Second Annual Innovation Day


May 09, 2014

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Startup entrepreneurs talk about swimming with sharks. Entrepreneurs at big companies must swim with walleye — which, in many ways, is even scarier.This exclusive invite-only event will feature Chicago's top innovators speaking about how they bring new ideas to the table everyday.

Walleye, like many fish, are cannibals as well as predators. That's the challenge of starting up a new company inside a big company.

“You have to decide whether you're willing to compete with your own business,” said Sam Yagan, a Chicago-based entrepreneur who now is CEO of Match Group, which operates dating sites and OkCupid.

He took the audience at Lightbank's second Innovation Day at City Winery behind the scenes of creating a startup inside a big company today. Most big corporations are wrestling with the challenge of reinventing themselves amid shrunken R&D pipelines and budgets.

A couple of years ago, created Tinder, a dating app that since has caught fire. Its users look for dates — by swiping through the Tinder app — 800 million times a day. Venture capitalists have come knocking with term sheets that would value the company at levels approaching $1 billion, Mr. Yagan said.


Match created Tinder as a way to get into mobile and connect with a younger demographic, and it's working well, Mr. Yagan said. Tinder, a product of an internal hackathon, launched less than two years ago. It's growing faster than Match or OkCupid. But it doesn't yet produce any revenue.

“Cannibalization has been the biggest question for us,” said Mr. Yagan, who founded OkCupid and sold it to Match's parent, InterActiveCorp. “On the whole, we think it expands the business. We really are seeing meaningful market expansion as a result of Tinder. So many new users are entering the category who never online dated before and, simultaneously, we're still maintaining strong growth in the core business.”

Beyond the profit-and-loss statement, there are other, less obvious challenges in creating startups inside big companies. The major ones are people, pay and place.

Companies need to recruit entrepreneurs and outsiders, giving them equity that could result in bigger paydays than their peers, or even top managers, receive. Being outside the traditional corporate offices also helps.

Inevitably, all of that likely will lead to questions from some in the broader company about differential treatment.

“Managing the HR and internal stuff is much harder than the actual innovation,” Mr. Yagan said.

You know you're an entrepreneur . . .

How much would it take for you to quit your day job to work full time on your startup?

For GrubHub Inc. co-founder Mike Evans, it was $141.

That's how much the online food-ordering service got paid by its first customer, Charming Wok, back in 2004.

"I took the check back to Mike, and he said, 'I'm quitting,' " GrubHub CEO Matt Maloney recalled at the Lightbank event May 9. "The next day, he quit his job" at

It worked out OK for Mr. Evans. GrubHub went public last month, and Mr. Evans' stake is worth about $66 million.

Mr. Maloney described the decade-long road to an IPO, from signing up customers and employees to raising money. When asked by Lightbank partner Paul Lee what he'd do differently, the 38-year-old CEO quipped: "I don't know. It's worked out pretty well."

While Mr. Maloney is best-known in Chicago for founding GrubHub with Mr. Evans, things are different in New York. Last year, GrubHub merged with New York-based competitor Seamless. Though the GrubHub name survived, it's unknown in the Big Apple.

"When I go to New York, and I'm introduced as the CEO of Seamless, I'm a rock star," he joked.