Corporate incubators

…and why I believe corporate incubators are not always a good idea..

You are an entrepreneur (to be) at heart. Bursting with ideas – and more to the point, with energy. You’re thinking about the future, and you cannot wait to let your target group become acquainted with what you have to offer. Some starting capital and someone who will lead the way in the minefield of entrepreneurship would help. So why not join a corporate incubator?

Many large companies these days offer an incubator programme. Even pension funds and law firms do it. That must be such an inspiring and entrepreneurial environment. It’s bound to be a safe choice because such big companies must know what they are doing, right? What start-ups often don’t realise, though, is that real entrepreneurs and managers are worlds apart. The fact that there is little entrepreneurial spirit in these hierarchical, risk-averse organisations is unfortunately often overlooked and is a severe issue to start-ups.

The result? 9 out of 10 start-ups are dissolved within one year. And the reasons are easy to explain:

Economies of scale

You will sit together with all the other start-ups that joined the incubator programme, in a large and hip office building. Most probably, various training courses will be offered to help all the start-ups grow. Unfortunately, these are generic training courses, while every start-up is unique and would benefit from a tailor-made approach. Training and advice should be 100% relevant to your start-up. Training that is not tailor-made is less effective and does not contribute to the cognitive schemas.

So why do they offer you a general training programme? A corporate incubator department is most often not designed to make your start-up a guaranteed success. The philosophy of most corporate incubators is to attract as many start-ups as possible through a generic incubator programme. In this way, the corporate firm maximises its chances of getting one success story. Suitable for the corporate, maybe, but not for you.

Tip: Make 100% sure your startup is a good with with the manager of the incubator, the trainings and the experts.

What does your start-up need? An environment that places your start-up at number 1. An environment that offers the right specialised training and that motivates you to be everything a corporate is not.

Tip: Don’t be blinded by the size of an incubator and the successes it has already achieved. Your start-up deserves personal entrepreneurial attention. The ecosystem in particular is a vital component for a successful start-up to grow.

Corporate culture

There are many different kind of incubators. University incubators, independent incubators and corporate incubators. Within a corporate, there is most often a culture of risk-avoiding behaviour. You will be lobbying for permission instead of seizing entrepreneurial opportunities. And if you don’t have to request permission, you’ll at least have to “report” your steps, which means you’ll have to record every step you take. You’ll participate in meetings instead of moving forward with passion. You’ll have to be very political, which drains your outside-the-box mentality.

How about the entrepreneurial mentality of managers within a corporate? Managers who function via Excel sheets, meetings, reporting, and avoiding confrontations? Don’t get me wrong – structure is necessary. But during the start-up phase, it is crucial to seize opportunities immediately, to implement ideas quickly, and to be allowed to experiment. You need an environment that gives you the space to grow and leaves you free to try new things.

It is an illusion to think that the culture of a corporation will not affect your start-up if you are stuck in the middle of it.

Tip: Make sure corporate incubators are not restricting your growth in any way.

Managers and advisors in corporate incubators

An entrepreneurial mindset is crucial. You can learn it, but you can also unlearn it. Within corporations, the focus is on risk management, reporting, Excel sheets, and conference calls. If you are part of a corporate as a start-up, you need to deal with that, because you cannot afford to step on anyone’s toes. As a result, you’ll end up being more careful, which influences your whole way of thinking.

In corporate incubators (and most large incubators) I see a crazy number of advisors ready to help you and to benefit from you.

There are three kinds of advisors you have to watch out for:

1. Advisors who have lost their connection with the day-to-day work

   Start-ups need a lot of advice to get through the first few years. Most often, simple things such as how you can best import goods, and which factory to source from, are relevant issues. Those advisors who are looking down from their ivory towers have lost the connection to these questions. Those advisors don’t understand the day-to-day issues of start-ups during their first few years.

2. Advisors who think too big

   Another problem is that advisors sometimes think too big. Running a European division at, for example, a corporate such as Unilever is completely different from growing a start-up. It all sounds brilliant, but in practice, their advice would be so expensive to implement that you would have to spend your seed funding three times over. Factories, numerous employees, trucks, an R&D department, etc. You’ll need an advisor with a different mindset in the first few years of your start-up. Start-ups can have a decent budget, but you can’t compare that budget with brands such as AXE or Red Bull. How do you generate the same output with a small investment?

   I have a solution for it!
   

3. Advisors who are too general

   Every market is specific, and every start-up is different. Incubators often provide a dozen advisors who are CEOs or entrepreneurs themselves. I believe that these people could help you to run the company, but from a company-, product-, or market-specific knowledge perspective, they will not fuel your cognitive schemas. And that’s what you need to create the ecosystem that will outperform. That’s why I believe the incubator should sit together with the start-up. Together build an advisory board with people who are 100% relevant to the start-up, and not just because they happen to be part of the same incubator.

What does your start-up need? Advisors who know the industry that you are in, so that they can give you spot-on advice.

Ask yourself: What kind of advice is precious for you in the first two years?

Tip: I am a great advocate of putting together an advisory board that is selected based on these needs, your activity level, and your market.

Cheap is expensive

Some start-ups opt for collaboration with a corporate by joining a corporate incubator. They believe they can benefit from services that the corporate supplies. A law firm could provide legal advice cheaper, and a company with a large social media and marketing department can help you with your online strategy. At first, this seems like a smart move. In reality, though, it’s not always the case.

The so-called free benefits turn out not to be so valuable when your business grows. Often these are benefits that save money in the short term, but later, when your start-up is growing, you’d wish you had paid for them instead of giving your shares away.

If work is outsourced within the corporate, the costs are invoiced on the internal budget of the start-up. The explanation is quite logical:

If a start-up starts with a corporate, there is usually a budget. The sooner this budget runs out, the sooner the corporate needs to make an additional investment. Due to the new investment by the corporate, the shares of the original owners of the start-up are diluted. The corporate, on the other hand, pays the bills, which are paid to the corporate itself and therefore don’t cost them much money. So be careful!

What does your start-up need? A company that allows your start-up to also source services from outside of the corporate environment.

Ask yourself: Is it desirable to join a corporate or corporate incubator because of short-term cost savings?

Tip: Make a plan upfront how much money you are going to need in the upcoming years.

The recipe: a flexible skin with a growth entrepreneur

Create an ecosystem with a flexible shell of resources and advisors. Maximise input of relevant information via talent, training, counselling, and advice. Join forces with an experienced entrepreneur to save time, benefit from their network, and gain investment and experience.

A start-up that is growing fast has different needs every year. A rigid corporate incubator is an ecosystem that impedes. You should adapt your ecosystem to the needs of the particular moment to stimulate growth and innovation.

Tip: Be critical about the resources you receive:

• Is a hip office garden filled with other companies that deal with entirely different products contributing to your start-up? Or will they mainly distract your employees?
• Do you need generalists or specialists?
• Do you need generic training or training that suits your needs?
• Would you benefit from an incubator led by an entrepreneur who focuses on the success of your start-up?

More questions?

Would you like to know more about the startup scene? Do you have interest to launch a company with me? Feel free to contact me!

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