Which Companies Have The Best Corporate Incubators?

Corporate incubators, also known as innovation labs, are a powerful tool for companies looking to innovate and grow. Essentially, they are internal startup programs that provide resources and support to employees or external entrepreneurs to develop new products, services, or business models. The goal is to foster innovation, create new revenue streams, and maintain a competitive edge in the market. In this blog, we will dive deeper into what corporate incubators are, their benefits, and some successful examples.

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Suppose you're interested in learning about other types of incubators, such as startup or small business incubators. Then, I recommend you read my piece What is a Startup Incubator afterward.

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Best Corporate Incubators

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Let's look at and learn from the companies with the best corporate incubators. The following stand out:

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1. Palo Alto Research Company

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Xerox is credited with the first corporate incubator, Palo Alto Research Company (PARC). Jacob Goldman, Chief Scientist at Xerox, pioneered the program in 1970. Unlike Xerox's existing laboratories, which aimed to refine or improve existing technologies, PARC's task was to create new computer-technology-related products and hardware systems which the parent company, Xerox, could commercialize into products.

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Located in California, PARC assembled a world-class team of experts in information and physical sciences from the nearby SRI Augmentation Research Center (ARC), Defense Advanced Research Projects Agency (DARPA), National Aeronautics and Space Administration (NASA), the U.S. Air Force, and graduate students and alums from Stanford University.

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PARC is the gold standard for corporate incubators, with many companies referencing its structure and collection of talent as something they want to emulate when setting up their incubators. For example, South Park Commons, a community for startup founders, references itself as a modern-day PARC.

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Notable PARC accomplishments:

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• Laser printers
• Computer-generated bitmap graphics
• Graphical user interface (GUI)
• Bravo, the WYSIWYG modal text editor
• Interpress
• Ethernet
• Object-oriented programming (OOP)
• Prototype-based programming
• Model-view-controller software architecture
• AspectJ

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2. Area 120

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Area 120 is Google's in-house incubator. Sundaar Pichai, Google's CEO, created the program in 2016 to provide leverage to Google employees who were already building products as part of their 20% time dedicated to building side projects. Since 2016, Area 120 has incubated more than 50+ projects, many of which have graduated to Google products.

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In addition to thousands of employees who contribute 20% of their time to projects in Area 120, Google also employs full-time team members of Area 120 who act as cofounders and GMs for specific projects. However, after Google's recently laid off 12,000 employees, fewer than 100 full-time team members are dedicated to Area 120.

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So why does Area 120 work? Some things that stand out:

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• Ensure that your company's mission aligns with its culture of innovation. This means empowering your leadership team to encourage entrepreneurial behavior and giving employees enough space to create, build, and make progress on ideas.
• Patience is a must. Innovation is complex, and it takes time to get results. Without ample time and investment, teams won't succeed.
• Maintain relationships between the parent company and incubator. Do this by encouraging cross-team collaboration within the incubator and leveraging the skillsets of employees at the parent company to contribute to the projects. This will lead to products seamlessly transitioning underneath the parent company when the timing is right.
• Be rigorous with your experimentation. Set clear criteria for evaluating ideas, set checkpoints to gauge progress, and outline clear move-forward or stop points with the product. This way, you don't sink time into projects that are not worthwhile.

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Notable Area 120 products:

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• Tables: A work-tracking tool to rival Airtable.
• Tangi: Bitsized video content focused on creativity and DIY projects.
• Chatbase: A way to analyze and improve AI-powered chatbots.
• Smart Reply: AI-powered responses to inbound messages.
• Byteboard: Replacement to on-site technical interviews for engineers with project-based assessments.
• Aloud: Google Translate for videos.
• Checks: Relevant and actionable insights for developers to identify app privacy issues.
• Qaya: A web storefront for creators.
• Stack: Scan and organize your documents.
• GameSnacks: A streamlined platform for HTML5 web-based games.
• Keen: A way to track your interests to rival Pinterest.
• Shoploop: A new and entertaining way to shop online.
• Fundo: A virtual experiences platform for creators.

3. X, the moonshot factory

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Google has another corporate incubator called X, the moonshot factory. Google founders Larry Page and Sergey Brin created X in 2010. Unlike Area 120, which builds products to incorporate into the current suite of Google products, X focuses on building new technologies and stand-alone companies to make the world radically better. The teams at X have incubated more than 100 moonshot projects since the incubator opened.

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Active moonshots:

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• Chorus: Software and machine learning tools to better understand how we move and use the world's goods.
• Tapestry: A single view of the electricity system, a multi-directional and complex super-highway.
• Tidal: Underwater cameras and machine perception tools to understand the complex ocean climate to help fish farmers run and grow their operations more sustainably. 
• Taara: Expanding fast and affordable Internet with beams of light.

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Graduated moonshots:

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• Waymo: Self-driving cars.
• Intrinsic: Accessible and usable industrial robots for businesses.
• Mineral: Unlocking a more productive, sustainable, and resilient food production system.
• Wing: Transport goods with drone delivery in an ecologically friendly way. 
• Verily: Applying AI and data science to accelerate the availability of safe and effective health solutions.
• Malta: Storing renewable energy in molten salt.
• Dandelion Energy: A more affordable way to heat and cool homes with a geothermal system. 
• Brain: AI technology that powers Google Translate, Android's speech recognition system, and more.
• Chronicle: Help companies find and stop cybersecurity attacks as part of Google's cloud-native Security Operations Suite.

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Discontinued moonshots:

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• The Everyday Robot Project: Robots to help with everyday life.
• H2E: Harvesting water from the air.
• Loon: Increasing Internet access using stratospheric balloons.
• Glass Enterprise Edition: Hands-free wearable computing smart glasses to make it safer for workers in the workplace.
• Makani: Capturing wind energy with kites to create renewable energy.
• Project Foghorn: Creating clean fuel from seawater.

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4. OpenAI Startup Fund

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The OpenAI Startup Fund is OpenAI's corporate incubation strategy to invest in startups with big ideas about AI. The $100 million fund is sourcing companies to partner with by:

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• Running a 5-week accelerator called Converge to invest $1 million in 10 teams.
• Partnering with top accelerators such as The House AI Accelerator and Neo.
• Making direct investments into companies.
• Partnering with leading companies such as Slack, Notion, Salesforce, and more to increase their AI capabilities. 

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To date, OpenAI has announced four investments, including:

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• Descript: Video and podcasting editing is made easy with AI technology.
• Harvey: Automating tedious legal tasks for lawyers using AI.
• Mem: An AI-powered self-organizing workspace personalized for you.
• Speak: A new way to learn languages with an AI tutor.

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Unsurprisingly, the fastest-growing consumer Internet app, reaching 100 million users in 2 months from launch, has a knack for innovation. When you control the underlying infrastructure like OpenAI does with AI, you have leverage that you can use to create new value by allowing companies to access your technology and resources. In the coming years, expect OpenAI to ramp up its incubation efforts with more money, resources, and support for external and internal projects. Also, look for OpenAI to acquire startups early before they break out now that they are within arms-length reach of the best companies leveraging AI.

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5. Nvidia Inception

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Nvidia Inception is Nvidia's corporate incubator. It's a free program for startups to access Nvidia's technology, resources, and team of experts in artificial intelligence and computing.

Nvidia's approach to corporate incubation works because it's a way for them to track the ecosystem, a system for them to conduct market research organically by observing what AI startups need to scale, and a chance to sell directly into the Inception network. The program works with 13,000+ startups, accounting for over 50% of the AI startups in the world.

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Some of the top startups in Nvidia Inception include:

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• Subtle Medical: The leader in AI-powered image enhancement. Subtle Medical closed a Series B bringing its total funding to over $45 million in November 2022.
• AiFi: Autonomous retail solutions that scale. AiFi raised $65 million in Series B funding in March 2022.
• Kinema System: Help robots manipulate boxes using vision sensors and deep learning software. Boston Dynamics acquired the company for an undisclosed amount in April 2019. 
• Aidoc: The leading provider of artificial intelligence solutions that support and enhance the impact of radiologist diagnostic power. Aidoc raised a $110 million Series D round in June 2022.
• Day Zero Diagnostics: Revolutionizing infectious disease diagnosis and treatment to solve antibiotic resistance. The company has raised $33 million in venture capital and $10 million in non-dilutive funding.
• 1upHealth: The complete FHIR data platform for healthcare. The company closed a $25 million Series B round led by F-Prime in April 2021.

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6. InGenius

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InGenius is Nestle's corporate incubator, which they refer to as an employee innovation accelerator. Employees launch ideas on InGenius, and then employees go in and vote on which ones they like. More than 83,000 Nestle employees have contributed 10,000 new ideas, which have received over 128,000 votes and comments. From there, they assemble teams and pitch the idea to executives to receive seed funding to work on the projects for six months to build the product hackathon-style.

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In addition to crowdsourcing new ideas from employees, the InGenius team posts challenges to highlight problems within Nestle's scope that need creative solutions. For example, the team ran a challenge to find food and nutritional solutions to soothe babies, a food and beverage idea for the morning, a new Kit Kat biscuit, and more.

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Since 2014, the program has incubated 120 new businesses.

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Some notable internal products include:

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• iKnow: A mobile application to connect and bond with other Nesle employees.
• Ocean Container Tracker: Automatically consolidate global ERP data and carrier information to track ocean containers.
• Warehouse Manager Cockpit: Helps warehouse managers identify and adjust to real-time disruptions.
• Equipment Catalogue: An easy way to search the assets and equipment in Nestle's R&D Pilot plants.

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Some notable external products include:

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• WaterSense: Moisture sensors for maize crops to help farmers in Pakistan save water and increase productivity.
• Fast and Green: A delivery service for Nestle customers in London.
• Gap Close Optimizer: Using machine learning to identify promotional opportunities to help Nestle products meet monthly targets.
• ZeroPack: A system for consumers to buy Nestle products in bulk without package waste.

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7. Store No. 8

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Store No. 8 was formed in 2017 as part of Walmart's innovation arm. It was named after the eighth Walmart store, where founder Sam Walton would test new ideas. The goal of Store No. 8 is to incubate startups to enrich the lives of Walmart customers and associates and push the boundaries on the future of commerce.

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The companies formed at Store No. 8 are structured as startups with their leadership teams and must recruit the necessary design, sales, marketing, and engineering talent to round out their rosters. Walmart structures the ideas it incubates this way to increase accountability and streamline decision-making.

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As these startups form, Walmart creates necessary nodes and anchor points to provide leverage and resources to the teams they work with. Eventually, the startups formed at Store No. 8 will graduate into Walmart. 

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Some critical projects incubated at Store No. 8 include:

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• Conversational Commerce: Text or speak to shop.
• InHome: Delivery from a trusted Walmart associated.
• IRL: Using AI to increase efficiency and create better experiences in the real world for Walmart associates and customers.
• Aspectiva: Shop using the wisdom of the community.
• Mixed Reality: Create wonderful shopping experiences through Augmented Reality.

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8. Lab 1886

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Lab 1886 is the independent innovation lab of The Mercedes-Benz Group. Its goal is to develop and operate companies that build a more sustainable future. Lab 1886 was founded in 2007 and has since worked on over 100 projects, founded 13 new business units, and created 22 startups.

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Lab 1886's most impactful projects include:

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• CIDA: Transform scrapped automotive parts into sustainable premium upcycled products for use by top design studios and universities.
• Carve8: A white label, 100% digital auto subscription expert for automotive trade and fleet owners.
• GLOBE: Hydrogen-based fuel cells for industrial applications.
• Car2Go: A car-sharing platform that eventually merged with BMW to create what is now called Share Now. The platform operates in 16 major cities in 8 countries in Europe and provides over 11,000 vehicles.
• MercedesMe: Invented in 2014, MercedesMe connected your Mercedes to your smartphone, home, and other digital services to make your life easier.

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9. Leonard

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Vinci, the French construction company, set up Leonard to foster innovation capable of participating in the cities and infrastructure of the future and keep a pulse on emerging trends that could impact the business. To do so, Leonard combines both external-facing and internal programs. Its four programs are:

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• Seed: For startup founders at the earliest stages.
• Catalyst: For early-stage startups that want to accelerate.
• Intrapreneurs Path: For Vinci employees with innovative ideas.
• AI program: For all entities working to build exciting AI projects.

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Leonard invests in startups following four major themes: Construction, Mobility, Real Estate, and Energies. Some top startups that participated in Leonard's Seed program include:

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• Auxilia: AI to enable airports and arenas to speed up security searches and improve their level of security.
• Oke Charge: A peer-to-peer electrical charging service open to anyone.
• Arsenio: An online learning platform for digital construction.
• Fostr: A platform to automate construction workflows and processes.
• Machine26: Smart equipment software that helps construction fleet owners manage and resell their machines.
• Oculai: Automate work progress documentation for a construction site. 

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10. Space Green

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Naver, the South Korean online search platform, created Space Green, its corporate incubator, in 2017. Space Green's incubation focuses on consumer-centric startups in the entertainment sector. This spans new technologies in the publishing, audio & video, social & creators, gaming, artificial intelligence, and 3D, XR, and Metaverse verticals. The program features free hosting at Station F in Paris, and mentorship and support from partners, experts, and its community of founders. To date, the program has funded and supported over 45 startups.

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In addition to its incubation program, Naver created the world's largest startup campus, Station F, in Paris. It's home to 1,000 startups and features in-house programs such as the Fighters Program, FemTech Program, and Founders Program 2.0.

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Outside of Europe, Space Green also operates an accelerator program in South Korea called D2SF. Some portfolio companies include:

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• MakinaRocks: A machine learning platform to help industries transition to AI.
• Pozalabs: High-quality AI soundtracks.
• Adriel: Software to help you with your marketing and advertising campaigns.
• Theori: Conquering the most challenging cybersecurity challenges.

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What are the benefits of corporate incubators?

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Corporate incubators offer many benefits to the parent company and the startups within the program. Here are a few of the advantages:

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• Access to new ideas and talent: Corporate incubators allow companies to tap into the creative ideas of internal employees or external entrepreneurs. This can lead to developing new products or services that the company would not have otherwise considered.
• Increased agility: By creating a separate entity within the company, startups within the incubator can move quickly and be more agile than the larger corporate entity. This allows them to pivot and adjust their strategies more rapidly than the larger company.
• Collaboration: Corporate incubators provide a platform for collaboration and knowledge sharing between startups and the parent company. This can lead to new partnerships, business models, and revenue streams.
• Branding: Corporate incubators can help a company build a reputation as an innovator and a leader in its industry. This can attract top talent and customers who are drawn to companies that are focused on innovation.
• Financial return: Successful startups within the incubator can provide financial returns to the parent company through equity or revenue-sharing agreements.

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Why do most corporate incubators fail?

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• Resistance to change: One of the biggest challenges for corporate incubators is getting buy-in from the larger organization. Many companies have a culture that is resistant to change, and the incubator can be seen as a threat to the status quo. Without support and resources from the larger organization, the incubator can struggle to succeed.
• Lack of focus: Another challenge for corporate incubators is finding the right balance between supporting startups and aligning with the company's strategic priorities. Incubators can become too focused on developing new products or services that are not aligned with the company's core business, leading to a lack of resources and support.
• Limited resources: Incubators require resources, including funding, mentorship, and expertise, to succeed. Without sufficient resources, startups can struggle to grow and develop, and the incubator can fail to achieve its goals.
• Poor selection of startups: Selecting the right startups to participate in the incubator is critical to its success. If the incubator selects startups that are not a good fit or do not have the potential to succeed, it can waste resources and fail to achieve its goals.
• Lack of entrepreneurial culture: Corporate incubators require an entrepreneurial culture to succeed. Without a culture that supports risk-taking, innovation, and experimentation, startups within the incubator can struggle to thrive.
• Unrealistic expectations: Corporate incubators can face pressure to deliver quick results and achieve high returns on investment. However, startups often take time to develop, and success is not guaranteed. If the expectations for the incubator are unrealistic, it can lead to disappointment and failure.

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