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Executives
say corporate ventures can offer entrepreneurs
the best of both worlds.
Can you be an entrepreneur — or at least entrepreneurial — and still work for a big company?
After all, entrepreneurship implies risk-taking, and people who operate within the safety of a big firm can hardly be said to live dangerously. Yet large companies are increasingly creating an environment for what's called "corporate venturing" — entrepreneurial energy and creativity on the part of employees.
Scott Cannizzaro (WG'03) of Johnson & Johnson, Vik Prabhu of DuPont and Rich Riley (W'96) of Yahoo! Small Business work at those sorts of firms. They visited Wharton this winter to share with students their experiences as "inside entrepreneurs."
Their consensus: corporate venturing isn't just talk. It works. But it demands commitment on the part of both a company and the inside entrepreneur. Companies have to let their people improvise, and they have to reward prudent risk-taking. Employees, for their part, have to push themselves to think innovatively and seek out new opportunities, just as startups sniff out new markets. "You have to know when to play by the rules and when to break them," said Cannizzaro, who directs Johnson & Johnson's stem cell internal venture.
Even people who are sure that they want to run their own company can learn skills at big companies that will make them better entrepreneurs, the three panelists said.
Riley knows that first hand, though you might say he learned it backwards. He started and ran Log-Me-On.com, an Internet software company, until Yahoo! bought it in 1999. He remained and today is vice president and general manager of Yahoo! Small Business. "I keep waiting for the bureaucracy to become too much for me, and it hasn't," he said. "And having a well-known brand makes the experience even more rewarding."
Working at Yahoo!, which had $3.6 billion in sales last year, lets him focus on expanding and improving his division, while leaving more mundane tasks to others. "At a large corporation, you don't have to worry about how the business is structured, how best to incorporate," he pointed out. "That's taken care of."
Yahoo! encourages entrepreneurial conduct by not being too punitive about failures, Riley said. "If you do a lot of things, you're going to have failures. I had a project that didn't work out. But our COO said to me, ‘You had a failure, and we saw how you managed through that.' They look for that."
Inside entrepreneurs have to hedge their bets, said Prabhu, who is a new ventures manager at DuPont Bio-Based Materials. "I make sure that I have a portfolio of things that I'm involved with, so I don't live or die by one failure."
He also tries to head off what he calls the "NIH syndrome — Not Invented Here," which occurs at companies of all sizes. He recruits key people within DuPont as unofficial stakeholders in his projects. "You make it personal for them," he said. And he tries to get external validation, such as feedback from potential customers.
Another way in which big companies encourage entrepreneurship is by letting some divisions hew to different, or at least relaxed, rules. That's the strategy of Johnson & Johnson Internal Ventures, which includes Cannizzaro's group.
"Outside of our division, J&J is a bureaucracy," he said. "But we've been allowed to operate outside of the corporate structure. I call what we do 'venture-capital light.' There is a safety net with Johnson & Johnson, and we don't get shares in the ventures in which we invest. But we do have an accelerated compensation and bonus plan."
Internal Ventures scouts Johnson & Johnson for promising, but unexploited, technologies and entrepreneurial employees. It then rolls them into new projects or ventures.
"When Johnson & Johnson buys companies, we end up getting groups of entrepreneurs," Cannizzaro explained. "They're typically scientists with interesting ideas. And then they become victims of the profit and loss statement. Our group walks the halls looking for scientists who've gotten lost in their P&L responsibilities.
"We have a website, too. If you're at J&J and have an R&D idea that's suffering for lack of funding, you can bring it to us."
Even people who aim to start and run their own companies can learn useful skills at a big firm, the panelists said. "You're dealing with real customers and real suppliers," Riley pointed out. "We see some startup guys where most of their experience is in doing PowerPoint presentations."
Likewise, understanding how big-company executives think and what they need helps when negotiating investments and mergers, Prabhu said. It also gives an independent entrepreneur more credibility.
Prabhu cautioned students against paying too much attention to what's in vogue or where their friends are headed when picking a career. Every generation feels a pull to go into a particular industry or kind of company, he pointed out. In the late '90s, students dreamed of signing up with dot-coms and becoming overnight millionaires, just as earlier generations angled for secure lifetime jobs at places such as General Motors or Ford.
Lately, private equity has been hot because students perceive it as both remunerative and entrepreneurial. "Sure, in business, there's going to be a certain amount of emphasis on money," he said. "But that's secondary to the joy of winning and increased influence through success. To me, influence is really the currency."
"There's no one particular path that works for all entrepreneurs," he added. "You have to have your own internal GPS [global positioning system] system and find your way."
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