IDEALAB the Cornerstone of LA’s Modern Tech Ecosystem

If Silicon Valley has Hewlett-Packard as the epicenter of its origins, then LA has IDEALAB.

Sure, Los Angeles is the birthplace of the internet (fact!), and quite a bit of innovation emerged from LA’s early role in the aerospace and defense industries, but if there were one modern-day company that this town can point to as the cornerstone of modern-day innovation in LA, most people would name Idealab.

Idealab was established in 1996 by serial entrepreneur Bill Gross, who got his start bootlegging candy in high school, put himself through CalTech by selling solar plans from the back of Popular Science, and built & sold a handful of software companies before hanging the Idealab shingle behind Pasadena’s famed Colorado Boulevard.

From its very beginnings, Idealab has been able to launch business after business internally from their studios, each company sparked by Gross’s intense desire to solve problems within particular verticals, and backed up with tons of research before the first computer model or physical prototype is ever built.

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Initially, Idealab was formed in order to start on average four companies a year. In those heady first few years emerged internet / stock market darlings CitySearch, Goto / Overture (the first company to place ads next to search results), NetZero, eToys, Pets.com, and Shopping.com.

Since then, Idealab has moved out of pure tech and grown into a number of verticals, including solar / cleantech, robotics, education, and security.

For a full list of Idealab companies, click here

Says Idealab VP of Biz Dev Alex Maleki, “Bill has a broad range of interests and he’s just as knowledgeable about advertising technology as he is about heliostats on a solar farm. Part of it is being aware of what the market wants, see where capital is being deployed, and where we fit in that.”

Continues Maleki on the Idealab model, “We’re an incubator in that 90% of what Idealab does is internally generated — we do market research, competitive analysis, build a prototype, and recruit a CEO to co-found that company with us.”

In addition to building and setting up core teams around new products, Idealab has a suite of shared services which allows that core team to focus purely on the development, engineering, and marketing of the product.

So while the core focuses on product and customers, Idealab’s shared services handles the administrative basics, such as accounting, legal, HR, design, and publicity, because, says Maleki, “As an early stage company you should be focused on product and customers. Everything else is a distraction, so we can help alleviate some of those things that pull time from early stage CEOs.

“As an early stage CEO, you need to able to build a team and raise money. And true marketing isn’t done until you know what you’re selling.”

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When it comes to developing pre-commitment products, timelines vary as to when Idealab decides when to get 100% behind an idea — for instance, building clickable prototypes for a mobile app can be done much quicker, than say, robotics or machine learning learning algorithms.

Maleki notes some of the most important criteria that Idealab studies before launching a new business: “Can we be 10x better than the competition? Is there capital available for an idea like this? Is the team backable and knowledgeable?”

Idealab summizes the market opportunity early in the development phase of a product: “We try to make those ‘go / no go’ decisions early in the process, as quickly and as cheaply as possible. Once we capitalize a company, we are 100% behind it, doing whatever we can to make it succeed.”

Above all else, even when a pre-commitment product or company has been researched, analyzed, studied, poked, and crunched, there’s still a big X factor in deciding to commit to an idea, something Gross himself addresses publicly in his speeches — market timing.

A number of companies have been acquired or spun out of Idealab over the years, Idealab currently has 16 companies in residence that employ roughly 150, while Idealab’s total office staff runs just past three dozen.

And when it comes to finding local talent, says Maleki, “Southern California spits out more software engineers than anywhere in the nation — the problem has been keeping them here [in LA].”

But he adds, “We’re seeing more & more people stay here, which is fantastic. We’re near the Arts Center, near CalTech, Bill in on the board for both — there’s a lot of talent here in Pasadena, but were seeing more & more people wanting to stay in this area, and finding opportunities to do so, but we’re ‘pull agnostic.’

“Wherever you are, we’ll find you, if you want to work in the great environment of Pasadena, we’re more than happy to have you,” noting that Idealab staff has degrees from all over, and that this summer’s intern program has a dozen interns from CalTech, MIT, and Pomona, among others.

“Now is a fantastic time to be in this space in LA, with pockets in the west side and downtown LA and Pasdena and everywhere in between, LA is the best place to be for any sector you want to go after in an entrepreneurial manner.

“Silicon Valley deserves its credit with many multi-billion dollar companies and the beginnings of Venture Capital, but if I’m a young entrepreneur right now, LA is a tough to beat.”

Author Description

Scott Perry -- LA Tech Digest founder

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