Recently, as part of melbourne knowledge week, i was lucky enough to book my ticket early and attend “Startups the Silicon Valley Way” lecture at Deakin Edge in Federation Square. Best of all, as well as being a really enjoyable and well delivered presentation, it was FREE!
My review of melbourne knoelwdge week so far is that it is outstanding. Very much looking forward to going to the other events I have lined up!
The presenters were
- Henrick Scheel
- Lecturer and mentor at Deakin SPARK
- Rebeca Hwang;
- CEO of a Silicon Valley Venture Capital firm that concentrates on female Entrepreneur run Startups.
Key takeaways & things I Learned:
ENVIRONMENT NECESSARY FOR STRONG ENTRPRENEURIAL ACTIVITY:
- Entrepreneurial Success is driven by a strong shared culture
- The culture is generated by a tight and well networked community of like minded individuals
- A philosophy of sharing among community members facilitates strong generation of ideas, and their nurturing and incubation.
- Ex entrepreneurs are a strong source of mentorship and capital for the next generation of Startups
- Highly experienced and entrenched industry veteran employees are good at execution, not development of ideas and concepts- they should be often sidelined to a supporting role
- Corporates should foster this community minded culture
- Open their doors to other startup entrepreneurs
- Hold discussion and brainstorming sessions with outsiders
- Provide assistance, mentoring and contacts to others-
- Often this work pays dividends as the network expansion, and exposure to new ideas and thinking is invaluable.
- Potentially invest in other small startups, embed employees and have them infused with the culture prevalent in “real” startups.
Problems observed that doom the NEXTGEN and transformation projects of LARGE CORPORATES:
- Key players within Corporate Startup and transformation activities are termed “intrapreneurs”
- Small, nimble startups are lacking in capital and resources (they are poor) , they are rich in freedom of movement
- Corporate Transformation Programs and Startups are Hamstrung by the following:
- Only Incremental innovation is allowed
- New ideas must fit the current business model. Even good Non core ideas with potential are not considered
- Governance processes and bureaucracy slow down the speed of development.
- Weak laws and regulations cannot be flouted or sidestepped freely to test new markets or concepts.
- Large corporates are unwilling to take on reputational risk, which is often necessary in startups.
- Rigid accounting systems and requirements for reporting distract intrapreneurs.
- Activities are often overly secretive, and not engaged in the industry’s community, or that of the start up community which can generate contacts and creative solutions.
- Staff are chosen based on significant experience and track record of successful execution.
- Many are old, tired and stale from being in the industry too long. Causes tunnel vision, and inability to see the future.
- Startup and transformation staff are often drawn from the internal pool, and the same industry.
- Risk taking and out of the box ideas are less likely to appear as entrenched employees seek safety and protection of their current positions of respect and trust. – they actually have something to lose.
- Entrenched staff are unlikely to agree to necessary new incentive structures that place their stable paycheck at risk due to significant personal and financial commitments.
- Intrapreneurs incentives to succeed, or avoid failure at all costs are not nearly as high as entrepreneurs.
- Corporates make the mistake of not giving employees equity or the opportunity to invest in the particular project
- Intrapreneurs have “no skin in the game”
- They still get paid if the project flops- no real punishment for failure.
- They receive a reward that is grossly out of proportion with the gain the corporate makes from success, and often negligible compared to their base salary despite millions made by their employer.
- The result is that even the highest performing intrapreneurs are less likely to be as diligent or creative, take risks, nor work long hours, or go the extra mile for the benefit of the project in comparison to a entrepreneur who has their family home on the line, or wants to eat, or pay the rent next week.
Suggested Solutions for corporates engaging in transformation programs & NEXTGEN intrepreneurship
Hire brand new staff for the new innovation team, particularly management.
- Draw many staff outside of the industry
- Do not look for experience or extensive track records- look for drive and passion, creativity, ideas.
- Put those staff in a separate building
- Engage with the startup and entrepreneurial community
- Provide assistance to others in the community
- Make the new team a hub of creativity and new thought in the area, that attracts others and allows networks to be built
- New acquisition or partnership opportunities can be found via this mechanism
- Highly experienced, entrenched incumbent staff from parent company should not be leaders in anything but execution of ideas
- Startup ventures should be branded separately, and in separate entities from the main company to quarantine risks.
- No mandate to “protect” core parent business processes – nothing is untouchable
- No mandate to stick strictly to the core business of the parent as their executive management sees it.
- If it looks like it could make money, build it!
- Executive oversight should be minimal, and parent corporate management should be silent.
- Core accounting systems from the main corporate should not be utilised
- No emphasis on reporting or detail- accounting & up to date record keeping is not a core part of an early stage startup.
- KPI’s & rewards should not be based on accounting numbers in early stage ventures.
- Employee incentive structures should be designed to create real skin in the game & high performance.
- Low base salaries, or base salaries at significant risk under failure conditions (i.e. at least 30% penalty)
- Large, uncapped Bonuses directly linked to value generated
- You unexpectedly made $2m for the company this year? You should get 200K at least out of that!
- Employees should be given equity in the startup entities they are involved in
- Employees should be given opportunity to invest in their startups significantly and increase their equity stakes if they desire.
There are some very interesting, and very cheap talks and training coming up via SPARK. (Less than $10 a day!, but an application process, and eligibility criteria, such as being an Alumni of Deakin Uni apply)
Melbourne knowledge week- If you are in this city, get into it!!