Seven Traps of Internal Ventures… and How The Future-Focused Avoid

Imagine the headline you wish you could write in five years. Not about a new product launch or one-off success, but about an entirely new business—conceived, incubated, and scaled inside your company—now outperforming legacy lines and reshaping your business’s trajectory. For most large firms, that kind of internal success is still a distant dream.

Over the past two decades, hundreds of companies have launched internal venture groups. They’ve built labs, named teams, designed logos, and carved out budgets. The promise was bold: act like a startup inside a big company and reap the returns of both.

Unfortunately, the results are often underwhelming. Few of these ventures have delivered meaningful financial returns or a durable competitive advantage. An early study by Song Ma of Yale School of Management found that the median duration of a corporate venture capital unit was about four years, after which many are terminated as parent firms stop investing in startups. Why? Not because the idea of internal venturing is flawed, but because most companies design them in ways that are structurally destined to fail.

Yet, through all those failures, there’s also been plenty of learning. Some future-focused leaders have identified the biggest reasons for failure in corporate venturing. And they’re creating paths around the most common pitfalls.

1. The Risk Trap

Venture capital is built on a power-law model, where rare events have outsized impact. In startups, a 10% success rate is not only acceptable, it’s expected. One out of ten big bets can return the fund. The other nine? Firewood.

Most public companies can’t play that game. They’re expected to deliver predictable returns, defend the core business, and avoid reputational damage. A 10% win rate sounds like failure—because internally, it is.

That mismatch can set new ventures up for an early death. They’re shut down after a single bad quarter or lukewarm pilot. Ironically, the same leaders who want breakout growth won’t tolerate the failure rate that makes it possible.

Over the last twenty years, Coca-Cola invested in internal startups around new beverage concepts and delivery models. Most fizzled out quietly. That’s because they were managed with the same KPIs as legacy lines. In a world of quarterly earnings calls, who has time to wait for the next unicorn?

Other companies have realized that’s just part of the game. Amazon famously spent over $170 million on the failed Fire Phone. Instead of retreating, they channeled the learnings into Alexa. As Jeff Bezos said, “If you think that’s a big failure, we’re working on much bigger failures right now.”

2. The Reward Trap

Internal ventures often get ignored or shut down, not because they aren’t promising, but because they aren’t big enough, soon enough.

Most large companies are looking for billion-dollar businesses. Anything less is considered a distraction. But most startups—internal or external—start small. They take time to grow, and their early value is often invisible if you’re only looking at immediate profits.

In many cases, the real value of a new venture isn’t in early profits. It’s in enterprise value. If the business were spun out and valued on its own, it might be worth hundreds of millions—even if it’s not yet throwing off cash. Most companies aren’t set up to recognize or value this. Their metrics are built for operational businesses, not emergent ones.

Barry Diller’s IAC is a rare exception. IAC has acquired, grown and spun off businesses like Expedia, Match Group and Vimeo—generating significant enterprise value through focused incubation and exit strategies. IAC treats its ventures as future public companies, not side projects.

3. The Time Trap

Similarly, game-changing businesses don’t often reach scale in twelve months. They compound slowly, then break out fast. But most large company leaders are focused on the next quarter, not the next seven years. They’re managing earnings calls, operational crises, and near-term growth targets. That’s the job—and it leaves little room for truly long-horizon thinking.

This creates a profound mismatch between how corporate leaders are incentivized and how venture-scale growth actually works. Without a long-view mindset, promising ventures get judged too early—or worse, deprioritized entirely.

Many telecom companies invested in internal 5G ventures, only to shelve or stall them when ROI didn’t materialize in year two. But the payoff curve for infrastructure innovations is often five to seven years long.

4. The Talent Trap

The best ventures are built by true believers—people willing to leap into uncertainty because they care more about the mission than the org chart.

That kind of entrepreneurial energy is hard to summon inside a large company. High performers often won’t leave their core roles for a risky project. And those who do are often hedging—they want the thrill of a startup with the safety net of a corporate job.

That tension kills momentum. Teams pull punches. Political cover becomes more important than product-market fit. And the people who would take the leap often can’t find a path inside the system.

Intel experienced this when it tried to launch internal ventures in mobile and wearables. Despite promising ideas, top engineering talent stayed in the core CPU business. The startup spirit never fully took hold.

Seeking to avoid this situation, Adobe launched its “Kickbox” program with a simple idea: give every employee a red box with a $1,000 prepaid card, tools, and permission to prototype anything. No approvals. Just action. It created a grassroots wave of bottoms-up innovation—with opt-in risk and ownership. Of course, these kinds of programs won’t prepare teams to leave their company, but they’re a start.

5. The Supply Trap

Venture capitalists manage the inherently low rate of success by massively increasing the number of times at bat. Top venture capital firms review thousands of deals to make a handful of investments. For instance, Sequoia Capital reportedly reviews between five and ten thousand deals per year. Of these, less than 1% receive investment. Andreessen Horowitz has noted that their partners collectively review hundreds of opportunities every week. Firms like Sequoia and Andreessen Horowitz aren’t always better at predicting the future—they’re better at seeing more of it.

Meanwhile, corporate venture teams often source ideas from internal suggestion boxes, hackathons, or a few internal champions. That isn’t deal flow. It’s a trickle. Without a wide funnel, you can’t apply real selectivity. You end up choosing from what’s politically viable or logistically convenient, not what’s truly disruptive.

GE’s Ecomagination and digital initiatives invested billions in a handful of internally generated ideas. They lacked external inputs, diverse perspectives, and raw volume. The result? Big bets on narrow assumptions.

By contrast, Alphabet’s X Labs (formerly Google X) is a moonshot factory. It kills 90% of its ideas early and only greenlights what survives brutal scrutiny. The key? Volume and velocity. Lots of shots on goal.

6. The Demand Trap

For startups, rejection is just one step in the process. If one investor says no, you go down the street and talk to the next one. That optionality is a key part of what makes the venture capital ecosystem dynamic and competitive.

In most companies, internal ventures have one shot. They pitch a governance board—often made up of senior leaders focused on the core business. If the CEO doesn’t like it, it’s game over.

That single-gate system kills promising ideas too early. Worse, it makes decision-makers focus more on cost than opportunity cost. In venture capital, no one wants to be the investor who’s famous for having passed on Facebook or Google. That creates positive pressure to engage deeply, challenge assumptions, and place bold bets.

Ironically, Facebook fell into the same trap its own founders avoided. Its Building 8 was a bold hardware venture. But it lived and died by executive preference. Shifts in Mark Zuckerberg’s priorities ultimately shuttered the program.

7. The Trap of Going It Alone

Venture capital’s biggest wins aren’t just about smart investing; they’re about commercializing long-term investments made by the American public. The overwhelming majority of unicorn startups were built on government-funded science: the Internet, GPS, AI, the Human Genome Project. VCs show up after billions have been spent derisking the foundations.

That matters. Some industries—like biotech or software—are rich with public scaffolding. Others—like consumer packaged goods or insurance—have to build their own. That makes internal venturing much harder.

Moderna’s mRNA platform was commercialized after years of NIH and DARPA investment. The company added brilliance on top of public R&D. By contrast, food companies like Kellogg have tried to launch internal ventures in breakfast and snacks. With little external R&D to leverage, these efforts often struggle to escape incrementalism.

Avoiding the Traps

Internal ventures aren’t doomed. But they require more than excitement. They demand a different structure. And good examples exist.

When Josh Sommer ran new ventures at Cox Communications, he built a growth portfolio that sidestepped many of the seven traps. One big idea involved launching a smart community initiative—a connected real estate play that integrated broadband, IoT, and concierge services into multifamily housing developments.

Rather than treating it as a side project, Josh positioned the venture outside the traditional P&L. He recruited a team from both internal high-performers and external entrepreneurs. And he created a test-and-learn environment that could iterate fast without getting crushed by quarterly expectations. By embedding strategic partnerships early—including with property developers, equipment manufacturers, and civic leaders—he expanded both deal flow and exit optionality. This approach allowed the venture to go from idea to revenue-generating pilot in under a year and paved the way for longer-term ecosystem plays.

Design a Different Model

There isn’t a single model for success in corporate venturing. Every leader needs to design a system that’s right for their industry, market position and company culture. Still, some basic principles apply.

Value enterprise growth. Recognize ventures for their market potential—not just their immediate returns. That often involves taking emerging businesses off the P&L and putting them on the balance sheet.

Think in venture time. Align timelines and expectations with how real breakthroughs actually unfold. Conversely, ventures need to find quick benefits along the way to feed back to the mothership.

Design for deal flow. Use open calls, university partnerships, and venture scouts to widen the idea funnel… and consider moving your corporate venture unit to places like San Francisco or Seattle where venture teams can easily run into potential opportunities.

Incentivize real talent moves. Give teams upside, autonomy, and permission to leap without penalty. And consider hiring outside talent from the outside with the express goal of being spun out again in a year or two.

Create market-like optionality. Build systems where ideas can survive a no and find alternate champions. Some companies have even established relationships with external venture partners who are free to pick up ideas that the company passed on.

Corporate ventures aren’t for everyone, and they have to be more than a PowerPoint deck. Done right, they’re a system, one that’s built to avoid the seven traps that most initiatives fall into. If you can’t find meaningful ways to stomach failure, recruit missionaries, create deal flow, build optionality, fertilize the soil, stretch your time horizon, and value long-term potential—then you’re not really doing venturing. You’re just decorating the org chart. Want to build the next big thing inside your company? Start by redesigning the system that makes big bets work.