This study explores spinouts as an alternative to the conventional growth strategy, diversification of a business portfolio under the umbrella of a single organization. We argue that in the context of schumpeterian competition the spinout strategy is more appropriate for high-tech startups than the conventional diversification strategy. Through the case analysis of spinout in Medison Co. Ltd., a Korean high-tech startup, we found that spinouts offer the following benefits: (1) reducing a parent company's exposure to the risk associated with diversification, (2) providing appropriate incentives for motivated employees and keeping entrepreneurship alive, and (3) minimizing communication complexity and administrative costs. On the other hand, it was observed that spinouts can increase transaction costs when functional departments such as marketing department are spun out.