundtable meetings where they will have the opportunity to network with members, seek their advice, and observe the investing process from an insider’s view.
“We want them to understand how the mind of an investor works,” Lettich explains. “They will have the opportunity to participate in our vetting, but also see what we are doing and how.”
Through the experience which Lettich repeatedly described as educational, he hopes the entrepreneurs will be successful when they finally pitch for investment capital to his or another fund.
In The Roundtable’s case, it has a defined process for making investment decisions. Once an opportunity is identified, it is vetted through two initial steps. The first one, described as filtering, determines if the opportunity is in one of the core areas of interest to The Roundtable. They are clean energy, cloud software (including mobile and Software-as-a-Service), general software, medical devices, and specialty chemicals.
If the company seeking investment passes that test, it goes through a more formalized screening process for further validation. Next up is due diligence before a deal is closed.
Lettich expects that part of the role of the two EIRs will involve helping with the due diligence process, again underscoring the educational nature of the effort.
“They might do reference checks or patent searches,” he explains. “They’ll see our entire process.”
During the 12- to 18-month experience, each of the EIRs will make a baseline presentation, another one at midstream where members of The Roundtable will provide feedback, and an automatic opportunity to pitch for investment capital at the end.
“This is an opportunity for us to bring these guys to the next level,” Lettich says.
Entrepreneurs are expected to think out of the box, so one can only applaud the efforts of The Roundtable to do the same thing.