Why Corporate Incubators Fail

And an idea on what to do about it

Casio

Two Awkward Outcomes

Limited Downside

Limited Upside

Questions

  • If the idea is successful, what resources will be available to it, on what terms, and based on what checkpoints? At what point will the team be allowed to incorporate itself and adopt its own independent governance? Will the team be given enough control and equity to be able to pioneer their own fates? After a split, what company resources will they still have access to? How will non-competes/poaching be handled? What equity and other rights or restrictions — such as preventing licensing IP to a competitor — will the parent company retain?
  • If an idea is directly competitive with an existing team or plan at the parent company, how will this be handled?
  • How will innovation teams be judged in a way most likely to validate market success?
  • If an idea is aligned with an existing team or plan, what compensation or benefit should the team enjoy for accelerating that team or plan?
  • Can the team hear from potential internal stakeholders with key unsolved problems they have and how they would value a solution? Will teams be able to sell their solutions to internal customers and charge those other areas?
  • Can the team utilize the parent company’s partnerships? Sales channels? Sales team? What’s off limits?
  • If a team fails to produce a meaningful output in a fixed window of time, what are the consequences?
  • Has the parent company built relationships with external venture capitalists and angel investors in a way where promising teams could pitch and receive term sheets to invest in their solutions?
  • If a team lands on an opportunity that is cash-flow positive but not venture financeable and the team wants to move forward, will the company support that?
  • Are there “forbidden” markets, customers, or products that you do not want teams to work on? Those should be highlighted as early as possible.

Idea: Take The Plunge

Reflections Two Weeks After Posting (Nov 3)

  • Strong executive sponsorship: when the CEO is vested in the success of the outcome and will “pull out thumbscrews” to bring VP’s into line if they try to “kill the babies”.
  • Arm’s length treatment: the incubees are materially “on their own”.
  • Fixed graduation & support structure: offering incubated teams a fixed-length program and pre-defined formula for ongoing support and participation e.g. commitment to maintain a pro rata and/or put up to $XXXk into the startup’s outside-led round. (A variable support structure where the parent corp has to decide how much support to lend and when ends up introducing signalling risk and requires the corporation to have talent on board that can credibly assess startup valuations.)

Response #1: Anonymous

Response #2: Peter Nixey

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David E. Weekly

Founder+CEO: Medcorder, ex-GOOG, FB. Started: Drone.VC, Mexican.VC, Neuron.VC, PBwiki, DevHouse, and Hacker Dojo. Startup advisor. Chopper pilot. Dad. ❤�