Corporate Entrepreneurship in IETECHSTARTUP course

Introduction

Looking at the hindsight on the completion of IETECHSTARTUP – “Managing the Tech Startups”, the course was surely a big milestone in my journey towards becoming a corporate entrepreneur. I always had the enthusiasm of driving new initiatives. But, my relative risk-averse nature had stopped me from getting into a traditional entrepreneurship concept. After coming to IE Business School, and learning about the idea of corporate entrepreneurship, I realized that this is the exact balance I have been looking for. Of course the rewards are relatively lesser. But, the risks are equally less too, which balances the equation. In the case of corporate entrepreneurship, a new initiative is driven within a larger enterprise by individuals. The idea can be run by resources within the authority of the individual, or further support can be sought from higher management. I was also engrossed by the aura of technology, and was sure that I will continue to work in technology industry after my graduation. When I joined the course of IETECHSTARTUP to learn about entrepreneurship within technology domain from Prof. Enrique Dans, one of the most popular professors at IE Business School, I was already excited about the opportunity. However, the challenge in front of me was to get all the learning of the course in context of traditional entrepreneurship, and translate all those to the context of the corporate entrepreneurship. My blog journal on this topic depicts my journey on this path of twelve very interesting sessions of IETECHSTARTUP.

Perceived Differences

There are surely some differences between traditional entrepreneurship and corporate entrepreneurship. Most of the differences revolve around the absolute cash values, and legal ownership patterns. However, to appreciate the beauty of parallel between corporate entrepreneurship and traditional entrepreneurship, it is important to look beyond the nitty-gritty of cash and ownership.

During the process of the generating funds for the initiative, a traditional entrepreneur has the option to get external funding initially by giving up some control, or to continue with self funding till the extent possible for higher valuation at later point in time. A corporate entrepreneur also has similar option. The entrepreneur can go to the higher management of the larger organisation for further funds, or can wait with funds available for the division or team to continue new initiative till the point it shows tangible results. In both the cases, the entrepreneur has the option between pushing the growth through increased growth, but this option dilutes the overall say of entrepreneur in decision making for the initiative.

There is also similarity in the case of final sale of the initiative. The corporate entrepreneur does not get 100% of profits from the initiative, or also does not benefit completely by exiting the venture through fundraising.  However, the profits in case of corporate entrepreneurship can come in many different forms. Bonuses, better career growth, immediate promotion, higher equity options in parent company, etc. can be some common examples. The sale of an initiative brings benefits to both traditional entrepreneur as well as corporate entrepreneur.

Similarities

Most of the other factors remain exactly same in case of traditional entrepreneur, as well as corporate entrepreneur. Personal dedication towards initiative, best efforts, using tactics to break into a market, branding the product, developing online presence, positioning, building public relation and using media, choice between size and growth, and customer focus: all the factors remain exactly same for both corporate entrepreneurship and traditional entrepreneurship.

Entering into a market with existing competition can be a challenge for both traditional startups as well as startups within larger organisation. In both cases, the entrepreneur should understand the customer needs and offer differentiated product.

Both types of entrepreneurs should consider end-user experience as important. They should also ensure the strong backend support for the user experience. The decision of whether to keep the initiative small can be important for both corporate entrepreneur and traditional entrepreneur. The small initiative can help the entrepreneur to focus on the personalized customer service.

Online communities play an important for both traditional startups and startups within larger enterprises. Entrepreneur should consider identifying the community leaders who share interest, and are open to cheer for the specific offering of the startup.  It is also important to encourage and recognize the community members.

Public Relations and media also play a very important role in all kinds of startup initiative. Whether the product is offered by a new startup, or by a new division within an existing company, the importance of building an active user community is very important. While building the user community, an entrepreneur should try to understand the user, and be ready to take feedback to improve the offering.

For both corporate entrepreneur and traditional entrepreneur, going commercial is an important phase in the life of startup. An entrepreneur should go extra mile to acquire first customer. Keeping the fixed list price of the product, even if huge discounts are given initially, can be a good idea as it retains the value of the product. The energy that is being put into the customer acquisition should also be commensurate with the size of potential customer client.

Internationalization of a product or service also poses equal challenge to both corporate entrepreneur and traditional entrepreneur. Strategy of internationalization should be given much thought by either. While considering new markets, it may be a good idea to consider the proximity of new markets. The main factor still lies around the product and the team. Most important point for the entrepreneurs is to ensure that product has strong fundamental customer value, so that it created differentiation for itself.

Maintaining work and life balance is also equally important factor for both corporate entrepreneur and traditional entrepreneur.

Both corporate entrepreneur and traditional entrepreneur can find it possible to start an initiative while continuing with the current responsibilities: may be a fulltime job for traditional entrepreneur and a current job role for corporate entrepreneur.

Working on traditional startup with friends can be compared with colleagues with whom a corporate entrepreneur shares good working relations. Involving close colleagues or friends may pose be a risk of getting alienated to those relationships for entrepreneurs.

Business Model and Fundraising

In the last session of the course “Managing the Tech StartUp’ –IETECHSTARTUP, by Prof Enrique Dans in  IE Business School, our guest speaker of the day was Rodolfo Carpintier. He is the President of investment company DAD – Digital Assets Deployment. He has been investing in the internet and tech projects for last two decades.
He strongly believes that the eCommerce model still needs to be reinvented

In a very intersting session, he analysed the business model of venture of one of the volunteer participants of the course.  It was a good showcase for the lesson that an entrepreneur should be prepared to pitch its business plan at any time. One of the most important learning of the session was that the business plan should showcase the focus of the entrepreneur. In initial stage, the entrepreneur should focus on only one source of revenue, and multiple sources may digress the attention of the entrepreneur. For example, having a B2B as well as B2C model in the same venture can be challenging for a new startup. It may be possible only with big shops with huge amount of money available. These days, most of the business plans have advertising as a major source of revenue. However, having more than 15% of revenue coming from advertising may not be reasonable. Another important learning from the session was the difference between venture eligible for investment, and a viable venture. There may be many viable ventures that may not be good for investment, as the entrepreneur never plans to mae it to the next level. The venture may still be viable and successful. but, it may not need an investment. One more learning from the session is the importance of right team, and correct equity sharing. Right team is very important as it will ensure that the job is well done. Having the right equity sharing ensures that the benefits of success is reaped by people in the order of efforts put in. For example, the CEO ends up doing most of the work for the company. And therefore, the CEO should own a lion’s share of the equity.

These learnings of traditional entrepreneurship can be applied to the corporate entrepreneurship as well. In the corporate entrepreneurship, an initiative is being driven within a larger organisation as an independent venture. An entrepreneur within a larger organisation should also have focus. There should be only one source of revenue, as multiple sources may be disturbing for the attention of the entrepreneur. The difference between venture eligible for investment, and a viable venture also applies in case of corporate entrepreneurship. Any viable venture can be carried forward by a team within a a division. But, if there is expectation of a further support by senior management of the larger organisation, there should be long term expectation of higher return, and just viability may not be sufficient. Also, the team structure and the sharing of profits is also equally important in case of corporate venturing. Right team is always important to make the venture work. However, the point to be noted is that the shares may not be in absolute cash terms, but rather in terms on relative gains.

Selling Your Startup

Last Wednesday, we had another session of course “Managing the Tech StartUp’ – IETECHSTARTUP, organised by Prof Enrique Dans in  IE Business School. The guest speaker of the day was Pablo Larguía. He is serial entrepreneur, and founder of Bumeran. Bumeran is the leading employment and human resources portal in Spanish-speaking world. The main point of this session was the sale process of the startup venture. However, Pablo Larguía also shared interesting points from all the phases of a startup.

Unlike the earlier guest who suggested that entrepreneur should also choose his VC, Pablo believes that it is not true. Entrepreneur should try to keep his options open, and go with the best possibility. For an entrepreneur, it is important to raise higher fund for the startup. Pablo also reiterated the importance of a prototype that can be demoed to a potential client, as was done by few previous guest speakers. In case of his startup, Pablo started by working with 3 investors. Dramatically, he ensured that clients are aware about his ongoing discussion with other clients. This kind of tricks raise the interest of clients. Pablo says that having a good product and a wonderful team is a basic necessity. But, the factor that can make the difference is the confidence of the entrepreneur. It is good to consider the strategic investor to raise fund. But, sometimes it may be necessary to pick up the deal which has higher value. A cash deal is considered a better deal than equity deal of same value, which happened in his case. Pablo also cautioned about the idea of shopping around too much. Sometimes deals can get lost within a day. It is important to get the deal through fast.

In case of Corporate Entrepreneurship, a startup is run by an entrepreneur as a part of a larger enterprise. As the entrepreneur is typically an employee of the larger enterprise, the sale process does not relate exactly to the case of an independent traditional startup. However, there are lots of similarity if the all the gains are considered, and not only the cash transactions. When the corporate entrepreneur leaves the control of the initiative to higher management, there is expectation of personal gains for the entrepreneur. Depending on the current and expected success of the initiative, the entrepreneur within the enterprise may expect gains such as promotion, salary hike, bonus, better role, etc. Whenever possible, it may be a good idea to have different sponsors ready for the initiative. In many large organisation, a small initiative can be supported by different divisions, or by different members of the management team. If the entrepreneur has multiple patrons within organisation, who are willing to promote the initiative further, it is likely that the entrepreneur is going to get good gains. Confidence plays an important role in the case of corporate entrepreneur as well. Depending on how confident the entrepreneur is, different senior managers may support the initiative. There is also a similarity in terms of kind of gains. There can be tangible gains, such as bonus and raises, which are equivalent to cash sale in traditional startups. Also, there can be equity stake in large organisation, similar to the equity swap concept. The timing of the deal is crucial in the case of corporate entrepreneur as well.

Even though sale of traditional startup looks very different from that of corporate startups, the basic concepts visible in both cases are pretty similar.

How to select projects for investment ?

Last Friday was the first time in our TECHSTARTUP class of Prof Enrique Dans that we met a VC. Roberto Saint-Mal comes from Adara Venture Partners and is a highly experienced VC. He talked on the topic of criteria for selecting projects, and funder’s perspective of startups.

The most important message from the talk was that VCs are also normal people. They are not trying to take unfair advantage of the deal with entrepreneurs. VCs take huge risks by investing in entrepreneurial idea, and it is only fair to expect multiple times profits if the idea clicks. VCs do want to invest only in projects that will result successfully. The VCs do a lot of due diligence before investing in the startups. however beside these quantitative and linear criteria, VCs also look for the people and related qualitative qualification of the project. For any project to be successful, it is important that the entrepreneur and the team is promising. VCs also want to start early, and work as a co-founder of the company along with the entrepreneur. Another important point he delivered was the importance of prototype. A good prototype increases the credibility of an idea multiple times. The IT projects can easily create a prototype with very little funds. It might be very good to pursue such ideas.

In case of the corporate entrepreneurship, startups are formed within larger enterprises. In such cases, senior management of larger enterprise approves and funds the projects for corporate startups. Therefore, the top management acts equivalent of a VC for traditional startups. The senior management also has high expectations from startups within their organisations, due to the inherent risks involved. While approving the funding, senior management also does the due diligence about the feasibility of the project. Besides, it makes sense to consider the individuality of the manager who will be driving the initiative. The importance of prototype cannot be underestimate in corporate entrepreneurship as well. A working prototype will surely increases the feasibility of the project, and hence approval by senior management.

Startups Going Commercial

Last week, we had Ronald J. Friedlander in our class of IETECHSTARTUP by Prof Enrique Dans at IE Business School. Ronald J. Friedlander is the founder and CEO of ReviewPRO. It is a startup dealing with social media monitoring and reputation management for hotels.

The main theme of this talk was about the the process of going commercial: how to acquire first customer, and build further on that. RJ believes that the first client is  very important. To acquire the first customer, which was local hotel, he directly reached out to them by cold calling. RJ also talked the importance of offering large discounts to first customers. Giving discounts is anytime better than reducing prices, since it can decrease the perceived value of the product. For the first large customer, RJ reached out directly to the CEO of the large chain, and requested time to demo the product. He was able to impress the CEO in first 2 minutes. RJ is firm believer that the most important component is having a solid product to offer. In general, his strategy of ongoing customer acquisition is to use telemarketing for smaller customer accounts, and personal effort for large accounts.

These concepts learnt in the session are also applicable in the case of corporate entrepreneurship. The startups within another large enterprises also work pretty similar to a traditional independent startups. Going commercial is an important phase in the life of corporate startups as well. A corporate entrepreneur should also go extra mile to acquire first customer. By keeping the fixed list price of the product, even if  huge discounts are given initially, can be a good idea as it retains the value of the product. The energy that is being put into the customer acquisition should also be commensurate with the size of potential customer client.

Implementing these concepts learnt from a startup in another startup withing larger enterprise can prove to be helpful.

Managing (?) Online Communities

Last Monday’s session of ITTECHSTARTUP in IE Business School saw another interesting guest invited by Prof  Enrique Dans. Pedro Jareño is the founder of Minube, the first spanish social travel network. In Minube, users can get inspiration for their next trips from others travellers’ experiences, plan their trips, compare flights and hotels and also share their own experiences. It provides end to end services for the new traveller. Beside other responsibilities, Pedro Jareño also handles marketing and communication at the Minube.

The central topic of the session was “organizing online communities”. Pedro followed several activities in different directions in order to promote his website. The initial task for any startup is to identify potential community leaders. Bloggers who share the interest around the product of the startup can be an interesting start. A personal contact to each of potential community leader can play an important role. The startup should value the potential community leaders, and encourage them to contribute to the community. Recognizing the community members at different levels is beautiful way of encouraging them. Recognition may play a key role to make members feel special. The most important message from the session was that one should not try to manage the community. One should listen to the community, and let the startup move along the lines of what communities want it to do. You cannot manage the community.

In case of startups within bigger enterprises as well, creating online communities do play important role. Even though the larger enterprise may have a its online presence, it may be important for the entrepreneur to have community around its offerings. A division may need to align its overall communication with the larger organisation. But, that may be all the relation existing with parent enterprise. The startup within the bigger organisation should also identify the community leaders who share interest, and are open to cheer for the specific offering of the startup. The entrepreneur individual within enterprise should consider encouraging and recognizing the community members. However, last point is about community can be manged by the startups or not. I believe that there can be difference between independent traditional startups,, and startups within larger enterprises. An independent traditional startup is in process of finding its niche, and its generally happy to take help from community in finding that niche. As long as there is enough customer support, it makes sense for the traditional startup to listen to its community and change its business strategy. However, for startups within larger enterprises, the product portfolio generally fits into the larger strategy of the bigger enterprise. That makes it important for managers to be very actively involved in the community, and not just listen to the same. Many a times, it is possible that community is not able to perceive the correct image of the offering. Entrepreneurs within the enterprise can use resources to ensure that enough info is pushed to the community, so that they are able to see the picture in the correct light. An entrepreneur within a larger organization should, therefore, maintain a balance between listening to community to modify its growth plans and contributing to the community to maintain the long-term strategic direction of the larger enterprise

Small is Beautiful ?

Last Friday, we had another wonderful session of ITTECHSTARTUP – ‘Managing the Tech Startups’ by Prof  Enrique Dans in IE Business School. The guest speaker of the day was Alberto Torrón, founder of Todotaladros.com. The session provided a complete different perspective of entrepreneurship in technology domain. The topic of the session was how starting and growing in a small way can be  great entrepreneurship style. Todotaladros.com is a small store dealing with power tools in Spain. The business started with the simple personal need to pay taxes to remain eligible for  retirement benefits. They  started  selling tools on eBay, and then transformed it swiftly to a simple e-commerce business. Alberto is a firm believer in the concept of KISS. He spoke that the offerings must be kept simple. Complexity should be avoided whenever possible. He also discussed the point about being in no hurry of growing business. He would prefer to continue growing slowly over time. The good part about being small is that owners can concentrate on customer service directly. It is important value proposition to take care of customers personally. Finally, the beautiful part of the story was that both Alberto and his co-founder were able to pursue this business part-time, while sticking to their full-time day jobs.

Some of these learning relate very well with the startup within larger enterprises. The reason to start a new initiative can be very small. We need not wait for bigger strategic opportunities. even if the reason to drive a new initiative is small, it may be worth pursuing the same. The point about better customer service if the initiative is small applies in enterprises as well. It is very likely that customers will be delighted if they receive a call from the head of the specific product division. This high quality of customer service does provide positive differentiation for the product. The last point to learn is that  if an individual want to start an initiative within a large enterprise, he need not leave all of his current responsibilities to concentrate on the new initiative. It is possible to continue with current role, while also driving the new startup initiate within the enterprise in a small way.

Going International

In our last class of IETECHSTARTUP (Managing Tech Startup), our guest speaker was Jesús Encinar from Idealista.com. We could not thank less our Prof Enrique Dans of IE business School, for bringing such wonderful speakers. Jesús Encinar spoke about the challenges associated with internationalization for startups.

Jesús moved into the geographiees which were close to his base. Italy and Portugal were the preferred choice after initial success in Spain. Jesús Encinar started his business by focusing on one city, Madrid only, at beginning. His team personally put lots of energy to ensure that idealista offers best solutions to its target customers. He later expanded to other cities in Spain. The critical factor before, Jesús Encinar suggest, is to have a strong product or offering to get fundamentals right, before venturing into another country.

These concepts are also equally important for Corporate Entrepreneurship. Even though, the overall organisation may be large, the challenge of international of one product lies with the individual entrepreneurs within company. It makes sense to give enough thought to the strategy of internationalization. Proximity of new markets can be an important factor. But, the factors may vary depending on the product and the team. Most important point for the corporate entrepreneur is to ensure that product has strong fundamental customer value, so that it created differentiation for itself. Only a product that has proved itself successful in home market should be considered for internationalization.

Public Relations and Media

In our class of IETECHSTARTUP by Prof Enrique Dans of IE business School, we recently had a special guest.  Gabriel Aldamiz-echevarria is the founder of Chicisimo. He had worked at IE in the PR Department. He later co-founded Strands, and was in charge of PR. Even with Chicisimo, he is handling PR. He talked on the topic of how to manage public relations and media.

He emphasized that the overall user involvement in the product ecosystem is important. It is a good idea to build the community of users of the product. And doing this community early is very important. One critical factor for startup is the low time to move from idea to product. He suggests to start with user experience, and then build functionality on top of it. While building the user community, an entrepreneur should try to understand the user, and be ready to take feedback to improve the offering.

In case of corporate entrepreneurship as well, the PR and media plays a very important role. Whether the product is offered by a new startup, or by a new division within an existing company, the importance of building an active user community is very important. A corporate entrepreneur may get some minimal help from corporate PR department. But still, most of the work needs to be done by the person driving the product. The corporate entrepreneur should also take care of the user experience factor, as that will decide the success or failure of the product offered by the division within the larger organisation.

Entering Market with Established Competitors

Our sessions of the course IETECHSTARTUP (Managing the Tech Startup) by Prof Enrique Dans have been going fabulous as part of International MBA at IE Business School. In the next session. we were introduced to Iñaki Arrola, Founder and CEO of Coches.com. He talked on the topic of competing with larger competitions. The used car market at that time was dominated by large competitors, including Coches.net, Autoscout24 and Autocasion. Iñaki started in the new car business with autodescuento.com, and later moved into used car with coches.com. In case of competition, the success will depend on the differentiation in offering. The user experience is the most important factor that drives success. The back-end of the user interface should be equally robust to support front end. Another side note suggestion from the session was to avoid working with friends on startups, as you may potentially lose those friends. Also, it is important to maintain work family balance. It is very much possible, even if you are an entrepreneur.

These learning can be directly applied also in the case of Corporate Entrepreneurship. Entrepreneurs trying to drive a new idea within the boundaries of a bigger organisations also face similar challenges. To move into a new market with established competitors is a difficult task. Sometimes it is easier to leverage some attributes of larger company, such as branding and financial stability. While in some other cases, existing attributes may also become a liability if it does not fit well with the new idea. In any case, the entrepreneur within the company also need to understand the importance of differentiation as compared with the existing competition. The entrepreneur should also look into the matter of end-user experience, and the backend support for the same. Working on traditional startup with friends can be compared with colleagues with whom a corporate entrepreneur share good working relations. Involving close colleagues may pose be a risk of getting alienated to those professional relations. Maintaining work and life balance factor is also challenging for a corporate employee driving an idea passionately. after this session, I believe that it is possible for an entrepreneur within large organisation to main happy personal life, while driving the idea withing organisation.