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A Startup on Your Premises Might Revive Your Startup Spirit

Balaji KrishnamurthyNovember 1, 2012

Credit for this month's topic goes to Gary Baron, CEO of Voice Systems Engineering. Growth companies must work hard to maintain that speed, agility and entrepreneurship that brought them the growth they enjoy. But as a company grows, those very attributes are threatened. Gary Baron has an interesting solution.

The first type is Talent for Rent. You need a specific talent - a web designer to build your web pages, a lawyer to write a contract, a tax preparer to prepare your taxes, etc. Your choice is to hire or rent. This is purely a financial decision. You decide that you do not have long term needs for this talent, or enough need for the talent to hire a full time person, so you decide to rent the services on a fee for service basis. Typically, these are very specialized skills and the product of their services (a web page designed, a contract prepared, tax papers filed) is usually mostly objective. The decision to hire such consultants is purely a financial decision between hiring and renting.

What if you opened up your office space to startups?

Assuming that you have an established office, with some capacity for expansion, what if you offered suitable startup companies a home for a year. You might offer the startup free office space, including the usual office services such as a telephone, internet, printer/copy/fax machines, etc, for perhaps a year. During that year the (presumably few) employees of the startup hang out at your offices, interact with your people, bounce their ideas off your people during lunch conversations, and the like. Maybe they pick up on some prudent processes and procedures from your company that a startup might not know how to do. Better yet, maybe they question some of your processes and procedures and force your employees to examine them. Overall the interaction is likely to be productive for both parties.

What do you get in return?

At a minimum you get the influence of the startup. Additionally, you might structure it so that at the end of the year, you have the right of first refusal for any investment into that company. You would have had one year to closely examine this company prior to any investment decision. You can take this concept further by observing that you can create even greater value if you are able to provide manufacturing services, logistical operations, procurement efficiencies or distribution channels that such startups might not have on their own.

Many metropolitan areas and university communities have established similar incubator concepts to provide startups with such infrastructure.

Where this idea differs is that here an established company provides its space for the benefit of the influence of a startup. Gary Baron has done something similar in establishing the Novotorium, focused on wellness and healthy lifestyle businesses. He has been doing this for a year and obviously has learned from that experience. Requiring the entrepreneurs to have some "skin in the game" early on helps in finding the seriously committed and eliminates ones who bounce from one free program to another. He also found that this program can make a big impact on these companies and that he would be well advised to reach investment valuation and agreement before the impact is realized. Finally, he felt it was better to provide a focus for the kind of startups you attract. Of course, one has to be mindful of any competitive issues both between you and the startup and between multiple startups that you might host.

Just imagine the kind of energy and spirit you would enjoy if you had a series of startups year after year. You might find that it generates a new startup within your own company!

Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.

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