Your New Business … That Your Company Paid For - OZY | A Modern Media Company

Your New Business … That Your Company Paid For

Your New Business … That Your Company Paid For

By April Joyner

More and more companies are funding their employees' ideas.


Ever wonder what it’s like to launch a business? Turns out you might not have to give up your salary and benefits to find out.

By April Joyner

Jeremy Kratz was working as a freelance Web developer in Little Rock, Arkansas, when he joined a Chicago-based software consulting company called We Are Mammoth. But he wasn’t hired to be just a rank-and-file employee; soon enough, he was helping to lead an entire business — a bug-tracking software company called DoneDone, founded by We Are Mammoth employees. Best of all: Neither he nor his colleagues had to put up the funds for this new venture. It was launched on their previous employer’s dime.

Giving employees the freedom to pitch and pursue new ideas is certainly an old management concept. It even has its own awkward buzzword: intrapreneurship. But even when employees have come up with smart business ideas, they haven’t necessarily shared in the profits they’ve generated. That is, until now, when some workers are actually getting paid to pursue their own startup dreams.

A growing number of companies, both large and small, are giving staffers funds to develop lines of business that can be spun into full-fledged companies. Maya Design, a Pittsburgh-based technology consultancy, Tasty Catering, a Chicago-based food service company, and Signature HealthCare, a Louisville, Kentucky, nursing home company, have each spawned multiple new businesses through this method. Essentially, they’re turning intrapreneurship into fully developed entrepreneurship.


Why encourage trusted employees to strike out on their own? Sometimes they may have lucrative ideas that aren’t necessarily a fit for the core business, says Yossi Feinberg, who directs a business innovation program called the Corporate Entrepreneur at the Stanford Graduate School of Business. Rather than quashing those ideas outright, companies can test them out under a separate organization — and may stumble upon an alternative path to growth. And, of course, giving employees the green light to pursue their own startups is a pretty awesome perk. “It definitely provides a lot of incentive for people to stay on the job longer,” Feinberg says.

Now employees have a greater stake in their projects — literally.

That’s especially true for entrepreneurial-minded staffers. This way, they can pursue their ambitions with limited personal financial risk and (businesses, take note) directly benefit the company’s bottom line. For example, DoneDone’s success led We Are Mammoth to formalize the process of launching new businesses: The consulting company now regularly tests employee-developed products with its roster of clients to see if they are applicable to a wider base. If so, the company sets aside a few thousand dollars to develop the product for release and attract customers. The effort has yielded a human resources software company called Kin, which a group of We Are Mammoth employees launched two years ago.

Encouraging employees to generate ideas for standalone businesses has strengthened the company as a whole, says Craig Bryant, We Are Mammoth’s co-founder. As a consultancy, We Are Mammoth had long developed products for other companies, but in many cases, Bryant says, the company hadn’t reaped the full benefits of that work. “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,” Bryant says. Now employees have a greater stake in their projects — literally. To encourage a startup mentality, We Are Mammoth gives all employees shares in each of the spinoff companies.

Of course, not every startup is a success. In fact, most of them aren’t. So giving employees seed funding to pursue ideas that don’t pan out could easily become a money pit. And if those ideas go nowhere, the employees’ morale could take a hit, too, says Feinberg: “The company might end up in a worse place than it was initially.” Another mistake that companies make, he adds, is trying to force a rote procedure — especially one borrowed from another company — for business innovation. Google’s fabled 20 percent time, for instance, has spawned plenty of pale imitations.

That’s a lesson that Grasshopper, a business software company in Needham, Massachusetts, learned from experience. In 2009 it launched a program called Grasshopper Labs, in which the company would incubate new businesses hatched by its founders and staffers. Though it yielded one successful spinoff, a billing software company called Chargify, Labs was a bust overall. So three years in, Grasshopper’s founders, David Hauser and Siamak Taghaddos, shut down the formal program.

They still, however, continue to encourage employees to pursue side projects, in order to develop “kung fu skills,” as they call it, in operations and management. Two projects — PopSurvey, an online survey tool, and Snacker, a site for ordering office snacks — remain in operation. Even though Grasshopper’s intrapreneurship efforts are now informal, employees say they still feel comfortable pitching new ideas.

Perhaps that’s the greatest draw of this extreme form of intrapreneurship. Treating a company as a perpetual incubator of business ideas is a good way to break up the monotony of work. That’s the goal that Craig Bryant had for We Are Mammoth, and according to him, it has succeeded. “We’ve created a serendipity in the workplace that other companies don’t have,” he says.


    Sign up for the weekly newsletter!

    Related Stories