- creating a group to be responsible for innovation
- increasing training to foster a culture of innovation
- promoting a specific innovation methodology
- forming an internal incubator, i.e., Google X
- acquiring innovative capabilities
While all approaches are on the increase, acquisition has been receiving much attention. It can take many forms, but more large companies are acquiring startups as a source of innovation. To learn more about this, from the perspective of the startup, I interviewed Tim Bates. He has been a startup founder, CEO, and now serves as an interim executive for hire in innovation, product, and senior leadership roles. He also lives in the technology startup utopia of Boulder, Colorado. Boulder is frequently recognized as one of the best places to found a startup, even rivaling San Francisco with a higher per capita percentage of computer scientists and PhDs.
See link for podcast interview below.
Why Purchase a Startup?
Companies purchase startups for three common reasons, including to:
- Acquire a promising or proven technology. An example is Under Armour’s purchase of MapMyFitness, a mobile app developer.
- Gain access to a new market or accelerate market share of emerging markets. Facebook did this by purchasing WhatsApp, with 450 million active users at the time of the acquisition.
- Grab talent before competitors do, known as acqui-hiring. WalmartLabs, the innovation lab for Walmart, purchased e-commerce company Adchemy, primarily for their talented team.
A Popular Exit Strategy
Startups want to be purchased. In addition to becoming a public company, it is a popular option for founders and investors to reap the rewards of their work and risk taken. However, it can also be dicey. Often cultures differ between the startup and the acquiring company. Founders lose control through the acquisition and may be asked to work on other projects. Understanding how the startup will be incubated and scaled are important considerations.
To learn more about large companies fostering innovation through startups,…
Listen to the interview with Tim Bates on The Everyday Innovator Podcast.
image credit: depositphotos.com
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Chad McAllister, PhD is a product innovation guide, innovation management educator, and recovering engineer. He leads Product Innovation Educators, which trains product managers to create products customers love. He also hosts The Everyday Innovator weekly podcast, sharing knowledge from innovation thought leaders and practitioners. Follow him on Twitter.