Falling corporate startups

I recently ran across a series of blogs of Richard A D Jones reasoning why corporate-founded startups fail. Interesting points. I'd like to share my thoughts on the topic.

I think an internal startup to be successful as a real one has to pretend to be a real one. The only difference should be is that the internal startup is being funded by a corporation and not by a VC found. So the corporation's intentions are not revenue-driven mostly (hopefully for the startup's founders) but originated by a desire to win on the technology or attacj on new market niches. Other than that the internal startup should be in general the same as the VC-founded one. Probably some variations are possible in the conditions of the founders but for regular employees there should be no significant difference.

I’m sure the corporate and the startup worlds are very different (if not just the opposite) and hence the odds to find passionate gurus from the corporation resources are small. People willing to drive a startup (and in a startup all employees should drive) usually don't work for corporations. Exceptions may represent former startups' employees recently being acquired by the corporation. These people usually have some vesting period and can't leave the corporation immediately after the acquisition. At the same time they taste the new (for them) corporate atmosphere. On the one hand they're comparing tradeoffs between coolness of working for a big brand and future career perspectives and on the other hand rigid restrictions of the corporate policies, deep hierarchies, and ubiquitous internal politics. Some of them will like the new reality but others will be missing the startup air and will eventually go. Now the question is how to find such employees. I don't believe a corporate VC can broadcast a message to its employees asking interested to apply for positions in a coming venture. It definitely can be part of the hiring process but shouldn’t be the only part.

Even a more crucial question occurs with “the founders” or the management team of the new venture. I’m afraid the option when a senior corporate VP invites her employee and declares that the employee is entrusted with a very responsible role of the new startup’s CEO simply will not work. The initiative should come from a founder (whether he works for the corporation or not). Passion of the team and first of all, the management team, underlines success of the new venture. I don’t believe that passion can be given to somebody by title. In the case of the management I see an exception in a way that a trusted corporate employee is looking for an option to leave the corporation to join a startup. Then a corporate startup can work for him.

I’m sure a corporation establishing a startup should clearly understand the difference between the two worlds and detach the new venture from itself. The new venture should have its own budgeting, decision making team, policies, and culture. The less connections exist between them the better chances of success are.

Comments

[Daniel Nerezov]

Great topic for discussion Roman!

Like many people, I too have a perspective on this matter, which is one embarrassingly simpler than most people's. Sorry, I really don’t have that much to say about this.

Anyways, I don't think corporations should do intrapreneurship. It's a, surprisingly, sign of bad management. Boards of multinational corporations should be focusing on up selling their most valuable, existing customers rather than playing around with startups, which typically deliver half baked products to undeveloped markets.

And that's the innovator's dilemma.

Large firms shouldn't innovate not just because they're not specialized at it, but because it's often a bad management decision. There are much better things boards can do than thow cash into the intrapreneurial black hole.

I say, leave the innovation up to entrepreneurs, let us do what we do best, and then just buy the startups. It's cheaper, quicker and more reliable that way.