People matter. Seventy-four per cent of CEOs are concerned about finding talent with the right skills. The third biggest killer of startups is ‘the wrong team’. Even in the era of algorithms, game-changing businesses are built by game-changing people.
With all these challenges identified, how can we identify and attract the right venture talent for corporate ventures? What do founders even want?
Three simple factors
Over the past decade, we’ve built and invested in ventures with more than 100 of the world’s biggest and best corporations. Talent, and particularly a difficulty attracting the right sort of entrepreneurial talent, has been a constant theme.
With the intensity of competition for venture talent heating up here in Singapore, we’ve looked to the data to understand how corporates can get ahead.
We’ve spent the past month engaging with 30 founders from across the entrepreneurial spectrum to understand more about why they would or wouldn’t be open to joining a corporate venture.
We’ve found three extraordinarily simple factors that corporations need to get right to attract the right sort of venture talent: Equity, freedom and metrics.
Fire and seasoning
Firstly, how should corporations define the ‘right’ talent? Like cooking a steak – it’s a matter of seasoning and fire. Specifically, we look for seasoned founders forged by the fire of Venture Capital.
Let’s look at the data.
Studies show that ventures with teams who founded three prior startups were nearly 50 per cent more likely to survive, regardless of whether the previous startups were successes or failures. These teams also logged 11 per cent more sales than teams with no startup experience.
The more experienced the founder, the higher the chances of venture success.
The quantitative data here is more limited. However, from our experience building 60 ventures and making 1,000 investments into startups, we see time and again that Founders who have previously raised Venture Capital funding consistently outperform others in a corporate venture environment.
Having been accountable for every dollar they spend they know what it takes to deliver on someone else’s investment. Importantly, they also know when to push ahead independently and when to selectively involve investors – a difficult balance to strike.
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Build it and they will come?
So we’re looking for seasoned founders who have been forged by the fire of VC. Most of the corporations we work with assume these people are pretty unlikely to join a corporate environment.
On the surface this seems a fair assumption – why would they join? But the data tells a different story.
So we’re in the game, what are the rules?
First, we have the talent magnets, the reasons why founders are so open to corporate ventures. Overwhelmingly, these are:
- Easier access to capital
- Ability to accelerate scale through corporate assets
- The chance to make a bigger impact on the world
The first rule of the game – understand why founders are open to the conversation and are careful to keep these things in mind.
Handling the hurdles
Then we have the hurdles, the reasons why founders might hesitate. Get these right and the talent pool is wide open.
Equity
Our founders overwhelmingly prioritise equity over salary. In fact, the more experienced (number of previous startups) and the more successful (number of exits) the founder, the more important equity becomes to them.
Equity is not something corporations are used to giving up and it can be tricky to structure, particularly in more heavily regulated industries. Is it really worth the trouble?
Our data and our experience say ‘absolutely’. Can you attract a founder on a salary? Sure. Can you attract a seasoned founder forged by the fire of VC? Probably not.
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Freedom
Corporations often assume politics and bureaucracy to be the key “founder repellents”. We were surprised to find this wasn’t the case for many founders. Instead, the killer “repellent” for many founders was a concern around autonomy.
Seasoned founders forged by the fire of VC are comfortable with the high-accountability-high-autonomy relationship between founder and investor. They live and die by their own decisions, and investors back them to do that.
Founders worry they will not get the same backing in a corporate context, and that their ability to truly lead the venture would inevitably be limited by the hierarchical and risk-averse nature of corporate decision-making processes.
Metrics
Finally, misaligned metrics and measurement is a key concern for founders.
Founders need to be confident that the success metrics set for the venture are appropriate and will remain so in the long term. For most founders, this means measuring the ventures by their market performance rather than internal KPIs.
In particular, many of the founders worried that corporates had unrealistic time expectations when it comes to short-term revenue generation. Founders expect to play a long-term game building equity value and are wary of being trapped into a short-term revenue generation game.
This also belies a suspicion from some founders around corporate motivations. They expect to dedicate four to eight years of their life to building a new venture. Before they invest that time, they need to be confident that the goalposts won’t move.
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Hearing from the venture talent themselves
To illustrate the data, let’s hear from two very different founders on their views of the corporate venture world.
Sophie Soowon Eom, CEO & Co-Founder of Adriel and Serial Entrepreneur, pinpoints some uniquely entrepreneurial traits and shares her honest thoughts on heading back to the corporate space. For a contrasting view from the inside of the corporate venture world Jeremy Youker, Senior Venture Architect and Founder at Longship Partners, discusses the complementary nature of the Founder-Corporate partnership.
What are the defining entrepreneurial traits that make you, and others like you, a great Founder?
Besides the obvious traits like mission-oriented, relentless, and flexible, a lot of the great founders I’ve met look and sound like they’re from the future! They’re truly convinced about what they believe is not going to happen in the market, what’s going to be the next big trend, where the opportunities are, and what potential risks they have to navigate.
Because they’re so convinced about what the next big thing that will change the world will be there they’re sometimes even willing to be misunderstood. Like Amazon’s Jeff Bezos once said, they can see solutions, threats, and eventual problems that most people don’t see. Their predictions are combinations of intuition and very well-calculated scenarios, which often turn out to be right.
What have you gained from your time as a serial entrepreneur that you couldn’t get during your time in the corporate world?
Before I became an entrepreneur, I felt like I had to please literally everyone, even in situations where unanimous decisions were not optimal for the company’s long-term growth. After founding two startups, I learned how to be tough when necessary – a skill that’s crucial in being able to make a great impact. With that lesson learned, I exited my first startup, which provided me with funds a typical corporate employee would never be able to dream of.
What would it take to convince you to take up an offer to get back into the corporate world?
A big plus would be that you get to know and work with many different people for different purposes. But even on these terms, I personally, would never want to go back because the startup communities are becoming so sophisticated and make for an extremely valuable network as well. I love being an entrepreneur in the startup scene. It’s tough, but you gain a lot, learn many lessons, and grow every year.
What must corporates do, be or have in order to attract and retain top Founders?
Ultimately, entrepreneurs bring the mindset, the behaviour, and the expertise on how to scale – essentially from zero to growth. They have very driving personalities which means they’re looking to make decisions as quickly as possible, with just enough information to validate their idea before getting things done. Corporates, in order to attract and keep top entrepreneurial talent within the corporate itself, need to make room for this type of behaviour.
Also Read: Entrepreneurship is at an all time high, but are you doing it right?
Entrepreneurs going into a new corporate venture, or founders, are looking for industry expertise, industry connections, and the ability to leverage some of the corporate assets. What they would be expecting from the corporate is really clear access to those assets that can give them an unfair advantage. This could be access to data, industry expertise, go-to-market distribution channels, Intellectual Property, technology leveraging brand credibility.
What are the biggest challenges or barriers facing corporates in attracting top entrepreneurial talent to lead their corporate ventures?
Generally, large corporates are not seen as the most innovative, or agile space where an entrepreneur can operate. Entrepreneurs are looking for an environment where they can move quickly, make decisions on their own without a lot of oversight and have freedom in their own operations. But, entrepreneurs don’t recognize the value that a corporate can bring, like access to corporate assets which boosts their ability to really accelerate a new venture.
Part of what we do at Rainmaking is to look for those assets and how we really can give an “unfair advantage” to a new venture. Corporations looking to do corporate venturing would be well-served by taking a close look at themselves, what corporate assets they could offer to new ventures, then working internally, to smooth the way for access to those assets as new ventures are developed.
It is no surprise that Corporate Venture Building is a universe fraught with the cultural inconsistencies of traditional corporations and innovative ventures. This makes the right talent challenging for corporations to attract, although one that is absolutely vital to overcome in order to succeed.
We have learned that the challenge clearly lies in alleviating the skepticism founders have about the motivations and intentions of corporations and we believe that the most efficient way to achieve that will be for corporations to work on the 3 key factors of Equity, Freedom & Metrics, to a degree worth boasting about.
This article is written as part of the Corporate Venture Launchpad programme. The S$10 million pilot programme by EDB New Ventures aims to enable large, established companies new to corporate venturing to launch a new venture in Singapore within six months, supported by venture studios experienced in corporate venture building.
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