Established companies with existing infrastructure, whether doing extraordinarily well or due for a restructuring or a turnaround, generally have some additional capacity, knowledge, personnel and perhaps some available cash sufficient to incubate and assist in accelerating the growth of a start up or seedling enterprise, if properly inspired and advised of the incentives, i.e., possible rewards, which can make the symbiosis powerfully rewarding for both parties. In many cases, established companies may make the best startup incubators of all.
In the illustration above, a large, established company is merely investing some of its extra capacity (and perhaps some significant expertise and mentoring) in the seedling which it has fully absorbed. While the benefits to the seedling are obvious, the benefits to the established host may not be. In summary, these may include: equity or profit-sharing; a new revenue stream, an influx of unbridled, undampened creativity; a possible product line from the guest or license relating to the same; a hedge against the very real risk of displacement of their market position due to disruptions in technology, consumerism and other variables.
In , the incubatee is embedded within the very body (womb) or the incubator. This gives the incubating entity more control, but a greater scope of responsibility. In AExample B, the incubatee is further removed as more of a joint venturer with the incubating entity, sharing in only some of the obligations and rewards. This gives the incubatee significantly more independence and control.
One of the reasons for the failure of established business to remain profitable can be (aside from mismanagement, poor product profitability analysis, high culturally-embedded fixed costs, supply-chain problems, and the like) the growing or radical technological obsolescence of a service or product [think of the printing industry]. Part of a defense against being squeezed out of your traditional market is to expand and diversify the demographics of your market/s and your offerings.
It is my strong belief that these alliances, and their potential reciprocal benefits might work well for both the CrowdFunding and venture realm, and for the established but less-than-vigilant established business who would otherwise be in need or a radical restructuring or a turnaround.
To carry this analysis one step further, think of the the jobs saved and new jobs created by uniting the established (but suffering from a paucity of creativity and market vigilance) with the up-and-coming visionaries who will create disruptions and sea changes.
Established companies acting as start up incubators might be a culturally-enriching means of stimulating our difficult economy. Young start ups might have some tremendous advantages over new market entrants who were sustained through the impetus of crowdfunding, and their respective “real world” incubators might just get an overdue infusion of flexibility and creativity at only a nominal expense.
Thank you for reading me, and for sharing my articles with your colleagues, connections and contacts across your broad new band of social media.
- Latvian Startup Incubator Eegloo Opens For Business (goaleurope.com)
- Government to incubate start-ups (thehindu.com)
- Fixing Broken Businesses: Workouts And Turnarounds (douglasecastle.com)
- MEST trains new Ghanaian ‘techpreneurs’ for global market (ghanabusinessnews.com)
- New digital start-up hub emerges in Dublin – north of the Liffey (siliconrepublic.com)
- Boulder becomes incubator hot spot with help of TechStars program (jsonline.com)
- Are Incubators Jumping the Shark – Have We Over-Hatched Innovation? (krispennella.com)
- Business Restructurings, Turnarounds And Remobilization Of A Nation’s Economy (douglasecastleblog.com)
- Selling Secrecy: Israel Turning The World ‘s Cyber Problems Into Economic Opportunities (seclists.org)
- Detroit VC: Why Bankruptcy Is Great For Us (inc.com)
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