The Start-up Factory

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Obviously, the entire system hinges on Gross's ability to find enough good CEOs. This spring, he says, he'll make a blanket job offer to all 75 or so engineering students graduating from his alma mater, Caltech. Gross is also trying to systematize the generation of new business ideas. (See "Ideas by the Gross," below.) Every quarter, he summons the Idealab staff, the CEOs, and sundry Friends of Bill to a hotel conference room for a weekend-long brainstorming session. He sets some ground rules: for instance, no off-putting body language--such as arm crossing--that suggests resistance. The group, sitting in a semicircle, then goes about the task of "expanding and filtering" ideas. "What I pick up from Bill is a singular belief in his own ideas," says Spielberg. "Once he thinks he's got it, he doesn't listen to reason, he doesn't listen to abstraction. That's very similar to how film direction is. You throw out an idea for a new film, and people say, 'It's too expensive, it's too difficult.' But if you're truly resolved, you'll go ahead with the project anyway."

Some of those ideas come straight from Gross's everyday cravings. "One thing I'd love to be able to do is to watch on the Web a Seinfeld episode I missed," says Gross. The problem is, the Internet is currently too slow to deliver TV shows, so Gross set up a company, Bandwidth+, to find a way to speed up delivery. It's experimenting with a "dictionary lookup" solution, by which frequently used images--"like Seinfeld's refrigerator or Elaine looking sideways"--would be stored in a visual dictionary at the receiving end. Instead of actually sending the image of Elaine's face, the transmission would simply refer the receiving computer to the dictionary entry of Elaine's face and plug it in.

"I think it's going to work," predicts Gross.

Oddly enough, Gross would never have started Idealab had he been a better CEO. "I'm not a focused person," he explains, seated with one leg folded under him at Knowledge Adventure's brilliantly colored, playpen-like offices, "and a company needs to focus to succeed." At Knowledge Adventure, where he still serves as an adviser, Gross says his rapid-fire idea generation had the "horrendous" effect of distracting the company from its original mission of helping children do better in school. "This company was all over the map," he declares. "I was indulging my own desire to participate in so many different ideas, to the detriment of the company."

Then, in 1994, a 10-member team within Knowledge Adventure developed a technology for building three-dimensional environments on a computer screen. It was neat stuff: one application turned the standard text-based Internet chat room into a lush 3-D castle, where chatters could step into the bodies of animated characters and explore from room to room. But the team soon began fighting the rest of the company for resources. "It got to a point where there was dissonance between that group and the rest of the company," says Gross.

Some colleagues finally persuaded Gross to spin the unit off into a separate company, with Knowledge Adventure retaining a 20% equity stake and access to the 3-D technology. "I did it reluctantly," says Gross. " Very reluctantly. I thought the technology was so valuable that I wanted to have it internal to Knowledge Adventure."

Within a year the spin-off, Worlds Inc., grew almost as large as Knowledge Adventure itself. Instead of owning 100% of a $5-million business, Knowledge Adventure now owned 20% of a $77-million business. "There's no way that kind of exponential growth could have happened inside Knowledge Adventure," says Gross. Plus, spinning off Worlds allowed Knowledge Adventure to return to its original, narrower mission--a strategy that propelled it from the number 15 to the number 3 spot in the industry in just over a year. "It all came down to one thing: focus," says Gross, who now embraces the concept with almost fanatical devotion. "You can make an incredible product, but if you can't clearly communicate to the customers where the product's benefit is, it's not going to do any good."

Each of Idealab's businesses stands to benefit from its ability to focus on a specific mission. (For examples, see "The Freshman Class," below.) And Gross is set free, able to be as unfocused as he pleases. "I can run around like a hummingbird, plugging my ideas into multiple, highly focused companies," he says gleefully. "For me the clincher was this: I have ideas all the time. My satisfaction is gauged by the percentage of them that turn into reality. I found that by relinquishing control, a higher net percentage of what I visualize in my brain is seeing the light of day."

"The first few months of a start-up are analogous to the first few nanoseconds in the birth of a star," says Steve Glenn, CEO of PeopleLink, an Idealab company that helps Web users link up. "Whatever happens during that short period will determine your permanent trajectory. So if you're freed up from the administrative stuff, you can focus on aiming that trajectory as high as possible."

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