Spinout Ventures Examples
Cisco WebEx → Zoom:
Eric Yuan was VP of Engineering at WebEx. Yuan wanted to develop a mobile friendly version of WebEx but was turned down by upper management. He was unhappy when he realized that most customers were dissatisfied with the performance of WebEx. Eventually, Yuan left to create Zoom, attracting 40 employees from the parent firm over to Zoom. This team included a marketing executive and a group of former WebEx engineers.
Shockley Transistors → Fairchild:
The story begins in 1955 with William Shockley, who invented the layered transistor in his lab at Shockley Semiconductor Laboratories. He was a brilliant designer and engineer but a reportedly a lousy manager. When Shockley took a pass on short-term opportunities to sell silicon microprocessors, instead championing a longer-term opportunity to develop technology for the telecom industry, a group of eight engineers left to start their spinout. This was Silicon Valley’s inaugural spinout and became one of the most important parent firm stories in the process. This group was subsequently labeled “The Traitorous Eight.” The group started Fairchild Semiconductor in Palo Alto, California, each founder putting in $500 in seed capital in 1957.
Fairchild → Intel:
Fairchild Semiconductor was a manufacturer of the Fairchild image Sensor and invested more in highly related technologies. Noyce and Moore believed that Fairchild would fail to invest sufficient developmental resources in research and development on new semiconductor technologies. Therefore, they left and started Intel. Noyce, Moore, and Grove alternated as chairman and CEO for Intel’s first three decades. Together they implemented the inflection points strategy, which posits that innovations always come along to change the rules of the game.
General Motors → Chevrolet:
Durant left GM over a strategic disagreement about the company’s acquisition strategy. Durant started Chevrolet in 1911 with Chevrolet and others to go after the small car marke. Chevrolet was quite successful. It sold its first production models in 1913 and had increasing sales and profitability. The spinout was so profitable that Durant could buy enough GM shares to take over the company and install himself as President. Like Buick before it, Chevrolet was acquired and folded into GM and became one of its highest-performing divisions, although it did go through some tumultuous periods.
Paypal → Palantir:
Founded in 2003, Palantir is a B2B business and information technology services company whose customers are large corporate and government organizations looking to solve big problems in their industries. There is an interesting link between Paypal and Palantir in that the former is a parent firm of the latter. The two companies have in common a combination of mentorship and seed investment from controversial billionaire Peter Theil, whose experience with credit card fraud at Paypal served as a motivation to start Palantir. Theil recruited Lonsdale, the company’s first CEO after he had interned at Paypal. According to Protocol, over 170 companies were formed by former Palantir executives and employees. That many spinouts mean that there is a whole ecosystem of related companies creating opportunities for Palantir, its mobile employees, and entrepreneurial founders.
Apple → Electronic Arts:
Electronic Arts (EA) is a leading media company specializing in video and computer game software. In 1987, Trip Hawkins completed his education at Harvard and landed a job at Apple as Director of Strategy and Marketing. At that time, Apple’s revenue was still relatively small and the whole organization had only fifty employees. He accomplished his dream by benefiting from Apple’s initial public offering in 1980. Having abundant wealth from Apple’s growth strategy leading to an IPO, Hawkins decided to start his own business. He raised $5 million from private investors and used it to found EA.
