As the director of the Corporate Startup Lab at Carnegie Mellon University, Sean Ammirati believes there needs to be a different level of discipline for large corporations looking to fund internal innovations due to the unique nature of corporate startup investment within the broader innovation ecosystem.
While speaking at the fourth annual Corporate Entrepreneurship Forum at the Swartz Center for Entrepreneurship located in the Tepper School of Business on CMU's campus, Ammirati, who is also a venture capitalist and a professor at CMU, emphasized that because there aren't VCs to turn to for such endeavors, corporations have to decide internally if such projects are worth continued investment in a way that differs from the route a typical startup founder might take.
After all, Ammirati said, startup founders can take their pitch to the next VC should they be rejected by the first one they reach out to; corporations don't have such luxury, he added.
But when it comes to funding corporate innovations, many companies take a path similar to what's shown on ABC's "Shark Tank" television show, Ammirati said, which isn't an approach worth taking either when it comes to pursuing such ventures.
"I think there is nothing crazier that big companies do as it relates to corporate innovation than say, 'I'm going to create a Shark Tank for my company startup idea,' I literally think that's crazy on three levels," Ammirati said. "First of all, the way you fund corporate entrepreneurship is nothing like how you fund traditional entrepreneurship, so trying to draw an analogy between those two things is not helpful."
Ammirati continued and noted that the way investors actually fund startups and what is depicted on a show like "Shark Tank" is far from reality.
"We've done a bunch of deals with Mark Cuban; the way Mark Cuban actually behaves and what you see on a 30-minute TV episode is not the same," Ammirati said. "I do a lot of work with people in health care and I tell them, 'hey, how similar is what goes on in your emergency rooms to what you see on the TV drama ER,' and it's like, okay, that's about the same level of similarity as Shark Tank and what goes on in venture."
So how should a corporation pursue these endeavors?
Ammirati outlined how "The Corporate Startup Canvas," a free worksheet he made with his peers, aims to better help corporations roadmap and support their own internal innovations. It asks companies to identify ideas and explain why the corporation is poised to benefit from the implementation of such an innovation. Questions relating to scaling, an idea's business case and why it's needed now are also asked so corporations can have a better mindset of what their innovation does and where it might go in the future.
But no matter how a corporation decides to embark on its own innovations, the continued pursuit of such ventures is crucial for the overall innovation ecosystem, Ammirati said.
"Part of what we're trying to do here is create content and conversations to help people figure this out without needing to have there be consulting engagements on the back end," Ammirati said. "It is absolutely essential that, as I look across this room and I know many of you, that your comapnies keep doing this stuff because there are innovations that can only live inside your company. The world needs many of the places where you are to step up and also take a part in creating the future the way it ought to be."
