Bill Gross and Idealab, the great startup incubator

If you don’t already know about IdeaLab & the tie between PPC, Picasa, eSolar, InternetBrands, WeddingChannel.com, Commission Junction, Shopping.com, CitySearch, Compete.com, eToys, and Answers.com…then read on.

While news about Y Combinator and startup incubation continues to rock the tech newswire…with tens of startup launchpads popping up all over the country every couple of months…it was actually a fast-speaking innovation hero in LA who paved the way for this booming generation of startup incubators…

Who’s the guy? Bill Gross. Bill has been one of my heros for many years…ever since listening to John Battelle’s book, The Search, the story of how Google grew. As John explains it, one of the keys to this empire was the revenue model that some incubator genius down in LA had pioneered…Pay Per Click advertising wasn’t invented by Larry & Sergey…far from it. We can trace the origins of PPC all the way back to…guess who? Bill Gross.

What’s remarkable is that apart from the predecessor of AdWords, IdeaLab…the incubator that Bill Gross created has now launched over 100 other businesses in the past 15 years, with a tremendous number of successes.

Perhaps the most noticable about his presentation was that he is an extremely fast talker, clearly a mile-a-minute type of person. I’ve always wondered what type of a person could have essentially built over 100 companies and so it didn’t surprise me to learn, but he is one of the fastest, articulate speakers I have ever heard.

His story…

As a 14 year old, built his first sterling engine, initially had a passion for energy…he took out ads in local newspapers, sold a few thousand kits, but energy wasn’t as exciting as other things.

Then the PC came out, and he became passionate about software and what it could do, and created three different pieces of Lotus related software.

Then he had a child, and became really passionate about children’s educational games. Then he started building childrens’ games, one of which he sold 20M copies of.

But all along through building and selling these different companies, one of the key things he learned about entrepreneurship was this: the more a company focused…the fewer things the company did, the better the company did…as long as you’re going down a path of what customers want, then the more focused you are, the better.

But he, personally, had a very difficult job remaining focused on one single thing…

But with an incubator, he could participate in many things, brainstorm many ideas, and help many different companies. And he could have each company have a laser-like focus.

One of the keys of this was sharing the upside. Equity is such a great driver of performance & a great motivator. There’s a magic you get when you give people above 1% of a company, then you ‘manufactured a new 100% equity pool for each startup’ – so you bring people into a company with a higher equity stake, albeit of a smaller company, but the person. You can unlock so much human potential when people have a big equity stake. At all his companies, the receptionist and everyone in the company has equity in it.

They would come up with ideas, then prototype like crazy, and then kill things that weren’t working. And a key was that he could kill projects, without it affecting people.

Structure was that he could hire a bunch of great people who were always working on new ideas & the ones who failed, could go work on a new idea. This made it very easy for people to see that they could take chances on things.

Bill believes that there are four critical personality types:
Entrepreneur – actually makes thinga happen, envision the future, and tries to make them before their time
Producer – who actually gets things done
Administrator – beaurocrat, sometimes gets in the way of things and helps organize things, to help the trains run on time.
Integrator – the people who understands the other three talents and tries to help them get along, because the other types usually hate each other.

Some people can have multiple of these personality types. Any one of these skills taken to an extreme is a negative, but all of these in the right balance, is necessary. He always looks to hire the I, the person who is in the room thinking about what everyone else is thinking.

The companies who succeeded, of his 100, had the right balance. The idea always comes from the E. Then there has to be a P, who gets along great with the E. But even once it gets going, it too will fail if there isn’t some system in place (coming from the A). He would even take a team that has all of these, even before a team with a great idea…it’s really that important.

Finally, he spoke about his latest company, eSolar…and he shared several key facts about energy demands and consumption, that by 2050, the world energy usage is estimated to be 50 terawatts. “It doesn’t have to about climate change, it’s even about resource wars.” He encourages entrepreneurship and believes that it’s ability to combine the skills of technology entrepreneurship, and Moore’s law, to drive success in energy.

Q&A:
Q: Are you more a VC or an incubator – the difference being where ideas come from.
A: He does think that only using ideas from within their lab could be considered a competitive disadvantage, so he would definitely take ideas from outside. But it’s always actually been a bigger problem of meeting great people than it is to find ideas to work on. “If I had enough talent to start 50 companies a year, I would”. If he has an idea that they can’t build a business around, then they try to patent them…he brings in outside experts

Q: How do you think about the early part of a business.
A: Find out exactly what the minimum viable product is.

In summary, this guy deserves plenty of credit for driving so much of the future of technology through this prolific creation of new businesses. If you’re interested in building startups or investing in them, Bill is certainly a great guy to learn from.