From: Robert Hettinga <rah@shipwright.com>
Date: Mon, 28 Apr 1997 10:04:25 -0700 (PDT)
To: Large Recipient List Suppressed <rah@shipwright.com>
Subject: e$: Time for a Financial Cryptography "IdeaLab"?
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Last week, a close friend handed me a February issue of Inc. magazine, the
one with an article in it about Bill Gross and his IdeaLab project in
Pasadena. Since then, I haven't been able to get Yet Another Idea out of my
mind.


Gross, a veteran entrepreneur with quite a few successful software startups
to his name, has set up a company which uses an investment pool to create
and spin off a rapid succession of small internet startups, using a sort of
"internet startup in a box" approach, all built around a common core of
financial, legal, and marketing people. The idea is to free an entrepreneur
to concentrate on designing, building, and selling the startup's product,
in this case, some kind of internet software or service. IdeaLab takes a
minority equity position in return for its money.

A Boston company which has been doing something like this, only on an
internal basis, is Thermo-Electron Corporation, who has made much more
money spinning off new companies than it ever could as a stand-alone
industrial enterprise.

IdeaLab thinks that it can have this kind of approach with internet
startups above all others because everything on the net happens so fast and
the cost of entry is so small that there are actual diseconomies of scale.
Moore's Law in a geodesic market as capital surfactant, in other words. :-).

Anyway, you can read more about all this, and IdeaLab itself, in the Inc.
Magazine archives: <http://www.inc.com/>.


So, after a couple of years of sitting on the sidelines and cheering people
on (I've had a bunch of fun, but my tax return for last year was a miracle
of financial brevity :-)), of second-guessing the market and being right
more often than I'd care to think about, I've decided to get into the game
and play a bit myself, and see what happens.


What I propose to do is to create a Boston-based copy of the IdeaLab
concept, focusing on financial cryptography, and, in particular,
peer-to-peer internet transaction settlement: internet checking, digital
bearer certificate technology for cash and securities, micromoney
"mitochondria", that kind of stuff.

To do this, I want to collect a core group of financial, legal, and
marketing/promotion folks who would work for the lab company itself, and in
support of the startup firms it creates, until those firms earn enough
money to hire their own people for those jobs. So, I need people in those
disciplines who're not only familiar with the net, but also the idea of
geodesic markets, and of  financial cryptography, but, more important,
people who have participated in founding as many startup companies as
possible. Finding those people may be hard, but I think they're out there.

More important than that, I'm looking for a small initial group of "angel"
shareholders who not only invest in the first round of funding for the lab,
but can work as advisors to these usually very young technological
pioneers, and teach them to think in profit-and-loss terms. Over time, I'd
like to populate the advisor pool with successful graduates of the lab.

The first round of "angel" funding will be to get the lab started and start
the first few companies in areas where I think things are going to pop in
the transaction settlement market shortly. A second round would be big
enough to get participation from the institutional investment community,
but the capitalization of the entire project won't be huge. IdeaLab was
started with $5 million, for example. Right now, I think $10 million would
be the most I could ask for with a straight face for the whole effort. :-)
I'll leave dreamy discussions of some hypothetical hockey-stick investment
return curve for the prospectus, where it belongs. ;-).


I'm at the utter ground floor on this at the moment. No business plan, just
what I think is a pretty good idea.

So, I need all the help I can get. If you've any ideas, particularly if
you've worked on any of the components I need to make this work, I'd love
to hear from you.


Cheers,
Bob Hettinga




-----------------
Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
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