Companies can compete with VCs if employees own and self-fund their ideas.
Let’s face it, large companies’ attempts to drive intrapreneurship are largely failing.
If we’re honest, how many of us employees are truly empowered to go beyond our day jobs and build a startup? Are you better off building it on your own and avoid dealing with corporate politics? Do you trust your employer to recognize and compensate your efforts fairly? Will your employer fund and support your venture? Are you willing to take the risk, quit your job, and pursue your idea full-time?
Sorry large corporations but many of your employees might feel skeptical of taking the intrapreneurship route. You need to recognize that you are your biggest enemy and you need to get out of your employees’ way. This requires a three-step approach that puts your employees at the center of innovation when it comes to (1) funding, (2) owning and building the startup, and (3) creating the right culture.
1) Tap employees to fund internal startups
If 10 percent of a 100,000-employee company voluntarily invest $1,000 a year this would raise $10 million annually into a pooled fund.
Companies could easily create a structure that enables their employees to invest their own money into a pooled investment fund. These funds will be invested in a portfolio of early stage startups founded and operated by the same company’s employees. The pool of investors could be opened to the company’s alumni network, or even to senior executives who can invest their own money as angel investors. What is crucial is to maintain the exclusivity of this investment opportunity only to the company’s employees and tap into corporate citizenship, loyalty, and pride.
2) Build an incentive and ownership model for intrapreneurs
The other challenge many corporations face is creating the right incentive structure that keeps employees from pursuing their ventures externally. One way to do this is to empower employees to feel ownership of their own idea and have them trust they will get a fair deal by sticking around. This requires enabling your intrapreneurs to be the CEOs and run their own venture, own the intellectual property (IP), receive a fair equity share in their own startup, offer an option pool to future hires, and have full decision making as their venture is firewalled from the larger mothership’s internal politics.
The large corporation would own a majority of equity and provide resources and coaching to founders in the early incubation stage. It also would have the right of first refusal to invest in the startup scaling stages and give founders the option to seek external funding if need be.
3) Put employees at the heart of the innovation culture
The third vital element for intrapreneurship’s success is nurturing the right organizational culture. A clear sign must be communicated to employees. It should not only be okay, but encouraged, to think about startups and innovation. Of course, on the condition they perform in their day job.
Employees should not, however, be only empowered to develop their ideas, they should also be empowered to kill them. Alphabet’s, aka Google, research lab gives out bonuses to team members that shut down their own projects. This approach is grounded in the assumption that people who invest effort and hope in an idea may be reluctant to let go - even if it is not viable. Giving people a financial incentive to admit when something is not working out and avoid the splurge of additional resources is a great way to create the emotional and safe space to celebrate failure.
In short, true intrapreneurship can only be tapped into if companies make the conscious decision to step out of their employees’ way and empower them to develop, own, and run their startups independently, and fund them collectively as proud employees of the organization.
This is a great deal for large companies. Today’s venture capital funds are thriving because large companies are ineffective in competing with them. They are paralyzed by a short-term, quarter-driven mentality, and miss opportunity to act on the long-term. This proposal empowers large companies to tap into its employees’ creativity, own equity, and be strategic partners without having to gamble the company’s money.
Let’s try this: give intrapreneurs independence, latch on to great people and disruptive ideas, and be fair by rewarding intrapreneurs and “intrafunders”. It is then that you will compete head-on with the VCs and reap significant gains.
Georges Sassine is a tenacious intrapreneur and social entrepreneur.