Making Internal Software Startups Work: How to Innovate Like a Venture Builder?

Abstract: With the increasing availability of software usage and the influence of the Lean Startup mindset, more and more companies choose to innovate through internal software startups. Such startups aim at developing new business models while at the same time relying on the resources from the companies where they emerged. The evidence from both researchers and practitioners indicates that driving internal software startups is challenging. This paper seeks to address this problem by asking the research question: how to make internal software startups work? We examined a unique case of a venture builder, a company primarily focusing on building internal software startups and launching them as independent companies. Applying a Grounded Theory approach, we analyzed data on four internal software startups at the case company. The results suggest that four strategies drive the examined startups, cultural, financial, personnel, and venture arrangement. We interpret our results by drawing on earlier literature on intrapreneurship and internal ventures and suggest four recommendations to succeed with internal software startups 1 establish shared arenas for the employees, 2 provide necessary resources for experimentation in the initial phase and increase them incrementally, 3 build up in-house product management competence through coaching, and 4 harness employees own motivation to develop their own ideas.