Corporations build startups on less than $1m budgets but struggle with staffing

Aspirations by large corporations to build their own startup companies could be frustrated by lack of funding and startup-style incentive structures. Even as corporate venture building has risen up the rankings as a CEO priority — with half regarding it as a top three business priority —  our recent GCV survey found that many corporate business-building efforts are small scale and with incentive structures that make it hard for them to attract the best talent.

GCV surveyed more than 100 companies globally which were engaging in some form of startup building activity. We found that while most of these — 84% — were run by specialist teams, the operations tended to be small, with the majority (64%) staffed by fewer than five people. Average annual lifetime costs of setting up a venture were reported to be less than $1m.

While this frugality may, in some cases, indicate a laudable financial discipline, we found that longer-established venture-building units tended to spend more than this. This raises a question of whether younger units are setting budgets that will ensure best chances of success.

Staffing was by far the most frequently cited challenge for corporate venture building teams. Venture builders told us that they struggled when asked to use the corporation’s internal staff for the projects, as this profile of person often lacked the needed entrepreneurial skills. But at the same time, venture building teams often struggled to attract talent from outside the company, as very few — just 20% —  were in a position to offer start-up style equity in the new companies being built.

As one respondent put it, the top challenge for the team was “attracting top entrepreneur in residence talent and compensating them accordingly with the opportunity, keeping them motivated in the long term with only base salary and bonuses.”

Register here to read the full survey of our findings, including case studies showcasing different venture building models at:

• Standard Chartered
• Old Mutual
• American Heart Association
• DB Schenker
• Techint Group

Complete our brief registration form to gain free access to the full report.