Entrepreneurship Inside Corporations
There is a real trend developing right now of large corporations becoming crucibles of innovation and entrepreneurship in a systematic way. In this post, I will discuss four specific sub-categories of this trend that we’re seeing, and for all practical purposes, participating in.
Corporations have come to realize that there are numerous great ideas buried inside their ranks, and are putting in place processes to help those bubble up and get developed. The most common form this process takes is a call for ideas, followed by various types of incubation of some or all those ideas.
Those ideas that look compelling after a few months of incubation go up to a management committee / innovation council for evaluation. A subset of these are given additional resources to be developed further. Through our 1M/1M Incubator-in-a-Box program, we’re involved with a number of these projects at major corporations, and see hundreds of millions of dollars of revenue opportunities being identified. Corporations with Intrapreneruship programs in place include Oracle, HP, Intuit, Computer Associates, etc.
For employees of these corporations, these programs offer a low-risk way to engage in entrepreneurial efforts, as well as distinguish themselves as leaders within their organizations.
Platform Ecosystem Incubation
We’ve been highlighting the platform ecosystem trend for a while. Recently, The Economist did a story on the trend as well. Bottom line, many major platforms have now developed within corporations like Apple, Google, Salesforce.com, Amazon, SAP, Microsoft, Nokia, etc. and the most widely practiced form of entrepreneurship currently in vogue is to build something on top a platform.
Again, our Incubator-in-a-Box for Platform Vendors has exposed us to several of these ecosystems where we’re incubating businesses built on top of major platforms.
In our conversations with people running these ecosystems, we have learned that motivations vary. Some platforms charge a royalty fee to the developers, and the motivation for incubation is to grow the revenue base. Others are looking for differentiated apps for their platforms that would make it attractive for customers to adopt the platform itself. The latter is particularly true for the mobile phone ecosystems.
Corporate Venture Capital
Corporate venture capital has been around for a long time, and at different points in history, its popularity has ebbed and flowed. At the moment, corporate venture capital is rather popular, with everyone from Google, Microsoft, Nokia, SAP, EMC, Salesforce.com and many others running their own funds.
Bootstrapping with a Paycheck
The last trend may not count as entrepreneurship “inside” a corporation, exactly, but is particularly hot right now because entrepreneurship has becomes so popular these days: getting a company off the ground while working a full-time job.
We’ve seen numerous companies get launched and gain traction in this mode. Some examples:
—Itai Sadan launched Dudamobile while still at SAP. The company now has over 5 million customers for its service to automatically mobile-customize websites.
—The founders of DataStax not only started while inside Rackspace, but got Rackspace to extend a small seed investment of about $100,000. Today, they have raised several rounds of financing and have built a thriving business.
—In geographies like India where the seed capital ecosystem is terribly weak, many startups have seen the light of day because their founders managed to keep their jobs while getting them started. Phani Sama launched redBus while working at Texas Instruments, built it up through a few rounds of funding, and has since sold the company for $130 million. And Sangeeta Banerjee got ApartmentADDA going with her husband while working at SAP.
As a matter of fact, the latter example highlights yet another trend, where an entrepreneur couple starts a company, one of them keeps a job while the other works full-time on the new venture, and once things start to roll, the second founder quits his or her job and joins the startup full-time. Sangeeta kept her job, while her husband Venkatesh started building their product. She worked weekends, while he worked full-time, until the company got to a stage of validation where they felt comfortable jumping in with both feet.
We have numerous companies in our portfolio who are bootstrapping in this mode.
All of these are healthy trends that keep creativity flowing across the corporate system. My prediction would be that corporations are going to invest more in both nurturing their intrapreneurs and the entrepreneurs building on top of their platforms, and over the next couple of years, corporate incubation will become a substantial contributor to innovation in general.
In parallel, bootstrapping with a paycheck will also grow as a tried and true mechanism to get businesses off the ground.