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The thought of leaving the security of a corporate job and searching for start-up capital is daunting for many would-be entrepreneurs. But what if you could obtain the capital and resources you needed from your present employer?
Intrapreneurial programs are making this a reality. With bank loans and venture capital becoming harder for start-ups to obtain, these programs are providing an alternative for the would be entrepreneur. The term “intrapreneur” was coined by management consultant Gifford Pinchot in 1978 to describe one who creates innovation of any kind within an organization. Xerox and Bell Atlantic are two companies that have these programs.
Of course, not every business idea would make a good intrapreneurial venture. It must fit within a company’s general goals. An effective intrapreneurial business plan presents the employer with a way to get added revenue from existing resources that may be underutilized or overlooked, says E. Michael Shays, president of EMS Consultants in Burlingame, California.
Shays, who helps large companies set up intrapreneurial training programs, says the business plan should include how much the venture can make, how the employer can back out of the deal with minimal loss, the resources needed, the customer base and how the company will recoup its investment. It should also address the possibility that the added revenue from the venture may take away from existing revenues.
The intrapreneur must be prepared to share the risk with the employer. That can mean giving up a portion of a salary and/or bonus until the venture is profitable. It also means long hours spent working on the venture, usually while maintaining your regular job.
In return, the intrapreneur is typically compensated through profit sharing of perhaps 10% or more. If spinning off the business is part of the growth strategy, you may negotiate to receive an equity stake at that time.
Semaphore Communications Inc. of Santa Clara, California, came out of Xerox’s Technology Ventures intrapreneurial program. Semaphore is a provider of encryption-based network security products. Started in 1990 by chief technical officer Mark Vondenkamp and two other Xerox- affiliated people who were working on a data encryption product, Semaphore now has annual sales of $10$20 million.
Although it’s majority owned by Xerox, Semaphore was a separate, privately held company from the beginning, says Douglas Kernan, Semaphore’s vice president of marketing. Even so, “We do have the ability to get support from Xerox’s infrastructure, and we don’t have all the overhead costs of other start-ups,” says Kernan.
Semaphore also benefits from Xerox’s major account relationships. If your company doesn’t have such a program, Shays advises finding a sponsor and/or protector in upper management who can protect the development of your Idea from the corporate bureaucracy and shield you from the repercussions of failure. He also suggests finding a mentor who has no direct influence over your performance to advise you on building your venture within the company.