WonderCo first maps a target market to find an exceptional company to back. They only choose to incubate a new company from scratch if their deep search reveals no existing "rocket" to provide fuel for, ensuring they build from a position of unique market insight.
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Unlike standard corporate M&A, an innovation incubator's acquisition criteria are different. Cisco's Outshift ignores a startup's revenue and business metrics, focusing solely on the technology, talent, and cultural fit to accelerate its own strategic objectives.
Don't wait for a 'Shark Tank' invention. Your most valuable business idea is likely a proprietary insight you have about a broken process in your current field. Everyone has a unique vantage point that reveals an inefficiency or an unmet need that can be the seed of a successful venture.
In a crowded market, the most critical question for a founder is not "what's the idea?" but "why am I so lucky to have this insight?" You must identify your unique advantage—your "alpha"—that allows you to see something others don't. Without this, you're just another smart person trying things.
Instead of searching for a market to serve, founders should solve a problem they personally experience. This "bottom-up" approach guarantees product-market fit for at least one person—the founder—providing a solid foundation to build upon and avoiding the common failure of abstract, top-down market analysis.
A core investment framework is to distinguish between 'pull' companies, where the market organically and virally demands the product, and 'push' companies that have to force their solution onto the market. The former indicates stronger product-market fit and a higher potential for efficient, scalable growth.
When evaluating revolutionary ideas, traditional Total Addressable Market (TAM) analysis is useless. VCs should instead bet on founders with a "world-bending vision" capable of inducing a new market, not just capturing an existing one. Have the humility to admit you can't predict market size and instead back the visionary founder.
An internal incubator’s biggest mistake is acting like an external startup. Finding product-market fit is insufficient. Lasting success requires achieving "product-company fit" by deeply understanding and aligning with the parent company's internal business units, strategic goals, and unique challenges.
Seeing an existing successful business is validation, not a deterrent. By copying their current model, you start where they are today, bypassing their years of risky experimentation and learning. The market is large enough for multiple winners.
