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Our company recently created a new department/unit that will develop apps for consumers. The company is engaged in the hardware reselling/distribution for 15 years and wanted to expand into the software business. Although we develop primarily for the web platform, I don't consider the company as a web development company who develop apps for business clients. We want to treat the company as an investor, and this newly formed unit to be a separate company. I also want to inject the startup culture into this unit.

I just want to ask if this setting will be okay for the long run. Have you ever saw a company with this setup? Thanks!

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Spin-outs are not as uncommon as people think but just be very clean in the separation, especially wrt IP issues and service agreements (eg distribution or support). Making the assumption that the parent firm is an investor might be worthwhile testing ... are the decision makers happy with the equity split, what about future capital calls or outside dilution. Making new hires and fostering an agressive startup culture is precisely why some firms spin-out non-core functions (eg if a foundation tech has different applications that are not in current customer fit) but it takes some enlightened management to handle the transition ... some employees may want to switch but are not comfortable without security blanket of regular income. New hires might see your subsidiary as jumping stone to a more prestigeous firm, etc ... So while the concept sounds good, making it work may take longer than you expect.

Good luck in the new foster-child (many founders think of their business as their baby)

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