The very definition of a startup means uncertain territory. Most startup founders are either strong in a technology or strong in marketing. Whereas turning an idea into a successful business requires a complete, well-managed cycle formed of – Idea, Assessment, Capital, Implementation, Technology, People, Financial Management, Marketing and Sales.
The existing number of accelerators, mentors, incubators can hardly groom a small fraction of the thousands of startups. All the rest are left to fend for themselves. It is said that 90% of the startups fail by the second year, which is obvious. While a significant number of them fail because of fallacies in the solution, a very good number fail because of lack of expertise to build an enterprise.
Right To Incubation: Need Of The Hour
Similar to the Right to Education, startups need Right to Incubation.
There is a need to provide guidance, mentoring and support to every startup which asks for it. Right now, while almost all of the startups seek support, possibly less than 5% are accommodated by various startup support institutions – accelerators, incubators, Angels, VCs. Hence, there is a vast gap that governments and existing institutions cannot fill in their current capacity.
The positive aspect is that large industries are also seeking startups that compliment their business and add value to their organisation. This is something that can be leveraged.
So who fills in the gap to incubate startups ?
From all the above indicators, the new concept of a CStR (Corporate Startup Responsibility) is something I propose.
Like a CSR budget, big organisations could have a CStR budget. The CStR budget should be used to provide incubation support to startups that complement the current and future business strategy of the Corporate.
The Selection Process
The selection should not be based on fancy contests, pitches or other marketing events. Pitches are not bigger than the startup. They end up in favour of the guys with good presentation and communication skills rather than a great idea. Startup contests are more of hungama and marketing stunts rather than genuine support. Would a company shortlist someone for an important position, simply based on a 5-10 min fancy pitch ? The same principle needs to be applied here.
The selection of startups for incubation under CStR should be similar to selection for a senior position. i.e. There needs to be a study of startup profiles, assessment of capability, and a multi-level interview process.
The selection of startups should be done by a panel that needs to think differently as compared to an M&A exercise. The approach needs to be top-down. Senior leadership should participate rather than leaving the selection to a low-end team.
This is because the very definition of a startup means that it is not possible to exactly estimate its success. All the financial plans and forecasts are mere imaginations. There is no way anyone in the world can guess how much a totally new idea or product will sell in the third year and how much profit is ready to be enjoyed.
A very fancy looking product could fail and an ordinary idea could be very successful. No one would have guessed Google, Twitter, and Facebook would become such successes on Day 1 as there wouldn’t be a genuine financial plan for these on Day 1.
The Incubation Process
I propose that startups should be selected in areas complementing the current and future strategy of the corporate, initially for a period of one year. Once taken up for incubation, these startups should be measured against quarterly targets. If trends suggest a negative opportunity, the incubation of the startup can end.
This goes a long way in ensuring every startup gets an opportunity to be really assessed against reality. While also helping organisations grow their business.
It also helps generate employment and create IP (Intellectual Property), hence resulting in a better society and GDP for the country.
Some companies have already started this – either as an internal ‘intrapreneurship’ or as incubation support for external startups. Support at a large scale by every sizeable corporate would provide the backbone of innovation for any country and reduce Startup failures.
CStR is about investing in innovation. It is akin to an outsourced R&D where startup ideas are the research projects and founders are scientists.
[This post by Venkat Narayan Srireddy first appeared on LinkedIn and has been reproduced with permission.]