There’s nothing new about encouraging workers to be innovative and proactive. When they’re pitching ideas and pursuing their passions, it can ultimately benefit the company—but what if it’s the other way around? Many entrepreneurs hold down full-time jobs while simultaneously joining a startup on the side or starting their own venture. However, the latest trend is for employers to back this decision financially, which can turn into a profitable move for everyone involved. Also known as “intrapreneurship,” this arrangement is all about helping employees to actually enjoy a slice of the profit they’ve helped to create.
Does the idea of paying employees to start their own business sound crazy? Perhaps at first, but companies big and small are dabbling in it. It usually starts with companies giving their employees earmarked funds to create “lines of business.” If all goes well, these lines can turn into startups in their own right. The companies are the very first (and sometimes only!) investors, while the employees have the stability of their “regular” job they also have the support of their employer to pursue “another” job. It’s a win-win for everyone.
The Time and Place
Why not just kick-start a line or new product, service, or venture as part of the existing company? At times, employees can come up with very profitable ideas, but it just doesn’t fit with the goals and mission of their employer. According to a director at Stanford’s Graduate School of Business, Yossi Feinberg, that doesn’t mean lucrative ideas need to die or be pursued in an employee’s spare time. Instead, savvy companies use employees to test out ideas and see if they’ll gel. Oftentimes there’s another growth path that can be nurtured. “It definitely provides a lot of incentive for people to stay on the job longer,” says Feinberg.
Plus, there are many more potentially successful entrepreneurs out there than people realize. The trouble is that they need the financial backing or security that they can’t afford with a traditional route. Maybe they have a family to take care of or really love their job, but also have a desire to go out on their own. Taking such a big personal financial risk can be dangerous, but not if your employer has your back. We Are Mammoth is an example of a company happy to support employee’s entrepreneurial ideas, and DoneDone is an employee-started venture that has done phenomenally well. Now, launching new businesses within the company itself is par for the course for this truly mammoth company. After all, the business already has a slew of clients that are perfect test subjects for in-house startups.
Happier Employees Makes for a Stronger Company
The co-founder of We Are Mammoth, Craig Bryant, says that such support makes for a stronger business. “We spent a long time building products for other companies, but at the end of the day the executive decision-making is in the hands of the client.” As an added bonus, the more interest an employee has in their company/startup, the better the odds they’ll stay, be happy and be more productive. Such “spinoffs” can rejuvenate a worker approaching burnout and bring new life into a team.
However, businesses know that most startups are failures. Won’t seed money turn into a black hole for companies? What about a worker’s morale after a failure? Feinberg agrees, “The company might end up in a worse place than it was initially,” which is why risk assessment is critical. Treating a company like an incubator instead of an investor is paramount, as is taking care not to blame the employees should the venture sink.