Idealab's New Idea: Cash Flow Positive Companies

from the what-a-concept dept

Idealab was, for many, the perfect model of dot com excess in a box. It started up me-too play after me-too play on whatever topic was hot at the time, and then tried to figure out how to make money later. During the boom years, it appeared to be working. Of course, at that time, what didn't appear to be working? This convinced a bunch of greedy investors to invest a ton of money right before a planned IPO that was supposed to make them even richer than they already were. When the bubble collapsed between the investment and the planned IPO, these investors who were promised a "sure thing" got angry and sued (I don't see how they have much of a case - they didn't do any due diligence and they got screwed - tough to blame that on Idealab). This has all been covered before. Now, however, Idealab is trying to make a comeback with a new idea. They've now decided that, rather than building up massively overhyped companies and selling them off for tremendous profit, they're going to build lots of new profitable companies and live off the cash they generate. It took them that long to come up with this idea? The problem with such a plan, of course, is that businesses that are likely to generate cash flow positive results that quickly, generally aren't the sorts of companies that have huge returns. They usually don't need incubators to help them out. Part of the reason for the incubator is to try to help lower the initial capital costs associated with businesses that have need high capital investment early on, but which they hope will be "big bang" successes down the road. Not that it isn't possible, but generally speaking, it's much more difficult to do a big bang sort of business while making sure you're eking out a profit as quickly as possible. It's two different strategies, and it's unclear why companies going after that strategy get much benefit from being in a for-profit incubator.