Startups aspire to reinvent every industry. We are in an era where technology, entrepreneurs, ideas, markets, and capital are working with unprecedented speed and ambition. In the US, over $1 trillion has been created in new market cap from startups in the last decade. In Europe, the European Commission has reported that the digital economy is growing at seven times the rate of the rest of the economy. No industry is immune to these disruptive forces.
It’s no wonder then that current large industry incumbents wax poetic about fostering a culture of entrepreneurship. Internal hackathons continue to be a common corporate occurrence, the term ‘intrapreneur’ has emerged to describe the notion of entrepreneurship within an established company, and in-house innovation units are popping up everywhere. Short term, these initiatives can help engender an external image of innovation and creativity, and serve as a quick, accessible recruiting tactic.
But the reality is, few companies are actually doing anything meaningful to help their employees become more entrepreneurial and build real, new businesses the way startups do. Research indicates that innovation initiatives within global companies across a variety of sectors fail between 70 – 90 percent of the time. The resources such projects require are understandably daunting, and furthermore, encouraging valued employees to walk away from full-time employment and pursue their entrepreneurial ambitions can be a tough sell to company stakeholders.
Big companies in Europe have plenty of startup DNA close to home. The EU is home to four of the world’s top 20 startup ecosystems – London, Berlin, Paris and Amsterdam. And Nesta has noted that 990 startups across the UK, France, Germany, Spain and Italy have raised more than $23 billion in growth funding in the last few years alone. It makes sense for established European companies to take the initiative and welcome entrepreneurs into their corporate ecosystem, working to advance promising startups from within.
In my experience leading Next47, where we help Siemens identify and nurture entrepreneurs in-house and invest in external startups, I’ve found the following three approaches most helpful in fostering entrepreneurship in a Fortune 500 company:
- Partner with experts:
It’s not realistic to attempt to self-execute on every aspect of in-house corporate innovation initiatives. Instead, consider looking to trusted experts who already have the infrastructure in place. For example, Next47 partners with Alchemist, a leading B2B startup accelerator program, to provide Siemens employees the opportunity to work on their business ideas full-time. By partnering with this external resource, chosen teams from Siemens have access to customers and mentors they wouldn’t otherwise be exposed to. A top-tier partner also helps compare internal ideas with the best they have seen externally, keeping quality comparable to the best in the market.
- Learn to let go:
Equally important to partnering with experts is then learning to let go. For us, partnering with an external startup accelerator works well because it allows both Next47 partners and Siemens entrepreneurs to cut the umbilical cord and go all in. By temporarily giving up the comfortable predictability of their steady job with Siemens to focus on their startup full-time, our entrepreneurs are able to demonstrate true commitment to their idea. Additionally, by going beyond internal company insights and tapping into customers, mentors, and competitive landscape, our entrepreneurs gain the opportunity to objectively validate their ideas and set themselves on a trajectory to succeed building a business.
- Limit capital:
Constraints usually lead to creativity, especially when product-market fit has not been achieved. By limiting the amount of early capital corporate entrepreneurs receive, you can create a unique breed of focus that forces entrepreneurs to not only spend wisely, but also continually prioritize what’s most important and what will make them win. It’s also worth noting that over-investment within corporate innovation initiatives can often lead to too many side projects that detract from the core task at hand: building standalone products and/or businesses that contribute tangibly to the global market.
There is much that internal innovation units can learn from the best startups globally. We partner with amazing startups as a top-tier venture investor and this provides us with a unique perspective on internal innovation. As an investor, we look for entrepreneurs who think big. We focus on deep technologies, delivering fundamental breakthroughs, from artificial intelligence to augmented and virtual reality, cybersecurity, autonomous driving, IoT, robotics and advanced manufacturing.
Ultimately, the onus is on Fortune 500 companies to provide substantive value to their aspiring entrepreneurs, not just feel-good PR fodder. In doing so, the undeniable benefits of in-house innovation initiatives can be realized, and the long-term viability of corporate venture can be protected.
Lak Ananth is the chief executive of Next47 a global venture firm backed by Siemens