I like Bill Gross, and think he is a dizzyingly smart guy. After all, Gross helped create the Overture model for advertisers bidding on search keywords that underlies Google’s giant revenues. That said, the following quote from him in a new BusinessWeek interview tells you a lot about how he has belatedly navigated his firm into a more rational investing business:
What are some of the strategy changes you’ve made at Idealab?
You really need companies with protectable intellectual property. GoTo.com had patents all over the core technology and ended up earning a tremendous amount of money. eToys did not. We began looking for businesses that didn’t hold as much inventory, didn’t need as many people. We looked at all of our ideas through that tougher filter and found there are just a lot fewer businesses. In 1996 we were making a business a month, post-2000 we’ve been making a business a year.
Whoa, a slower investing rate and more emphasis on IP? Hey Bill, it sounds like you’ve discovered … venture capital!