Corporate Spin-offs or Entrepreneurial Start-ups
“I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” – Steve Jobs
When we think of start-up companies, we often think of a friend, neighbor, teacher, business partner, or acquaintance coming up with a random idea and finding a way to manufacture and commercialize the product. In today’s world, a growing share of start-ups aren’t generated from a random new idea. Instead, large corporations that have vast amounts of funding are finding that they can seed technologies in start-up that are more nimble and creative in creating new products for new markets that have often been ignored for years by the large corporations. Today’s corporate venture groups are very likely to be the seller, not the buyer. These start-ups are proving to be the best of both worlds creating small spin-offs owned and operated by the corporation. Imagine well funded tech start-ups outside of Boston or San Francisco.
The Biggest Difference is Funding
Entrepreneurial start-ups must fight the up-hill battle to locate and secure funding through pitches with the 3F’s, Family, Friends and Fools, Angel Investors, and Venture Capitalist. Corporate Spin-offs don’t have unlimited funds; but, these start-ups bypass the initial funding hurdles and enter with more funding than most start-ups can attain in multiple years.
It Isn’t Just Funding Though
It isn’t only funding that differentiates these two types of start-ups. Entrepreneurial start-ups must work with many investors, advisors, boards, etc. to accomplish tasks that they would normally have hired for, but cannot afford. Corporate spin-offs will still utilize volunteers, investors, advisors, and boards to develop the company; however, these companies can use employees from the corporation and have the funding to secure employees to finish tasks.
Will Corporate Spin-offs keep Entrepreneurs from Emerging?
Entrepreneurs entering the market have so many hurdles to tackle, corporate spinoffs are just one more thing to deter entrepreneurs from ever starting. The big corporations might dominate emerging new markets but it’s likely they can’t do that based on antiquated or bureaucratic approaches. What is most likely to emerge is a highbred marriage extracting the best from each.
A great showcase of this process the Earnest and Young Entrepreneur of the Year award. I actually won this recognition in St.Louis in 1995. Back then, being an impoverished entrepreneur was the only way to drive a successful start-up. Being broke and having massive personal debt helped keep the pressure on the founders. Today’s successful entrepreneurs are as likely to be designing better supply-chain management systems and working out of Saginaw Michigan and their bonuses might not be stock options. Tomorrows new companies may well be coming from yesterdays giants. Be sure to check out this year entrepreneurs at eh E&Y competition and marvel at the breadth of backgrounds, size, ages and social diversity. The market makes sure that entrepreneurial changes are changing our entrepreneurs.