He Turns Ideas into Companies - at Net Speed

Bill Gross, CEO of Idealab, has started 18 companies in nine months. On the Net, he says, "time is more important than money."

High-tech entrepreneur Bill Gross has been starting companies since he was 16. But it wasn't until he began hanging out with Steven Spielberg that he came up with his ultimate entrepreneurial idea — a company dedicated to ideas themselves.

Gross and Spielberg are business partners
(Spielberg is an investor in Knowledge Adventure, a multimedia-software company that Gross founded in 1991) and the two recently collaborated on "Director's Chair," a make-your-own-movie CD-ROM game. Every so often, as the project moved forward, Gross would visit Spielberg to watch him work.

"I would go over to DreamWorks and Steven would invite me to tag along," he says. "His assistant would drive him around the lot in a golf cart, whisking him from meeting to meeting. He'd walk into a room and there would be the people from a TV show. They'd say, 'We need to talk about the script' and he'd do that. Then he'd go to the set where they were filming a movie. It was just continuous creative power. He was playing with ideas all day long. I knew that's what I wanted to do next — create a playroom where I could work with ideas."

Thus was born Idealab (http://www.idealab.com), a Pasadena-based think tank that conceives and funds new companies on the Internet. But Idealab is more than just a "playroom" for its 38-year-old founder. It represents a new model for building companies that reflects both the power of ideas on the Net and the challenges of doing business there.

Gross launched Idealab last March. His first-stage goal is to build 10 companies, worth an average $100 million each, that can go public or be sold by the end of the decade. He's wasting no time. Idealab has started 18 different ventures, 6 of which are fully operational. One of these companies, CitySearch, already looks to be a hit. It is going head-to-head with Microsoft and America Online — and, thus far, is holding its own — in the race to create online information services for urban communities.

Starting companies is a process that comes naturally to Gross. He paid for his college education (California Institute of Technology) by selling patented stereo speakers he designed himself. He made his first big score when he sold a software company he founded to Lotus Development. His best-known startup is Knowledge Adventure, now the fourth largest educational-software company in the United States.

But even Gross concedes that his impressive track record doesn't count for much when it comes to starting companies on the Internet — an entrepreneurial medium like no other. What's the key to success on the Net? "Speed," Gross says without delay. "Time is more important than money. If a company can't go from concept to launch in nine months, it's not going to make it. This is the toughest business in the world."

Idealab's formula for speed is built on four principles. The first is to evaluate ideas quickly — and to turn good ideas into companies even faster. Gross has set a timetable for Idealab: over the next five years, he wants Idealab to identify one promising idea per month and to launch one company per quarter.

To accelerate the evaluation process, Idealab has assembled 10 Internet luminaries to serve as its brain trust. They include information architect Richard Saul Wurman, creator of the influential TED conferences; MIT professor Sherry Turkle, an expert on the sociology of the Net; and Bob Kavner, the high-powered AT&T executive who left to join super agent Michael Ovitz at CAA and now runs On Command Corporation.

These advisers don't just provide insight; they also offer credibility with investors and connections to other business people. "We have amazing people working with and funding us," says Charles Conn, CEO of CitySearch. "Once Bob Kavner became chairman of our board, we got AT&T and Goldman Sachs as investors. All you need is those first few breaks, then it's like a chain reaction."

Idealab's second principle relates to talent — the biggest difference between success and failure on the Internet, according to Gross. He wants Idealab companies to be fanatical about recruiting.

"We have 18 companies in various stages of development," he says. "The only thing holding us back from having all 18 companies fully online is people. Where are we going to find great people to execute the ideas? That's our biggest challenge every day."

The third principle to increase speed is to alleviate the headaches that slow down so many entrepreneurs : negotiating for office space, protecting intellectual property, creating a corporate identity. Idealab has a central staff that performs these and other support services. For example, graphic designer Tom Hughes, who created the Macintosh logo for Steve Jobs, designs logos and marketing collateral for all of Idealab's companies.

"With these shared resources," Gross says, "I can be three times faster than someone starting a company in the 'normal' way."

Finally, Gross argues, that the way to create wealth quickly on the Internet is to spread it around. On that principle, Idealab does not take a controlling interest in its companies. In return for startup capital and shared corporate resources, Idealab receives a 49% equity stake. The rest is reserved for later-round investors and the executive team.

"The way to get speed is to create shared knowledge about this medium as quickly as possible," Gross says. "Your competitors won't share what they know, so you have to find allies. I am trying to create a family of companies that are allied with one another in a commitment to increase the speed at which we do business."

"Search For Speed"

Add New Comment

0 Comments