mjones.la

How big internet brands can compete with startups

Sweat equity is a hard thing to reproduce. It is one thing to build a internal team to magnify an already growing business. Most large brands do this well - growing month over month - motivating their teams to do "more" of what they had done in the past. But lets look at the new "big" web destinations:

3 of the top 10 sites were grown externally with VC involvement:

YouTube
TheFaceBook
CraigsList

MySpace is the exception. The founders of MySpace became part of the eUniverse (aka Intermix) family through acquisition. While within Intermix they founded MySpace with a unique agreement that permitted them personal equity in this new venture and the ability to also raise external funds to supplement Intermix's growth funds. This could had been amazing foresight on behalf of Richard or Brad from Intermix - or just pure intelligence from the MySpace founders. What they managed to do is something that Google, AOL and Yahoo have not been able to replicate. How does a big brand build a top 10 web property online and organically.

I believe the answer is through equity distribution to founders - setting up private / partially owned subsidiaries - that have internal founders participating in ownership of the newco - giving the larger parent ownership, funding responsibility and a preferential longer term buy-back arrangement. This permits founders to spend the extra time and effort on developing these new businesses - partial legal protection to the parent for the relaxed process compliance, and the benefit of being part of a potentially large and new business segment they were not participating in the past.

I doubt many large brands will take this progressive approach - but it would be a differentiator that would attract top talent to assist in building these new companies - and possibly allow these top internet brands to truly compete with organic startups.