For any startup to blossom from a bud to a flower, incubation plays a very important role. Like any other incubator, corporate incubators are now gaining worldwide recognition. This is especially after giants like Google, RBC, and other companies have started their own incubators and are giving them stellar results.
However, corporate incubators are no child’s play. A startup incubator has a lot more risks than any other incubation center. Before understanding the risks involved in running a corporate incubator, let us know what a corporate incubator is?
What is a Corporate Incubator?
A corporate incubator is a wing of a corporate organization that solely works to support startups from an idea to a full-fledged business. These startups are usually portrayed as a brand associated with the parent company.
Some organizations have a team that dedicatedly works towards ideating a new concept and bringing it to life. This idea may or may not be related to the business area of the parent company. These ideas are then funded, mentored, groomed, and shaped up into a running business by the parent organization.
But then the question arises that if such an established company is incubating a startup what might go wrong? Why do corporate incubators fail then?
Why do Corporate Incubators fail?
After successfully running one business, there are chances that the new business that the parent company incubates might be a failure. Sounds surprising right?
With so many incredibly smart and highly talented lot of employees brainstorming for an idea - grooming it and making it a business and eventually that business does not perform why? Let us understand the reason behind why corporate incubators fail, from the perspective of David Weekly, who has been in Silicon Valley for 25 years.
The biggest problem for a corporate incubation is that even if it comes out with an idea that is roughly close to what they are dealing in and an idea that is completely off the track, in both cases, they are doomed.
Failing with an idea close to their business
Generating its own competition
When a corporate incubator incubates an idea that is even roughly close to what it does, it is in other ways generating its own competitor in the market. The organization will never want to generate a threat for the near future, so there are possibilities that it might drop the project midway.
Also, they can adopt the whole concept and bring it out in the market before the start-up does thus killing the startup even before it is launched.
An idea outside the core business
An organization or company is best at what it does. This is why they are considered pioneers in that field. Since the parent organization does not have any expertise in the outside fields, they have very limited in their kitty to mentor the new startup.
There have been cases where the parent organization withdrew their support to the start-ups only because they thought, rather than putting energy and investments in something new, putting it in the parent company and getting more productivity is always beneficial. It is a huge distraction because the startup has already invested time and resources in generating an idea into a business.
This is why parent companies who plan to have their own incubation, fail because at times they are not adept at accepting the new.
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