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Introducing Extovate

I’ve been working at the startup-corporate intersection in one form or another since 2015. After spending three years at The Estee Lauder Companies building the External Innovation function and writing The Startup Gold Mine, I worked with a bunch of other large companies as a consultant to build and implement external innovation strategy, which in regular English means I helped them scout startups to solve tech and business problems. A big part of this work was building market and startup landscapes.

Doing this kind of work as a consultant was interesting but problematic, for clients and for me. Consulting, at least the way it’s usually done, creates a weird incentive structure where consultants are incentivized to take longer to get something done, simply because they can bill more hours. While most consultants wouldn’t consciously do this, incentives shape our behavior in ways we can’t perceive directly. This definitely isn’t good for clients but also isn’t good for me in the long run. Another major issue with doing this type of work as a consultant is the lack of process. Every project is different from the previous one and while you can try to create a process for yourself, it doesn’t really work. So you find yourself reinventing the wheel every time. This means clients also have to pay more money to account for the hours it takes you to get up to speed. Not great.

Nowhere was this more clear than projects that involved helping connect large companies with relevant startups. When I was doing external innovation full-time, I saw large consulting firms (yes, the ones you’re thinking of) charge six figures to create beautiful 100 slide decks where the only real value was a quick, high-level summary of the market and a list of startups that usually lacked key information like detailed product comparisons.

Seeing these problems is what led me to co-found Extovate with Sean Ammirati and Dalal Almukaimi. Extovate is a tech-enabled service that builds customized external innovation market maps. These maps are completed within three weeks and done at a fraction of the cost of an innovation consultant. Each Extovate Map consists of two main sections: a market overview and a startup scan. During the intake process, customers share the market or technology area they’d like to research, what their goal is with the search (such as partnering or investing), and key parameters of the startups they’re targeting. The market overview is a deep dive into the particular market being researched – and includes a breakdown of subsegments, regional differences, specific technology and market trends, corporate activity, and much more. The startup scan is a detailed look at startups that match their criteria.

Our customers, which include mid-market companies as well as Fortune 500s, have used Extovate to identify investment targets, source new technology opportunities, and build landscapes of potential disruptive threats.

There are two main things you get by working with Extovate on your external innovation program. The first is an on-demand service that can take you from zero knowledge about a market or technology to having a full landscape along with a full funnel of startups relevant to what you’re searching for – all within three weeks. In comparison, finding an individual consultant or signing an engagement with a large consulting firm can take months, not to mention the higher cost and in our opinion, inferior results. The second is a tool that can keep those landscapes updated as things inevitably change over time.

If you’re a corporate innovator and curious about how Extovate can help you, reach out to me and I’ll send you some free sample reports and even spend some time with you on the phone to audit your external innovation process. You can reach me using any of the channels here or via the Extovate website.

Starting and Selling a MicroSaas Product in 16 Months

I officially sold Open Innovation Leads to a new owner last week. Here’s the story of the project, including how I built, grew, and sold it, as well as what’s next.

Problems With Corporate Innovation DAOs

A few weeks ago, I wrote an article exploring the effects of structuring a corporate innovation group as a decentralized autonomous organization. In that post, I outlined the problems that a DAO structure could help solve versus the traditional innovation structure, like the innovator’s dilemma, resource allocation, incentives, and more. In the weeks since, I’ve had a chance to discuss the article with a bunch of people, many of whom have different perspectives on this topic than I do.

In this article, I take the opposite position and outline the problems with using a DAO structure for corporate innovation purposes.

Reimagining Corporate Innovation As a Decentralized Autonomous Organization

Since the inception of the term ‘corporate innovation’, companies have struggled with how to structure it in a way that is both separate enough from their core business to be innovative but still able to take advantage of the resources large companies provide. Other struggles like incentivizing top talent, failure stigma, and involving stakeholders like customers have been problems since the beginning. To solve these issues, companies have developed and continue to experiment with structures like accelerators, corporate venture capital, and innovation labs but the struggle continues.

The rise of web3 has presented a potential new solution to the corporate innovation problem in the form of decentralized autonomous organizations, commonly known as DAOs. To use Linda Xie’s definition, “A decentralized autonomous organization (DAO) is a group organized around a mission that coordinates through a shared set of rules enforced on a blockchain. This article by Packy McCormick gives you a good overview of DAOs and why they’re so powerful. Packy makes one addition to the definition that I think will make the concept click:

“More simply, DAOs are a new way to finance projects, govern communities, and share value. Instead of a top-down hierarchical structure, they use Web3 technology and rapidly evolving governance and incentive systems to distribute decision-making authority and financial rewards. Typically, they do that by issuing tokens based on participation, contribution, and investment. Token holders then have the ability to submit proposals, vote, and share in the upside.”

In this article, I’ll explore how a corporate innovation DAO could be structured and what it solves. To make the discussion more straightforward, let’s assume the DAO is composed of stakeholders including the parent company, the innovation team and internal employees, loyal customers, and fans of the brand. These stakeholders all hold tokens in the DAO and the value of those tokens increase if the DAO is creating value or there is some other social benefit that comes with being part of it.

Customer Mirage: Risks of Signing A Large Company As Your First Customer

Imagine you’re in a hot, dry desert and desperate for water. You’ve been walking all day and the thought of drinking nice, cool water makes you ecstatic. Suddenly, you see it! A pool of water in the distance. You hurry towards it, running as fast as your legs will carry you. But when you arrive, all you find is sand. Damn sand!

You’ve just experienced a mirage. And this is exactly what it feels like when you’re looking for that first customer and close a whale. You’re desperate for validation and revenue. If only you could get that big name-brand customer, investors would be tripping over themselves to give you money! TechCrunch would write about you! The cash would be rolling in and all your worries would be over!

After weeks or more likely, months of emails, calls, negotiation, and nervous waiting, you finally land a deal with a WHALE, a well known publicly traded company. Not just any deal – this deal starts with $100k+ in revenue and has the potential to bring in much, much more. This is the inflection point right? It’s all #winning and *crushing it* from here!

Unfortunately it usually doesn’t work like that. If your first customer is a large company, the deal is more likely to be a mirage than the start of a winning streak.

The Art of Rejecting Startups

Corporate innovation people get pitched by startups All. The. Time. In theory, a startup may reach out or be introduced and they’re a perfect fit at the perfect time, leading to a quick deal. I’ve personally never seen a deal happen that smoothly and certainly wouldn’t bet on it. The far more likely scenario is you’ll be rejecting startups that reach out to your corporate innovation group.

Startups are rightly rejected by large companies for a variety of reasons. The startup may have misinterpreted the corporation’s existing capabilities or the corporation is already building a similar solution, internally or with an external partner. But many times, a startup with an objectively needed capability comes around – and yet, the timing isn’t quite right so a deal doesn’t get done. Sometimes the issue is budget. Other times, it could be an attention problem – decision-makers are focused on another, more important problem.

No matter the reason, the world is always changing and corporate needs are no different. Smart corporations (similar to VCs) are great at saying no while leaving the door wide open for future collaboration when a need arises. There’s a fine line between misleading a potential partner and clearly saying no but leaving the door open for future opportunities.

The Five Questions Large Companies Ask When Evaluating Startups

I get contacted regularly by startups looking to partner with large, global companies who can give them scale. My work over the years has shown me a number of these deals from both sides of the table. While almost all of these relationships make some logical sense on paper, in reality they are way more difficult to implement than founders initially think.

On the surface, the logic for these relationships is straightforward – one party has a unique technology or product that can improve things for end users while the other party has global distribution and scale. What’s not to love? But there are several other factors that go into the decision making process for large companies which founders often fail to consider.

Corporate Startup Lab Demo Day 2019

Last week, I had the pleasure of attending and keynoting Carnegie Mellon University’s Corporate Startup Lab Demo Day. My friend and mentor Sean Ammirati first shared the Corporate Startup Lab model with me in 2017 and I’ve been a fan since Day One. The idea is to bring together Fortune 500 companies with interdisciplinary teams of students to build internal startups solving problems and developing new business models.

Inside Outside Podcast Interview

I recently had the opportunity go on my friend Brian Ardinger’s podcast, where we spoke about The Startup Gold Mine. We were able to get into a few different things, including:

Startups and corporates speak a different language

Different timeframes
Size of deals
Response times
Number of stakeholders

Corporate incentive structures for successful partnerships

How comfortable is the corporate team in innovating? If comfortable, they’ll have a higher tolerance for misses. Look at the entire portfolio.
Companies that allow intrapreneurship give employees new outlets to thrive.
Allow more employees to scout for deals – innovation can come from all parts of the organization.

What are the benefits of startups-corporation collaboration?

Inside large organizations (10,000+ employees) it’s an echo chamber. They only see direct competitors.
Need someone looking outside of direct competition. Expose the corporate team to new ways of thinking.
Startups also get exposure to see how their tech can apply to different domains.

You can listen to the podcast on iTunes, Spotify, or your favorite podcast player. Learn more about this and other great innovation episodes on the Inside Outside Innovation website.

Make sure to grab a copy of The Startup Gold Mine at your favorite bookstore!

Agile Giants Podcast Interview

My good friend Sean Ammirati has started a brand new podcast called Agile Giants. The show is inspired by his work over the past few years leading Carnegie Mellon University’s Corporate Startup Lab (CSL). In Sean’s words from his Medium post announcing the podcast:

If you already are a corporate entrepreneur, want to become one or are just looking for some advice around commercializing transformative innovation, this podcast is for you.

Sean was nice enough to interview me on the podcast. Our wide-ranging conversation was mostly focused on The Startup Gold Mine but also included stories from other projects I’ve worked on, like Estee Lauder’s External Innovation team.

You can listen to the episode below or on your favorite podcast player.