The Start-up Factory

 

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

  1. The new company begins the development cycle. An Idealab project team is assembled.
  2. Market research is done. A prototype is developed. A business plan is written. Seed money is given.
  3. The CEO is in place. Start-up staffers are hired. Prototypes are refined. Market research continues.
  4. The business goes "live." Staffers are hired according to growth. Financing is boosted as required.
  5. 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:

    Answers.com
    Quick: What's the principal export of Botswana? For a fee, this Web site will answer any question within 24 hours.

    CitySearch
    Idealab's flagship operation, which provides Internet guides to local communities. Gross hopes it will go public this year.

    EntertainNet
    An Internet broadcaster like Pointcast--which delivers news and other information via a screen saver--but with an entertainment twist.

    Idea Market
    An on-line market for buying and selling intellectual property.

    I-map
    3-D technology for visualizing the results of search engines. "The results look like a galaxy, with articles clustered according to their proximity to one another," says Gross. "Oh, it's amazing."

    Intranetics
    Off-the-shelf "intranets in a box" for small and midsize companies.

    PeopleLink
    A suite of Internet communication tools. One application enables on-line chatters to switch to anonymous telephone discussions.

     PREV  1 | 2 | 3 | 4 | 5 | 6  NEXT 

    Read more:

  6. How Google Cost Me $4 Million
  7. The Way I Work: Michael Arrington
  8. Tony Hsieh: Why I Sold Zappos

Sign-up for our Finance Newsletter