Old news, but some more outlets are reporting on the new NewsCorp startup incubator, SlingShot labs. Business Week has a good story.
MySpace plans to announce as soon as Feb. 13 that it has formed a business incubator called SlingShot Labs to spawn Internet startups for News Corp.’s growing empire of Web properties, which now includes The Wall Street Journal’s WSJ.com as well as the video game site IGN. Murdoch and MySpace CEO Chris DeWolfe plan to be closely involved in the venture, which News Corp. has seeded with $15 million to hire roughly 40 employees, mostly software developers, say people with knowledge of the plans.
Creating an incubator like this is often a wet dream for large companies tired of paying out large sums to acquire small startups. The logic is simple. Instead of acquiring the startups later, just grow the products internally. Boom! You save yourself a couple hundred million.
The only problem is that this isn’t the way the best products are created. The best companies and products are going to continue coming from the marketplace at large because the incentives are there and there are simply more companies to choose from. Incentives are big. While everyone says they’re doing startups because they “love” the business, everyone clings to some hope of a big cash out. Corporate incubators hire “entrepreneurs”, which is an oxymoron. The returns to these developers are capped by salary and any possible bonus tied to a successful product. When you sign up with a corporate incubator, there’s no bidding process that pays the market rate for your product, so no million dollar payout. It all strikes me as empty PR.
Also, incubators suffer from their partial relationship to the larger company. Example, Yahoo Brickhouse. Brickhouse is based out of San Francisco and is meant to develop new products at the beat of their own drum. The only problem is that new products don’t integrate with any of Yahoo’s existing products. Do they really need Yahoo Mash? Where does Fire Eagle fit with the rest of their mobile initiatives?
Trying to internalize the startup method means they’re going to experience a lot of the same problems faced by the community as a whole. A lot of companies don’t go anywhere. The same is true for incubator companies. At least in the real world, failures are done on someone else’s dime. When large corporations buy the “spaghetti that sticks” they’re effectively subsidizing those failures by rewarding the successful company and encouraging more entrepreneurs.
Corporations are much better off injecting themselves into the process by making smart investments in sectors or companies that fit with their objectives and then just continue to buy the good stuff.
