How Companies Have Sex

All is not sweetness and light in the realm of organizational sex, however. For every JavaSoft there are perhaps 10 times as many products and business models that fail. And even Java was born out of a heritage of multiple failures, a reminder that any aspiring Luther Burbank of new enterprises needs to be tolerant of disappointment.

But there is an even deeper tension -- one that harkens back to the power games and seamy struggles that can accompany sex between people. Sex is about pleasure -- about wonder, discovery, vulnerability, and hope. But all too often sex is also about pain -- about rejection, betrayal, and sometimes, abuse and exploitation. It can happen in organizational sex as well.

The acts of corporate sex that spawn new companies often result from the coming together of two different sorts of players: those with money and those with sweat. The financial types include venture capitalists and corporate venture officers. Those with the sweat equity are, of course, the entrepreneurs who want to build a company.

The tensions come from what each side is geared up to contribute. The venture capitalist makes money from investing in many different enterprises -- in a "deal stream." Think of this as a man with many lovers who hopes that as many as possible will bear healthy, happy children who will mature into full-grown adults.

The entrepreneur, on the other hand, has to care for the child born of the union of money and ideas. The entrepreneur doesn't like to be seen as one of an endless stream of lovers -- and certainly doesn't like the idea of being left to raise the newborn alone.

If some currently controversial scientific ideas are correct, this conflict has a parallel in the biology of sex. Some researchers now argue that in many species, each male competes to have his DNA be the mostly widely dispersed, a phenomenon scientists call "sperm wars." In some species, males seek to win the sperm wars by impregnating many females -- a kind of biological deal stream.

Females, the argument goes, also seek to maximize the reproduction rates of their DNA. But they must use different tactics, since their success depends on nurturing their offspring to maturity. For the female, the ideal mate will also help care for the newborn, contributing more than just his seed.

There is an obvious tension between the male urge to sow seed widely and without responsibilities and the female desire for a mate who'll settle down and help with the kids. The same tension pertains to the sexual politics of business. As organizational sex grows up, entrepreneurs are attaching more value to investors who contribute more than just money. It's quite common today for the hottest startups to turn down money that doesn't come with other resources -- ranging from linkages to complementary organizations, to insightful board members, to initial contracts for products and services.

In response, leading members of the venture-financing community are experimenting with new ways to add value. At venture capital firm Kleiner Perkins Caufield & Byers, for example, John Doerr has become known as an activist investor who will stitch together collaborative networks among companies and their executives. Doerr and Schmidt recently joined with others to raise a $100 million venture fund to invest in and create a community of companies that will use Java to spawn products and services for the Internet. Similarly, Ron Fisher of Softbank Holdings is leading the investment of more than $500 million to establish an intricate web of mutually supportive Internet media companies. Softbank, which owns the Comdex computer industry conferences, will host a conference this fall for companies it owns or in which it has an investment. The goal is to facilitate cross-fertilization.

Perhaps the biggest lesson in corporate sex is to recognize the dangers of asexual reproduction and excessive inbreeding. No matter how successful a company's current product or business model, clones and cousins are unlikely to result in new triumphs of the same magnitude. Lotus Development Corp. enjoyed wild initial success with its Lotus 1-2-3 spreadsheet -- followed by years of failure to spawn a second hit. Finally, it jumped in bed with Ray Ozzie and a small team of outsiders, and out came Lotus Notes.

The second lesson is that organizational sex is not without its risks. One-night stands can lead to long-term regrets. In promiscuous pairings, bad things can get spread. There are organizational equivalents to sexually transmitted diseases, dangerous liaisons, even fatal attractions. At the same time, there is such a thing as organizational safe sex and committed relationships -- combinations that pay attention to the long-term reasons for a particular pairing and manage closely the union of ideas, processes, and talent.