After questioning Reasons to launch a spin-off, the second article in our series devoted to spin-offs this time focuses on best practices for doing so in the best conditions.
If you're looking for content that tells you how to start a business, you'll find millions of articles, videos, podcasts, and other books.
On the other hand, it is very different if you launch a query on “how to create a spin-off”, where we are confronted more with an information desert than with a tsunami.
Expertise is indeed much rarer in this field, even though we are currently witnessing a small spin-off gold rush.
Meeting with some founders of spin-offs to gather good practices.
Achieve momentum before leaving the parent company
You have probably already heard this advice given to consultants and sometimes to entrepreneurs: you must wait to bill your first client before creating your legal structure. Indeed, there would be no point in doing so if you are not assured of having a product or service for which the market is ready to pay.
In a way, it would seem that similar advice could be addressed to the founders of spin-offs.
Indeed, the success of such a structure will be all the more assured if he takes advantage of this period within the company to validate market interest and work on his go-to market strategy. At 321, this phase is completed in two months to make it possible to save incomparable time and money.
Hugo Falgarone, CEO of Skyreal (an Airbus spin-off), followed this advice to the letter:
” I did not need to raise funds to start because I had found enough customers in advance so that, within the first month, I had money to start and hire the first people. From the first year, we generated profits.”
Ensure its financing
This is a variation of the previous point for a product that would need to continue its R&D phase and which is therefore not intended to find an immediate customer base. The advice is provided by Cécile Campagne, director of valorization and industrial partnerships at the Institut Curie. Indeed, this leading player in the fight against cancer has also distinguished itself by its ability to launch numerous spin-offs over the years.
” Today, we have 32 companies founded by technologies from the Institut Curie, explains Cécile Campagne. Our oldest was created in 2002, but it became exponential from 2016 when an institutional strategy was put in place. ”
This serious track-record has allowed Institut Curie to forge a certain number of beliefs over the years.
One element thus remains fundamental in his approach:
” We will create the startup at the moment when external funds are assured, explains the director of valuation. You only make a spin-off official when you have an investor, whether it's a business angel, VC, startup studio or even corporate VC.”
It is also possible that the initial financing is carried out by the parent company itself, which requires having worked out a precise business plan so that the amount requested is as fair as possible.
Thus, in the absence of market confirmation provided by the signature of a first customer, the spin-off still receives validation from this investor.
Carefully plan the new incorporation
” Making a spin-off is not a project you do just for fun, laughs Michaël de Lagarde, founder and CEO of Alteia, a spin-off of Delair, which he also co-founded.
” This is something that must be sustained so that it is not too brutal and experienced as a teething., shares Michaël de Lagarde. We couldn't unplug the support functions the next day, so we had a transition period during which the support functions worked for both entities. They were part-time with a planned agenda. We have taken the time to hire and train the newcomers.”
Twenty-four months later, the two companies continue independently with strong growth on both sides.
Retain the sponsor of the parent entity
Among the many questions that will arise with the creation of a spin-off, there is that of identity. It is indeed a balancing game to find the posture that will allow you to reap the benefits, with as few disadvantages as possible.
Even today, the image of Alteia is often associated with that of drones, even though separation has been put in place to diversify the source of the processed data (which are now only 10 and 20% by drone).
“It's an image that sticks to the skin, confirms Michaël de Lagarde. We are still hearing people say: “Oh yes, you are a Delair subsidiary” three years later.”
This is obviously a founding element of these spin-offs, which often play the spin-off game for a while. For Hugo Falgarone, who flew away from Airbus with the Skyreal project, this was a presentation element for several years.
” I always emphasized the link with Airbus in my presentations. It was an important part of our identity. But four or five years later, we started deleting it from our presentations and our website. I will obviously say it if someone asks me how Skyreal was created, but that is no longer how we present ourselves. I think it's a sign of maturity. A way to demonstrate that you are an entity in your own right.”
The link with the parent company can therefore be an advantage during the launch, a way to legitimize a young project, to open doors for it.
Finding customers with a culture close to the parent company
Another advantage associated with setting up a project within a parent company is the establishment of a very specific culture. This is indeed something that has been very positive for Skyreal, which has found itself attracting a whole range of companies with a culture similar to that of Airbus:
” They can see that our tool comes from a very industrial environment and some customers are very sensitive to it.”
In this case, being a spin-off had the advantage of making it possible to identify a perfect clientele: not only was Airbus immediately (and still remains) a Skyreal customer, but the spin-off was also able to attract Airbus suppliers and a large number of players with a culture similar to that of the aeronautical giant.
Be aware that each spin-off is unique
As we have seen, a certain number of organizations have become veritable spin-off factories, like MIT or Google. At Institut Curie, Cécile Campagne attributes their numerous successes to the incubation program they have set up.
” Incubation in the direction of the egg that is incubated before hatching, she explains. The researchers will thus sign a support agreement with Institut Curie and they will enter a program where they will meet a network of investors and mentors to work on their economic model, business plan, pitch, etc.”
There is no no miracle recipe therefore, but a very structured process to support the creation of a spin-off.
The secret ingredient, however, is the flexibility that is put in place to adapt to the particularities of each project. No spin-off is similar to the previous one and should be designed like any other entrepreneurial adventure: with patience, curiosity, and a lot of determination.
In the end, everything depends on the team that we put in place to support the launch of this spin-off. For 321, the path forward is clear:
“A project will be all the more fluid and successful if it is in the hands of seasoned entrepreneurs, explains Patrick Amiel, founder of 321. It is therefore often a bad idea to create a spin-off with 100% internal collaborators. You cannot improvise yourself as an entrepreneur and you must seek these skills from people who can best support the success of a spin-off.”.
See you next month to get into the hard part of this [HOW TO] spin-off: with sharing the mistakes not to make when you launch your spin-off!
And if you want to test the market's appetite for one of your services developed internally, our team of entrepreneurs can assist you.
