Building the incubator
Being open to new ideas always helps maintain your competitive edge.
“Start-ups have a lot of energy, and they keep you looking
toward the future, so we always have two or three new companies incubating here at Cypress,” Rodgers says.
“We’re known within the Silicon Valley community as having an
open door to new ideas, so sometimes we’re approached by
external entrepreneurs who have an idea for a new business or
internal employees who present an idea for a new product that
further leverages our existing technology. Our openness to new
ideas is also a powerful recruiting tool. Sometimes prospective
employees approach us with an idea, and they come in as sort
of a package deal. We get a new employee and a new idea; they
get the chance to be entrepreneurs.”
When someone from the outside approaches Cypress with an
idea for a new product, they write a business plan that defines
the market the product will appeal to and the team that will be
responsible for developing the product and executing the business plan.
“Our management team decides if this is something we
should fund, and then we take the idea to our board for approval,” Rodgers says.
What makes the incubator structure so unique at Cypress is not
only the number of internal employees who are spending their
days working on new products but the flexibility of the support
relationship between Cypress and the incubating company.
“Part of what gets decided before we agree to move forward
is how the new company will be supported through Cypress’
infrastructure and what support they’ll provide themselves,”
Rodgers says. “If they use Cypress support services, such as
accounting and HR for example, we’ll bill them back for the
time and materials. Since Cypress is providing the funding, if
the new venture runs short of cash, it will sell Cypress additional shares to raise cash.
“Like any start-up, not everything succeeds, and you don’t
always know exactly what the customer wants. I would say
that maybe six out of 10 new ideas will fail.”
But Cypress has had two really big winners. One was the creation of SunPower, which got the company into the solar energy
business, and the other was the creation of Cypress Microsystems
Inc., which was an employee start-up that is now doing $160 million per year in revenue.
“Both of these businesses helped diversify our offerings,
counterbalanced our cycles, improved our profitability, and
they keep us on the leading edge of innovation,” Rodgers says.
“Creating these entrepreneurial start-up subsidiaries has
allowed us to really do two things at once. Many companies
have a hard time driving innovation, but with this structure,
our main line managers can continue to drive our existing business, and they don’t have to worry about the fear of failure
with new product development.”