By SARA FISHER
Staff Reporter
Bill Gross, already by many accounts the world’s preeminent e-commerce entrepreneur, is just warming up.
With his Pasadena-based Idealab incubator having spawned two meteoric initial public offerings over the past six months eToys and Ticketmaster Online-CitySearch Gross is preparing to unleash his second wave of e-commerce companies.
And there are several more waves down the line. In fact, Gross has nearly two dozen companies in various stages of development.
“(Gross) is unbelievable. I’ve been in business all my adult life, and I’ve never seen anyone so fertile with ideas,” said Bob Kavner, Idealab’s general partner. “We vet our own ideas, and we choose not to pursue all of them. But if we had the capacity to develop more companies, Bill could easily generate enough solid ideas to overload it.”
Among the new wave of Idealab companies now emerging:
? Tickets.com, which recently merged with Advantix Inc., is becoming a major player in online ticket sales and has filed preliminary documents with the Securities and Exchange Commission to go public.
? The search engine company GoTo.com has filed for an IPO, which it expects to bring to market later this month.
? Federated Department Stores recently bought a 20 percent stake in WeddingChannel.com, an online registry and wedding information site.
? E-commerce company Cooking.com just landed $16 million in later-stage funding.
“Working with Bill is a very electric experience,” said Jennifer Fonstad, a partner at Silicon Valley venture capital firm Draper Fisher Jurvetson and a board member of several Idealab companies. “He’s a catalyst for sparking discussions and drives thinking in new ways. I sincerely believe Bill’s a creative genius.”
He’s certainly becoming a wealthy one. With Idealab being a privately held company, Gross is not required to publicly disclose its finances, his equity stake or those of his partners.
But the two Idealab IPOs provide a glimpse into Gross’ mushrooming wealth. Idealab’s equity stake in eToys alone is worth about $900 million, based on the stock price late last week, and Gross’ personal stake in Ticketmaster Online-CitySearch is worth about $109 million.
In part to further bolster his fortune, Gross last summer took on the additional role of venture capitalist. He teamed up with investment veteran Bill Elkus to launch Idealab Capital Partners, also based in Pasadena. The fund, which closed in February with $105 million in capital commitments, is providing financing to fledgling Internet companies, especially those based in Los Angeles.
Among the Idealab companies that have received capital from the fund are CarsDirect.com, Cooking.com, Launchpad/Ewallet, Tickets.com, Utility.com, WeddingChannel.com and Kids OnLine.
One of the reasons for the fund’s creation, according to Kavner, is to enable Idealab to retain a bigger equity stake in the companies as they go public.
The result: Bill Gross, already a kingpin in the exploding world of e-commerce, will likely see his fortune grow exponentially.
Much of Idealab’s strength comes from its internal structure.
Kate Delhagen, director of consumer e-commerce research at Forrester Research Inc., describes it as one of the first Internet-related operations to apply the hub-and-spoke system, meaning that lessons learned in one start-up are applied to its other ventures.
CarsDirect.com is one example. Based on the example of eToys and other Idealab companies, Gross realized that the concept of buying goods online, sight unseen, might work in the automotive business. Through CarsDirect, a consumer can now shop, purchase, and have a new car delivered to his doorstep without ever talking to a salesperson.
Talent is utilized in a similar fashion. Brad Ramberg, Idealab’s chief financial officer, previously was CFO at Ticketmaster Online-CitySearch and helped take it public.
Kavner agreed that this leveraging of experience is the true strength behind the company, though he noted: “It’s not the Midas touch. I don’t believe in that idea. Instead, we deliver a body of knowledge that is relevant for the market.”
Not all of Gross’ concepts have turned to gold.
Ever hear of ideaMarket? The company was shut down when almost all of its employees quit after disagreeing over what kind of business software and reports to sell online. Launchpad/Ewallet, an e-commerce tool that stores a consumer’s name, address and credit card information, hasn’t flown too well, either.
“(Gross’) ultimate success or failure will come in his ability to sift through the flood of ideas that come his way from outside sources and make judgment calls,” said Delhagen. “We have yet to see that.”
Jon Goodman, chief executive of EC2, a technology incubator affiliated with USC, pointed out that the Internet industry’s hyper-evolution means it’s too soon to declare Idealab a barn-burning success.
In fact, the days of simply nabbing a sexy Web address and building a company around it are coming to an end.
“There are no givens in this industry, and past successes may not be a guarantee of future ability, especially given the speed of this industry’s growth,” Goodman said. “We need to get to the five-year mark, or to their second venture capital fund, to see how Idealab really does.”
The most promising of Idealab’s up-and-comers are those in the consumer e-commerce niche precisely where Gross already has a solid track record. Tickets.com, WeddingChannel.com and Cooking.com are frequently referred to as the brightest prospects.
The majority of Internet companies coming out of Idealab are dreamed up by Gross himself. And according to Idealab’s Kavner, Gross is also creative when it comes to formulating business plans.
Free-PC was initially lambasted by critics when announced in February. The idea was to give personal computers away for free to consumers willing to have highly detailed personal demographic information about themselves disclosed to advertisers, and agreeing to let advertisers stream non-stop advertising across their computer screens. Critics were quickly squelched, however, when more than 375,000 people swamped Free-PC’s Web site the next day, hoping to get in on the deal.
Another company in which Idealab invested, Westlake Village-based Internet service provider NetZero, has a similar business model.
“If you look at today’s portfolio compared to our early days, the biggest change in Idealab is that we’re pushing the envelope on how to monetize our ideas,” Kavner said.
Of course, both computer-giveaway companies have yet to prove their long-term viability, and in a broader sense, the same could be said of Gross and Idealab as a whole.
“Idealab is taking some bold swats at different business models,” said analyst Delhagen. “Some will win, some won’t.”
And as in all businesses, timing is everything. Gross has proven himself remarkably adroit. He first began dreaming up Internet companies back in 1995, when the ‘Net was just starting to become commercialized. He moved fast to turn ideas into reality, and therein may lie his key to success.
“Bill Gross’ single greatest strength to date has been his ability to act fast,” said Goodman of EC2. “He has been very prescient in understanding the importance of speed in this industry, and the Internet so far has belonged to the first-movers.”
Gross also has shown himself adept at predicting what consumers will want before even they themselves know it a trait shared by many super-successful venture capitalists and entrepreneurs.
“His out-of-the-park successes have been in the consumer space,” said venture capitalist Fonstad. “He clearly has a good nose for anticipating consumer needs.”
