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If you’ve had the feeling corporate spin-offs have been on the rise in recent years, you’re completely right. According to Goldman Sachs, corporate spinoff activity surged by 33% in 2022 to its second-highest level on record, and it’s easy to see why.
The last few years have been marked by fewer IPOs, low merger activity, rising interest rates and below-average economic growth - a favourable climate for spin-offs - and 2024 is shaping up to be no different. As a result, we’re bound to see more companies spinning off their ventures as a strategy to:
- Gain new investors
- Sharpen its strategic focus
- Scale its operations
- Meet regulatory requirements
- Increase value for shareholders
Spin-offs (aka spincos) can be a win-win strategy, enabling the parent company to focus on its core business and the spin-off to operate with more flexibility, untethered by corporate restrictions. Spin-offs themselves are attractive to investors because they offer greater flexibility, simplified business models and a focus on specific segments.
To give you a better idea of how spin-offs work in practice, let’s take a look at some recent real-world examples from top global enterprises.
1. SQUAKE
Year of spin-off: 2021
Spin-off gain: New investors
Parent company: Lufthansa
SQUAKE is a climate-tech startup that makes it easier for travel and mobility companies to develop sustainable offerings. It leverages API technology to connect companies to its platform and enable them to calculate the CO2 emissions of their activities. As described by SQUAKE CEO and co-founder Philipp von Lamezan:
"For many companies in the travel, mobility and logistics industry, making the switch to sustainable offerings represents a major obstacle. This is precisely where SQUAKE comes in: We are helping companies create flexible offerings and products that meet their customers’ needs with a solution that is easy to implement…"
To offset their emissions, companies are provided with access to a variety of climate protection projects and CO2 reduction technologies.
Since spinning-off from the Lufthansa Innovation Hub back in 2021, SQUAKE has gained two new investors: neosfer (formerly Main Incubator) and BackBone Ventures. Together with Lufthansa Group (SQUAKE’s original investor), these companies are providing SQUAKE with the support and expertise it needs to scale its operations.
2. TreasurUp
Year of spin-off: 2021
Spin-off gain: Scaled operations
Parent company: Rabobank
TreasurUp provides banks with white-label, cloud-based web and mobile front-end solutions created to meet the needs of corporate clients in areas like risk management, liquidity management and finance. Its services focus on helping banks grow in the commercial banking space by providing their business clients with a constantly improving online experience (designed by corporate treasurers) through web, mobile, and APIs. As explained by TreasurUp CEO Niels van Daatselaar:
"Banks around the world are challenged with new business models and technology for small and medium-sized corporate clients. TreasurUp aims to bring them back into the competitive arena with online services that are completely designed around SMEs.”
Through its innovative and user-friendly platform, TreasurUp helps businesses achieve greater financial control and visibility, supporting better decision-making and financial health.
Since being spun off, TreasurUp has focused on expanding its operation outside Europe as well as developing new treasury modules and services for banks.
3. Lissi GmbH
Year of spin-off: 2023
Spin-off gain: Sharpened strategic focus
Parent company: Commerzbank Group
Lissi is a corporate startup that was incubated in and spun-off from neosfer, Commerzbank’s innovation unit. Through its software platform, Lissi offers a broad range of solutions designed to help both users and organisations issue, store and verify credentials. Its identity management software is built on global, open standards like Verifiable Credentials and OpenID, enabling trustworthy interactions throughout the entire customer lifecycle. As explained by founders Helge Michael, Sebastian Bickerle and Adrian Doerk:
“We are proud to make a decisive contribution to strengthening trust in our increasingly digital society. The path to the future is already lined with promising collaborations, including municipal use cases with the cities of Cologne, Leipzig and Dresden, as well as various use cases with major banks such as Commerzbank AG and ING Deutschland. These early adopters will benefit from improved process efficiency, reduced paperwork and higher data quality, resulting in significant time and cost savings.”
Since its spin-off in 2023, Lissi has sharpened its focus on becoming the leading software provider for secure interactions between organisations and European Digital Identity Wallet (EUDI) users. This was facilitated by last year’s introduction of EUDI across the European Union, enabling Lissi to expand its offering to include functions that go beyond the standard European Union Protocols.
4. Koa Health
Year of spin-off: 2020
Spin-off gains: New investors, Scaled operations
Parent company: Telefónica
With over 3 million users, Koa Health is a digital healthcare provider that offers a range of personalised and accessible mental health solutions backed by science. Its comprehensive care model, Koa Care 360, is designed to help employees find the right human and digital support to meet their specific needs. Its Koa Foundations offering provides exclusive evidence-based tools and interventions designed by leading experts.
Using a prevention-first approach, Koa Health lowers the barriers to mental healthcare, making it more accessible. As explained by CEO Oliver Harrison:
“It is increasingly clear that digital technology has the potential to help close the growing demand gap in mental healthcare. However, the field has been limited by the inherent challenges of providing an integrated, evidence-based, ethical and personal solution that fits the needs of service users and customers. Because of Telefónica’s support, we have been able to deliver this solution.”
Since spinning-off from Telefónica’s moonshot factory, Alpha, back in 2020, Koa Health has gained the support of companies like Morningside, Ancora Finance Group, Wellington Partners Life Sciences, and MTIP. The move to spin-out was also meant to support Koa Health’s goal to scale its operation internationally, providing mental health support to a broader audience.
5. Louisa AI
Year of spin-off: 2023
Spin-off gain: Scaled operation
Parent company: Goldman Sachs
Born in Goldman Sachs’ in-house incubator, GS Accelerate, Louisa is a collective intelligence platform designed to tap into a company's collective internal knowledge. It connects various data sources, functioning like a central hub for accessing pooled intelligence, enabling companies to use their workforce's full potential to address challenges, seize opportunities, and gain a competitive edge.
Louisa’s features include smart news alerts, expertise search, and dynamic network graphs, fostering cross-selling and collaboration. It also offers personalised feed to help keep users updated on things like team changes, new clients, or expertise developments, boosting communication and efficiency. As explained by founder and CEO Rohan Doctor:
“Think of Louisa as an AI-powered LinkedIn on steroids. We have smart profiles and a smart network and Louisa reads millions of articles a week from 250 providers and begins connecting people.”
Since its spinout from Goldman Sachs, Louisa has signed additional partners, including Insight Partners and an undisclosed commercial bank. It has also increased its users from 25,000 to 50,000 users.
6. SpringWorks Therapeutics
Year of spin-off: 2017
Spin-off gain: Sharpened strategic focus
Parent company: Pfizer
Spun-off from Pfizer back in 2017, SpringWorks Therapeutics is a commercial-stage biopharmaceutical company that uses a precision medicine approach to develop treatments for rare diseases and cancer. Its collaborative business model leverages partnerships with various stakeholders, including scientists, biopharmaceutical partners, patient groups, funders and philanthropists, to deliver ground-breaking medicines to underserved communities.
As explained by founder and former president of SpringWorks, Lara S. Sullivan:
“SpringWorks Therapeutics will pursue the development of medicines across therapeutic areas, focused on diseases where there is an urgent need and the potential for the greatest impact for patients…”
The spin-out was prompted by SpringWorks Therapeutics’ ambition to move forward with the development of several new rare disease drugs that were outside Pfizer’s scope at the time. The move was supported by several investors, including Bain Capital Life Sciences, Bain Capital Double Impact, Orbimed and LifeArc.
Most recently, Spingworks launched its first FDA-approved commercial product, a drug called Ogsiveo, designed to treat desmoid tumours.
7. Nona Source
Year of spin-off: 2021
Spin-off gain: Scaled operations
Parent company: LVMH
Nona Source was created as part of LVMH's DARE (Disrupt, Act, Risk to be an Entrepreneur) intrapreneurial program. The goal of the initiative was to transform innovative ideas into concrete solutions that address the challenges and opportunities within the fashion industry, particularly in sustainability and circular fashion.
Nona Source is an innovative re-sourcing platform for high-quality materials from top luxury Maisons like Louis Vuitton, Dior, Fendi and Celine, among others. These materials, known as "deadstocks," are high-quality leftover or excess inventory that has not been sold or used for its intended purpose. Nona Source gives these materials a second life, facilitating sustainable practices and encouraging designers to create collections with lower environmental impact.
The move to spin-off gave Nona Source the increased operational flexibility it needed to focus on its core competencies and scale its operation without the constraints of the larger corporate structure.
8. Articul8 AI
Year of spin-off: 2024
Reason for spin-off: Sharpened strategic focus
Parent company: Intel
Articul8 offers a full-stack, vertically-optimized Generative AI platform that enables organisations to quickly develop, deploy, and manage secure, enterprise-grade GenAI applications. The solution is designed to be flexible across various infrastructures and hardware, focusing on converting data into actionable insights. With a team experienced in AI deployment across multiple industries, Articul8 supports businesses in leveraging AI to drive innovation and make informed decisions. As explained by Intel CEO Pat Gelsinger:
“With its deep AI and High-Performance Computing domain knowledge and enterprise-grade GenAI deployments, Articul8 is well positioned to deliver tangible business outcomes for Intel and our broader ecosystem of customers and partners…”
The newly minted spin-off will continue to leverage Intel's generative AI system and is already being used by companies including Scripps, Uptycs and Invest India. Its post-spin-off focus will include companies in areas like telecommunications, government, aerospace, life sciences and cybersecurity (among others).
Final thoughts
These spin-off examples highlight how businesses all over the world are adapting to the current climate and ever-changing landscape. While the outcomes of these ventures can be uncertain, it’s likely that many will go on to be successful. According to CNN Business, in 2022, 11 of 20 spin-offs outperformed the S&P 500, and six outperformed their parent companies.
It will be interesting to observe how these spun-off entities evolve independently and how the parent companies fare in the years to come.
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Looking to launch your next spin-off? We can help you leverage insights gained during your validation initiatives to take your independent venture to scale and beyond.
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