Startup or Spinout? Choosing the Right Path

Aligning Your Venture Approach with Strategic Goals

Before we even get to making a choice, it starts with asking the right question. Rather than asking, “Should we build this internally or externally?” a more productive question is, “What is the best way to ensure this venture thrives?”

George emphasizes that there is no single correct answer. “The choice sometimes is not as easy as some folks might think. It’s really about how we define ‘easier.’” The right approach is based on your organization’s goals, resources, and market position:

• If your venture aligns closely with core business strategy and needs to leverage existing corporate assets, internal development may be the best fit. However, this requires strong executive sponsorship and dedicated resources (without which the venture may struggle to gain traction).
• If speed, agility, and an independent culture are critical, external partnerships or spinouts may offer a more effective route. This can shield the venture from internal constraints and allow for rapid experimentation.

George advises innovators to assess key factors like leadership alignment, operational flexibility, and risk tolerance before committing to a path. There’s no universal answer. “All roads lead to Rome. It depends on how you execute it,” he notes. “It’s up to you to look at your surrounding environment and determine which path to choose.”

Common Pitfalls and How to Avoid Them

Innovation teams can face roadblocks when deciding between internal and external venture building. A common issue is that internal ventures stall due to corporate bureaucracy.

George notes, “If leadership isn’t fully on board from the start, internal projects risk getting deprioritized when business units shift focus.”

To avoid this, innovators should engage key stakeholders early and ensure innovation teams have the autonomy they need to execute.

On the other hand, external startups can struggle to integrate with corporate strategy, leading to disconnects that make scaling difficult. “Just because a startup moves fast doesn’t mean it will automatically align with your company’s needs,” George warns.

He suggests that if a corporation is investing in or partnering with an external venture, there must be a clear structure for collaboration.

“The best partnerships happen when there’s a balance where startups get the independence they need, but they also get meaningful access to corporate resources.”

Another major challenge is the talent mismatch between corporate teams and startup environments. Employees skilled at managing existing business operations are not always the best fit for innovation initiatives. “You can’t just take people from traditional business units and expect them to think like startup founders,” George emphasizes.

Leaders must be deliberate in assembling venture teams, ensuring they choose people comfortable with the fast-paced, uncertain nature of startup-style work.

Case Studies: Lessons from the Market

RBC’s Portfolio Approach

RBC, one of Canada’s largest banks, took a systematic approach to internal venture building by launching multiple startups under its RBC X unit. Rather than treating these ventures as traditional corporate projects, they ensured that each one operated with the independence needed to succeed. “RBC is a really good example of how to think about strategy holistically and attacking from all fronts,” highlights George.

Why it worked: RBC recognized that internal ventures often struggle when tied too closely to the parent organization’s structures. By giving ventures the freedom to operate as standalone businesses, they created a more agile and entrepreneurial environment while still benefiting from corporate backing.

This disciplined approach kept the portfolio focused and results-driven. “What RBC did brilliantly was set goals very clearly at the beginning,” George says. “If a venture isn’t self-sustainable, it gets shut down regardless of whether it’s generating leads for RBC.” By ensuring that each venture stands on its own financially, RBC created a model for sustainable long-term internal innovation.

Key lessons learned:

• Internal ventures must have operational autonomy to succeed.
• Clear performance benchmarks ensure ventures are evaluated on their own merits rather than corporate priorities.
• A portfolio approach helps balance risk across multiple innovation bets.

Hive Box’s Strategic Spinout

SF Express, a major logistics company in China, could have kept its employees’ ideas for a smart locker system in-house. Instead, the CEO recognized that building and operating a network of smart lockers required expertise outside their core logistics business. By spinning out Hive Box as an independent company and securing investment from multiple competing delivery firms, SF Express helped create an industry-wide solution that ultimately benefited all major players in the market.

Why it worked: Rather than restricting the innovation to internal use, SF Express saw the potential for Hive Box to transform the entire logistics ecosystem. George notes that this collaboration broke the deadlock of a price war and benefited the industry as a whole.

“This is a wonderful example of corporate leaders not just thinking about themselves but coming together as an industry to solve the problem of moving forward and increasing productivity.” By involving competitors as investors, the company ensured rapid market adoption and reduced resistance from other delivery services. This cooperative approach allowed Hive Box to scale quickly and capture 75% of China’s parcel delivery market.

Key lessons learned:

• If a venture requires industry-wide adoption, a spinout model can accelerate growth.
• Sometimes, enabling a startup to operate independently leads to a broader impact than keeping it internal.
• Collaboration (even with competitors) can unlock new market opportunities.

Dollar Shave Club’s External Play

Dollar Shave Club revolutionized the men’s grooming industry by bypassing traditional retail channels and selling razors directly to consumers through a subscription model. Instead of seeking a partnership or investment from a large corporation, founder Michael Dubin turned to venture capital and a venture studio to build his company. This decision allowed Dollar Shave Club to operate entirely independently, enabling it to move quickly and challenge established brands like Gillette.

Why it worked: Had Dollar Shave Club partnered with a large consumer goods company, it likely would have faced internal resistance and slow decision-making. “When startup founders approach new ideas, they make the choice of who they believe will be the best partners to bring something like this into reality,” George notes.

By remaining external, the startup was able to focus entirely on customer acquisition, marketing innovation, and brand differentiation. The result? A $1 billion acquisition by Unilever, proving that external ventures can rapidly gain market share and challenge industry incumbents.

Key lessons learned:

• External ventures can disrupt industries more effectively when they are not constrained by corporate bureaucracy.
• Speed, brand differentiation, and a direct customer relationship can be significant competitive advantages.
• A strong venture-building partner or investor can provide the resources needed to scale quickly.

FLO’s Packaging Innovation

UK-based startup FLO created a standout brand in the female hygiene market using bold, ice-cream-inspired packaging to capture consumer attention. “The effect of walking down the aisle and seeing a product that looks completely different means they don’t need to put up billboards or buy TV ads. When you’re in the store, you already see it,” George explains.

Why it worked: Unlike traditional consumer packaged goods companies, which must navigate extensive legal and compliance reviews, FLO had the agility to take risks with disruptive branding. By treating its packaging as a marketing tool, the company minimized advertising costs while maximizing in-store visibility.

Key lessons learned:

• Startups can leverage bold, unconventional marketing strategies corporations may struggle to implement.
• Reducing reliance on traditional advertising channels can create cost-effective brand differentiation.
• Navigating corporate risk aversion can be a major advantage for startups operating independently.

These case studies reinforce George’s core message that success isn’t about choosing one model over the other but about ensuring the execution matches the strategic need.

“There’s no definitive answer to whether internal or external venture building is best. The real question is: ‘How do you create the conditions for success?’

The right choice depends on your strategy, your resources, and how much flexibility you’re willing to give the venture to grow,” he says.

Next Steps

If you’re weighing internal vs. external venture building, consider these guiding questions:

1. What problem are we solving, and does it require leveraging corporate assets or moving independently?
2. Do we have leadership alignment and dedicated resources for an internal build?
3. Are we willing to provide autonomy and investment if we go external?
4. What talent and capabilities do we need, and where are they best sourced?
5. How will we measure success, and do we have a clear framework for decision-making?

By answering these questions, you can choose a path that maximizes impact, whether inside or outside corporate walls.