Tyler Stauss’ startup idea – to create an online index of promo codes – did not fall from the sky or come to him in a dream. “I started my career at a startup called SurfMyAds.com,” he said. “After a year there, I started a company in the same space called GoPromoCodes.com.” Ten years later, Stauss is still running the website.
“I don’t think I could have done it without working for the first company,” Stauss said.
Stauss’ story is a familiar one in today’s entrepreneurial landscape, where company loyalty is eschewed for being your own boss.
After talking to several entrepreneurs whose current ventures are spinoffs of initial office jobs, we concluded there’s more than one way to innovate from your previous employer.
Spinoffs that identified a competitive advantage
A spinoff startup does not have to involve a complete overhaul or groundbreaking innovation to be worth it. Instead, most are marginal, incremental innovations on their parent company – enough, however, to gain a competitive advantage in the industry.
During his time at SurfMyAds, Stauss identified several areas for improvement. One was search engine optimization.
“I thought having a better URL structure for my retailer-specific pages would rank better in Google,” Stauss said, which he did by replacing the string numbers his previous employer used in their URLs with the name of the specific retailer.
Another was in the number of retailers offered. While his previous company had a limit to their offering, Stauss listed as many retailers as possible, “regardless of whether I could make money from the coupons or not.”
GoPromoCodes did not invent anything new or revolutionize an industry. By applying a few tactical changes, however, it was able to gain a leg up on its parent company.
Spinoffs that applied a new technology to an old industry
In another example of incremental innovation, some changes are just a matter of applying new technology to an old industry. This was the case for Maria Vorovich, co-founder of GOODQUES, after spending 10-plus years in the advertising industry and growing tired of the “blatant inefficiencies, Zeus-sized egos and inflated belief in our own intuition.”
Vorovich started GOODQUES when she realized she could do better – rather than pulling ideas from thin air, her company would create campaigns informed by consumer data.
Vorovich is first to admit she did not invent the use of data. Instead, she said, “GOODQUES took an innovation that was staring us in the face,” noting that while data collection is hardly new in the business world, the communications field has been slow to catch up. “What is interesting is that brands are starting to realize this as a need, but agencies are slow to respond, slow to adapt and slow to change their Mad Men ways.”
Spinoffs that filled needs encountered in previous jobs
Just as business-to-customer startups are often formed around consumers’ unmet needs, business-to-business startups are formed to meet employees’ unmet needs. This proved the case for Will Read, founder and CEO of Sideways 6, who, rather than creating a competitor of his previous employer, created a service his employer could have used as a client.
The idea planted itself when Read became frustrated with the “structural rigidity” – particularly the impossibility of communicating suggestions or ideas for improvement – in his first job at UK TV network Sky TV. When Read sought out to create what he described as a “suggestion box 2.0,” he realized that Sky TV already had one in place – providing further testament to its ineffectiveness.
Instead, Read focused on creating a program that was less clunky. Rather than requiring users to download a separate app or software, Sideways 6 integrates with pre-existing communication tools like email and Facebook to capture employee ideas. Thus, his startup is kind of meta – an employee’s idea for a way of cataloging employee ideas.
Then there are the serial entrepreneurs who create startups based on the needs of their own previous startups. Apres, for example, was created to address an issue that founder Matthew Waite encountered at his previous company, which served mid-market technology companies as clients.
“Technology companies were having issues scaling operations in a lean and flexible way,” Waite said. “This was an issue felt most seriously at companies trying to implement AI, my previous company included.”
The problem led Waite to his next startup, Apres, which uses machine learning and automation to help companies manage their data. “Had I not built the previous company, I would have never intimately understood the innovation needed, and Apres might never have been developed,” Waite said.
Spinoffs that capitalized on an entrepreneur’s unique expertise
A further subset of spin-offs are simply the result of employees realizing their own value. After working for an international financial organization, developing their cloud-based architecture, Sebastian Dolber realized his skill experience was in demand and started his own consultancy, Astor Software.
Meanwhile, Juli Lassow started retailing consultancy JHL solutions based on her experience assessing and onboarding suppliers at Target, where she worked as an executive for over 15 years. Describing her time at Target, “I found that less of my time and my team’s time was dedicated to having open and direct conversations with suppliers,” Lassow said. “Time wasn’t spent discussing their goals for their businesses, or their goals for their partnership with Target … So I left the security of Target and I started up my own business.”
Neither Lassow nor Dolber could have started their own company if it weren’t for the experiences gained at their previous employer. Eventually, however, they started their own companies when they realized their expertise had value outside the company.
Sources of conflict
Companies are aware by now of the potential competitive threat of their own employees. There’s a fine line between inspiration and intellectual property theft, which many companies take advantage of with noncompete clauses, trade secret laws and nondisclosure agreements (NDAs).
For aspiring entrepreneurs, this is something to be wary of. One story that strikes fear is Vanity Fair‘s 2013 account of former Goldman Sachs employee Sergey Aleynikov, who was arrested for stealing computer code Aleynikov had been storing on a flash drive for later use. (Aleynikov was prosecuted twice and acquitted both times.)
Luckily, for Dolber, this was not a concern. “I did not take any proprietary code with me; I just realized the potential of the fully managed/serverless cloud services and decided to start building a business around it,” he said.
Some states, like California, are also lax about enforcement, lessening the legal challenges for entrepreneurs. “I was certainly afraid when I first started thinking about [GoPromoCodes.com] because I was young and didn’t know any better,” Stauss said, until he researched it and realized he was safe in California.
Indeed, much of the Bay Area’s success over the formerly rivaling Boston Route 128 region has been credited to California’s ban on noncompete laws, allowing people like Stauss to pursue their own entrepreneurial ventures.
“I just learned the bare bones of what I needed to get started, and then there was lots more learning after that, on my own, independent of my previous company,” Stauss said.
The irony is that many of the same companies that began as spin-offs are the ones that later spawn further spin-offs, benefitted by the same innovation-conducive legislation that once benefitted their previous employer. Even where it’s legal, no number of NDAs can stop a former employee from capitalizing on their experience.
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