The story of how Bill Gross has channeled his creative zeal into a business that generates start-ups and why.
Cover Story
Bill Gross just needed to stop his brain from buzzing with business ideas. His solution, Idealab, may be his best idea yet
It was in a golf cart with Steven Spielberg, motoring around the set of the movie Casper, that Bill Gross decided he needed to explore a strange new world. The 38-year-old founder of Knowledge Adventure, a prominent maker of educational software, had been wrestling with a problem: his creative zeal, which had served him so well in his start-up days, seemed to have fewer and fewer outlets.
Not an uncommon difficulty for CEOs of maturing companies. But for Bill Gross--a diminutive, charmingly geeky figure who spews ideas with an enthusiasm that borders on abrasiveness--the frustration was unusually acute. "He's kind of like a mad genius," offers Spielberg. "His brain works like a roundhouse in a train station, spinning off ideas in seven directions at once, yet not losing its focus on any one of them."
Indeed, Gross is a man who considers a great brainstorming session to be "a little bit like having sex" and feels emasculated by the tedium of daily management, whose skull gets so overloaded with ideas that he feels compelled to download them periodically, distributing a spreadsheet of factoids and random neural associations to his associates. "In many ways, we're very similar," says Spielberg, who invested both his money and his creative talents in Knowledge Adventure.
On the set of Casper, Gross couldn't help being dazzled by Spielberg's special effects: not the kind he produces on-screen, but the unusual impact he had on the set. The renowned director floated around it, dropping nuggets of creative wisdom, leaving it to a network of lieutenants to actually implement the niggling details. "He walks around all day using his brainpower to creatively enhance things around him," Gross says. "I'd always thought you had to take the good with the bad. How audacious to think that your job could be perfect all day long. But here was someone doing it."
It occurred to him that his own "core competency"--like that of E.T.'s creator--was bringing ideas to life. "I don't want to compare myself to Steven Spielberg," he says, "but in the same way he has this expertise about what things should ultimately look like on-screen, I have a very good vision for pure business concepts--for what a consumer experience is going to be like." The solution, therefore, wasn't to rein in his creativity to fit the organization; it was to build an organization that would let his creativity reign.
So in September 1995, Gross handed over the day-to-day operations of Knowledge Adventure to his younger brother, Larry, and embarked on a daring experiment to do just that.
"We're going to have a stream running through here," says Gross excitedly, hunched over a Styrofoam model of the building he's renovating for his new company. "Most of the walls and furniture will be on wheels. And the trees from this courtyard will extend indoors."
The company, Idealab, is a factory of sorts. But as the floor plan suggests, it is no ordinary manufacturing operation. It doesn't churn out toothpaste or sheet metal or software. Idealab--with Gross's preferred punctuation and capitalization, it's the frenetic idealab!--is in the business of creating businesses.
It's a start-up factory.
Since its inception, a year ago, Idealab has been spinning Gross's raw ideas into independent companies. All are Internet-related start-ups, most of them based around Pasadena. There are 19 of them so far. At last count they employed about 400.
The Styrofoam floor plan, which Gross displays with all the exuberance of an eight-year-old showing off his latest Lego creation, speaks volumes about Gross's ambitions. It's a radial hub-and-spoke structure, with each spoke intended to house an entire fledgling company. The hub is Gross's office--represented on the model by a large red dot--a round thinking chamber where he will sit like the captain of the mothership, radiating his wisdom to the periphery. "I'm going to have a round desk around me," he says, "so I can sort of sit in my chair and rotate."
Oh, and the stream--that will burble past a glass brainstorming room to encourage a steady flow of brilliant business ideas. "I've had good experiences meditating to the sounds of the Merced River at Yosemite," explains Gross, "and we want the sounds, the lights--everything--to be as conducive to freethinking creativity as possible."
Creativity, Gross believes, matters most. In a typical business, he argues, even the most creative entrepreneur ends up squandering precious mental energy mulling over such mundane matters as compensation and financing. So Gross hands the incoming CEOs what he calls an "Internet start-up in a box": a template for a company structure, replete with stock options, benefits, and a system of open-book management. Idealab even provides a temporary chief financial officer to fill in for the first few months.
Relieved of such drudgery, some CEOs have actually held focus groups on their second day of operations. Says Steve Damron, CEO of Idealab's EntertainNet: "If I hadn't been with Idealab, I would have put in a lot more time working with lawyers, working on names and trademarks, working on incorporation papers, working on a logo." As it was, he was working on the creative element--building a prototype of his Web interface, for instance--just a few weeks after his first discussion with Gross.
If the whole concept seems a tad quixotic, if not outright flaky, consider Gross's track record. As an enterprising 12-year-old in Encino, Calif., he noticed that the corner drugstore sold candy for 9¢ while the Sav-On around the corner sold it for 7¢. Spotting a classic arbitrage opportunity, Gross soon had a network of salespeople wringing profit from the spread. Those proceeds he plowed right into his next venture, Solar Devices, which sold $25,000 worth of cardboard-and-tinfoil parabolic dishes and plans through ads in Popular Mechanics. That money, in turn, covered his first year's tuition at Caltech, where he promptly founded a stereo-equipment maker, GNP Inc., that grew fast enough to land on the Inc. 500 in 1982 and 1985. Next he and his brother started tinkering with Lotus 1-2-3 and invented a way to make the spreadsheet obey simple commands. So impressed was Lotus founder Mitchell Kapor that he bought their company for $10 million. In 1991 Gross founded Knowledge Adventure; he sold it three months ago to CUC International for approximately $100 million. Spielberg, the man whose 1993 dinosaur epic, Jurassic Park, remains the highest-grossing film of all time, calls him "my favorite investment." He adds, "I've also made a lot of money with him."
