There’s no such thing as a “startup inside of a big company.” This misnomer actively misleads both big company employees working in such teams as well as people toiling in actual startups. Despite all best efforts to create megacorp “startups”, they can never exist. Here's why:

(And, by the way, I ran one of these “startups inside of a big company” myself and at the time thought it was basically a startup. We had a cool name. We were small, lean, and agile and dreaming about the future and had a $50,000 3D printer. This was not a startup. I was wrong.)

1) The most fundamental, pervasive background thread of an early-stage startup is that when it fails, everyone has find a new job. The company is gone, kaput, relegated to the dustbin of Crunchbase. The company literally lives & dies on the work every employee does every day.

On the other hand, early-stage work that any 20-person “startup” team does inside of a 50,000 person company can’t cause that entire company to fail. The physics dictate that it is impossible. (It is also why some people prefer the stability of big company jobs, and that’s ok!)

2) In the startup community, early-stage failure is often tolerated and even celebrated. People understand what an accomplishment it is to have built a startup and are eager to hire people for a next gig. Failure is a badge of honor and is seen as eventually leading to success.

In many big companies, on the other hand, taking a risk and failing often puts the stench of failure on the people who tried, leading to career stagnation at the hands of those who chose the “safer” path of sticking with the cash cows that are going to make money no matter what.

3) Big company “startups” start off with the existing infrastructure of a megacorp. The company provides snacks and drinks. Someone takes care of custodial, finding you office space, makes sure you have sweet conference rooms, benefits, hardware, access to software and services.

In fact, in a big company “startup” you often get the coolest space and the best perks. Teams are set up in a “garage” or “innovation lab” decked out with modern amenities, cool showcase design elements, and state-of-the-art hardware and workspaces.

In a real early-stage startup, you are taking out the trash yourself. If you want a drink, you buy it. You build your own desk. This can actually be a fun part of startup life; it teaches you to take less for granted and creates a tangible sense of ownership in the company.

True story: We once wrapped an ethernet cable around the outside of our high-rise office building like a clothesline from the 19th to 18th floor to get internet to our sales team. I bought the cable bulk from Home Depot and tried to pick a subtle color so we wouldn’t get caught.

These all seem like small things, but creating a functioning, humane workplace for people to do great work can take a lot of time, thought, and resources. Emulating the startup “garage” atmosphere inside of a big company is all of the glamour without all of the garbage.

4) A big company “startup” product is sold and promoted with the resources of the big company behind it. Even if you are a “just” a 30-person team, when you do Fast Company to show the cool thing you incubated, it’s with the implicit megaphone of a Google or Facebook behind you.

You’ve got a field sales team ready to sell what you’ve created. A marketing/PR engine ready to promote it. The name, goodwill, and trust that your company has created with customers. These are all incalculably valuable, and often forgotten or taken for granted.

As someone who made a transition from a big “center of the tech world” company to founding a company, I didn’t realize how much I assumed that when we created new stuff, the world would pay attention to it. No such luck. In the startup world, you have to hustle for every story.

5) Hiring in a big company “startup” is often more like a draft, where you get to pick the “best & brightest” from other teams to rapidly fill your headcount. Teams can quickly ramp to 30, 50, 100+ people, with plenty of money to pay them and loads of readily-available talent.

Startups, on the other hand, have to put much more effort into building their teams. Every hire is from outside the company. You have to sell people on your vision, the ambiguous role, that you will still be around to pay their salary and health care in six months.

Real startups naturally attract people willing to embrace the risk/ambiguity in return for bigger challenges, autonomy, faster learning, and more ownership/upside. When I read megacorp resumes that say they work “in a startup,” I try not to judge. They don’t know how it sounds.

All of this is not to say that “innovation teams” inside of big companies shouldn’t exist, or that they are bad places to work. These teams might well be fun, with smart people and great perks. They may produce interesting products. But they are certainly not a startup.

Big companies bragging about "start up culture" is right up there with "rockstars" on my list of sure fire ways to make sure I never want to work for a company.

you need skin in the game

Is it important for something to be called a “startup” as long as small teams are innovating inside a big company?

All of this is remarkably consistent with my experience (I've worked at several startups, and been on several 'startups at larger companies', and started and failed at my own company). Well said Jensen!

Interesting breakdown, thanks. What would you recommend big companies do differently?

I think @jensenharris is is not saying that big companies need to do something differently given their goals; just that employees should understand the difference between that and working at a true startup.

If your question is what company should do if they wanted to use their resources to start startups, then I'd say they should do what GV does and just fund actual startups.

I don't know who GV is? But assuming they want to start startups so that they can be more innovative.... research has shown that if a company isn't innovative, simply acquiring startups isn't going to make them so - more likely their bigger culture will just kill the startup's.

And at least at some corporations, you still have to deal with their bureaucracy and lawyering. Can't simply take risks or hack processes or skimp on the legal bits. Which can really slow down some types of disruptive startups.

Great thread, reminds me of the four hours I spent digging a flag hole in rocky north vegas soil at Hyperloop. Our desks were doors from Ikea. (And weren't made for 20 ton hydraulic cylinders lol) That was a startup.

I worked for a business incubator funded by a very large company. Startups got a lot of resources via us but they were not BigCo employees. This seemed to be the right mix of best of both. We could do what needed to be done. The startup had to make its own way to survive.

Seems like a good reason for big companies to spin out interesting projects rather than keeping them in house. They get significant ownership in exchange for VC and right of refusal on an acquisition if it later makes sense.

Great thread. Two more: 1) no stock options or promise of an exit. This can be a rallying cry. 2) Walk around the office at 5:00pm. In BigCo the place is empty. In startup it’s humming. Resulting social dynamic and team cohesiveness are not BigCo but are definitely not Startup

Some BigCos don’t even have the sales machine ready to help. I’ve worked at two BigCos where the sales team had long-standing relationships with customers. They spent more time protecting custs from product team “great new ideas” than selling. Startups can align incentives better

I was hoping you'd get to this point, and I think it's significantly more important than your almost incidental mention indicates: the largest upside in a large company is generally a pat on the head and a modest bonus. The upside in a startup is a seven-figure-or-more payout.

Conversely, if the megacorp doesn't want to endorse you, it's basically impossible to do anything because they will block you and quell your branding/marketing decisions.

That's so bad ass

Generally agree with larger point, but most in big companies are shielded from consequences of failure. From my experience at Apple and Facebook, plenty are promoted after working on products that fail to take off or stagnate for years. Not sure it's bad for your career at all.

I wish that were true but this failed founder is 5 months into a job search.

I’ve heard “we’re like a startup” more times during interviews than I can count. Thanks for spelling out the differences. Very insightful

I hear that too. They're not.

Having worked in both, I'll add that the "big co startup" picture you paint is best-case scenario: resources of a big company, self-determination and work ethic of a startup. There's a much darker possibility:

That's where you're resource-starved like a startup, but suffer the bureaucracy and infighting of a large co.

Most happens in dying big companies who half-heartedly try to recapture their innovative youth on the cheap, but senior leadership doesn't really buy in, or is just prepping for a sale and trying to inflate the price.

If ever you find yourself in one of these situations, look for a new job immediately. There's no winning outcome (except bitter experience).

WARNING: Comments like that will earn you the wrath of all those that lead incubator efforts at big companies. :-)

technically the smart thing would be to do is say "yes, that is indeed the worst case scenario. here's how we avoid it: <share doc>"

Completely agree!!

No carrot or stick placed properly in this environment

Great thread. Having a field sales team ”ready to sell” in bigco does not necessarily result into sales of a new disruptive producr as salespeople are notoriously comfort-seeking and are likely to ontinue to sell what they already are familiar with.

Creating and launching a new product within an established big company has its own set of unique challenges (anti bodies and big company thinking) but it is nothing like a true startup. The biggest difference is the knowledge that there’s no safety net in a real startup.

Thanks for sharing, Jensen - Pls do consider blogging. Cheers,

It's also the common phrase for a new team lacking direction and start throwing agile jargon and lean methods when it is neither a manufacturing nor software company

Speaking of which the best job title in a "start up" is of course "consultant". No wonder the man is scrubbing off all the barnacles today.

Two additional differences that I see: 1) Corps sometimes launch “internal startups” because they fear that someone more nimble may create the next big thing and disrupt their business. Yet the implicit charter of the “startup” is often to create that thing, non-disruptively

which is kind of hard to achieve. 2) Corporate projects rarely fail with a bang, for reasons of politics. So instead of fail fast, everybody “works” until the budget has been spent, the project is then declared a success and transferred to some poor souls in Bangalore.

Great thread. Could probably also do a whole breakdown of how this impacts the bigco employees who don't get to work on the shiny incubated startup. Or often worse are asked to "give it what it needs". Negatives almost all the way down.

So you mean such pseduo startup miss the soul.

A very comprehensive list of differences between (free) entrepreneurship and corporate entrepreneurship (intrapreneurship). But I could easily use this to claim that intrapreneurship is way more effective than entrepreneurship.

Hadn’t thought about [2] but definitely see it in hindsight