Pros and Cons of going with an EIR program?

searcher profile

August 05, 2023

by a searcher from Georgetown University - The McDonough School of Business in Washington, DC, USA

Am seeing a lot of different EIR programs nowadays - why aren't more people going with them and doing a traditional search?


They have interns already whom source for you, and they can close a deal much quicker with committed capital vs you needing to parade the deal to all of your investors. Why go traditional search instead?

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commentor profile
Reply by a searcher
from The University of Chicago in Chicago, IL, USA
Pro's: One stop shop for everything. Built in cohort of people both at your exact stage and 6/12/24 months ahead of you. Smart people to sanity check your investment thesis and outreach approaches (can also be found without EIR just requires legwork). Pre-built go to market engine that lets you spin up your search quickly. Existing relationships with service providers such as lawyer, QofE, bankers, etc.

Cons: One stop shop, if they don't like your deal then you don't do that deal. Can't do the gap equity bring half the cap table along approach. This limits some of the industry/deal size/optionality you may find in traditional and the ultimate flexibility of self funded. Not a huge issue just something to vet out prior to signing onboard that you and them are a good fit for your targets. Less exposure to a broad range of investors vs traditional. Tend to take small cohorts of 4-5 people so it can be selective.

On the economics side all of the major US ones (Next Gen, SFA, Broadtree, etc) seem to offer identical or near identical economics to traditional search (25% equity in 3 tranches, 50% step up in initial capital, 8% pref on capital, etc). I am joining SFA in a few weeks to kick off my search so I know they don't do the 8% pref or the 50% step up which is nice. I have heard Broadtree also doesn't do the 8% pref but I'm not 100% sure about that. From what I have heard Next Gen and SFA both require in person where as Broadtree allows remote if that is something you are interested in.
commentor profile
Reply by a searcher
from Babson College in Long Island, New York, USA
I think EIR programs are great, but there are many more searchers than there are open spots in EIR programs. It's not an unlimited well. The risk from the fund side is higher so you're going to need to control that by highly vetting the participants, plus taking more equity to make up for the risk of not actually closing on a deal.

Also, the salary generally is good for many, but not as good if you're a mid level exec and need to be making above $150K with full benefits.

EDIT - I misread your question. - was thinking about pros and cons vs. self-funded You're asking why Traditional search over EIR? I agree. If I was already prepared to give up 60% of the business with traditional search, I would rather apply for an EIR position. That said, I think it still boils down to supply and demand.
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