Besides swapping intelligence, Idealab companies share servers, high-speed digital phone lines, health plans, legal and accounting services, travel planning, and focus-group facilities. "I'm trying to factor out all the common business problems and put them in Idealab," says Gross, "and leave in the individual companies just those things that are uniquely related to their businesses."
Idealab also greases the skids for later-round funding: no sooner had PeopleLink taken corporeal form last April than Gross was working the venture-capital wires to rustle up interest. Not only does that free up the CEOs from begging for more money, but an Idealab affiliation helps assure venture capitalists that a company has its business fundamentals down pat. "If this were a stand-alone company," notes Savannah Brentnall, chief operating officer of Intranetics, a developer of off-the-shelf intranets, "venture capitalists would say, 'Who the hell are you, and why should we listen to you?' Instead they say, 'Tell us more.' "
Why, then, doesn't Gross just lump all 19 start-ups into one big entity? "Because I believe there's actually a diseconomy of scale when it comes to creativity," Gross responds. "It's worse to be bigger." The best way to motivate managers, he has preached since the success of the Worlds spin-off, is to give them control of an entrepreneurial venture and a stake in its upside. Mixing everything into one pot, he warns, blurs the focus and dulls the edge. "You just get so much more out of people when they come in to work each day feeling that they have a real effect on what happens," says Gross, who requires all employees to buy some stock. "The world is coming to believe that individual empowered entrepreneurs generate way more value per unit of time, for their investors and themselves, than people under a big corporate umbrella."
With Idealab, Gross is thus reaching for that Holy Grail of modern business: an organization that harnesses both the power of a big company and the nimbleness of a small one.
It's likely that companies of all sizes will be watching carefully. Fortune 500 types regularly tromp through the headquarters of Thermo Electron Corp., the company that probably comes closest to Idealab's organizational model. The industrial giant, based in Waltham, Mass., has spun out a family of 18 distinct companies. All have gone public--their offerings are routinely oversubscribed--and consolidated sales have topped $2.2 billion. "It has worked way beyond our expectations," says John Hatsopoulos, whose brother George founded the company in 1956.
Hatsopoulos believes there's a simple reason that so few of his visitors have actually tried to replicate the model: in a corporate world that stresses hierarchy and predictability, giving ventures their independence "represents a tremendous threat to the CEO." Even Gross admits to feeling "weird pangs" of fear when he let go of operations at Knowledge Adventure, but in doing so he came to yet another insight about himself: he needed to move beyond the empire builder's lust for seeing more and more bodies working directly for him. "In the end, I'm relinquishing control and letting the marketplace take over," says Gross. "I argue vociferously for the things I believe in. But my viewpoint is not always upheld, and I'm thrilled that it isn't. The CEOs need complete freedom to shape their companies."
So far, anyway--the true test may come when there's more at stake--Gross seems as good as his word. "Bill has never been insistent or thought us idiots for not doing something," says Glenn of PeopleLink. "He totally understands that his role is to be at a very high altitude, unencumbered by the laws of gravity, while the people at the front lines of the individual businesses determine which of his suggestions seem most relevant and possible."
But as an earthbound entrepreneur, Gross has set a difficult challenge for himself: to be true to his doctrine of creativity, he must repeatedly let go of his creations. "The most important time is the first two years of life," Gross, who is the father of an eight-year-old boy, acknowledges. "After that, they're sleeping through the night." He claims he'll be content, however, to admire his offspring from afar as they make their way through the world. And, he adds, "I bet there will come a time when one of the companies wants to spin off a splinter group inside it. I'd like to think that Idealab could be the ideal starting ground."
Grandchildren. His eyes brighten at the very idea.
Jerry Useem is a staff writer at Inc.
Bill Gross: Before Idealab
1977: As a college student, Bill Gross launches GNP, a loudspeaker maker that would become one of the country's fastest-growing companies.
1984: Gross and his brother start GNP Development. HAL, an early product, simplifies Lotus 1-2-3.
1986: Gross sells GNP to Lotus, where he works until founding Knowledge Adventure, in 1991.
Start-up steps: Idealab's System for Building Businesses
- The new company begins the development cycle. An Idealab project team is assembled.
- Market research is done. A prototype is developed. A business plan is written. Seed money is given.
- The CEO is in place. Start-up staffers are hired. Prototypes are refined. Market research continues.
- The business goes "live." Staffers are hired according to growth. Financing is boosted as required.
- The business may go public or be acquired. The business joins the Idealab family. The investors are rewarded. The new technology and the development experience benefit Idealab.
The freshman class
Idealab's 19 companies will all graduate to lucrative careers in cyberspace--or so hopes founder Bill Gross. Here's a sampling of how some of them plan to do it:
