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Idealab founder on the energy transition: ‘There’s a multi-trillion-dollar opportunity’

Idealab Founder Bill Gross talks with Yahoo Finance at the World Economic Forum (WEF) in Davos, Switzerland about helping companies reduce their carbon footprint, the tech incubation model, and the equity investor environment.

Video Transcript

JULIE HYMAN: Idealabs is betting big on the future of clean technology. Its founder Bill Gross joined Yahoo Finance's Editor in Chief Andy Serwer in Davos to discuss why he says the current energy transition is, quote, "bigger than the Industrial Revolution."

BILL GROSS: Heliogen is taking the sunlight and replacing fossil fuels. We concentrate sunlight like a huge magnifying glass and enable industrial companies to decarbonize. And that's really important for them right now, mining companies, steel companies, cement companies. They're all trying to reduce their carbon footprint. And we have a technology that enables them to do that.

ANDY SERWER: It sounds a little bit like the set of a James Bond movie, if you ask me. But all right, so what's the business model? How does it work?

BILL GROSS: So the business model is, we go to these companies. And on their premises, we build them a facility that enables them to stop burning coal or natural gas but still have control over their energy assets. And they're really excited about that, because right now, the volatility in energy prices, the increase in energy prices really makes them want to have something that's stable, reliable for the long term.

ANDY SERWER: Right. And so the customers then, are what kinds of companies? Can you name them specifically?

BILL GROSS: One of our big investors is ArcelorMittal, the biggest steel company in the world. That would be an example of a customer. Another is Rio Tinto, a big mining company. They're all companies that use energy to an extreme degree, where energy is of their biggest expenses. And they're all companies that are really looking to reduce their carbon footprint by 2030 by huge amounts. We really can help them do that.

ANDY SERWER: Bill, you were sort of the original tech incubator guy with Idealab going back to the 1990s. Now there are a lot of others doing it. But what was that like starting that up back then?

BILL GROSS: Oh, boy, people thought we were crazy. Well, I think many good ideas, people think you're crazy. In fact, many breakthroughs are a crazy idea right until they become a breakthrough. But we started Idealab in 1996. And I had these 10 ideas for companies that I wanted to start. And who knew that seven of them would be successful enough to allow us to continue running Idealab for 26 years now?

But I love the idea of helping entrepreneurs make a big difference in society. And that's what I love doing. We started more than 150 companies over these last 26 years.

ANDY SERWER: What are some of the companies that you're most proud of?

BILL GROSS: Well, we started a company called Goto.com. I don't know if you remember that. Actually, we sold it to Yahoo. We invented paid click advertising, pay per search advertising, keyword advertising. And Google licensed the technology from us and used it. And I'm very proud of that impact.

We started a company called Cars Direct. It was the first company that sold cars online back when people were afraid to put their credit cards online. So I'm really proud of some of the things that we did there were big innovations. But we also saw a lot of things that were way ahead of their time that didn't make it too. I learned a lot of painful lessons from those that I employ with all of our companies today.

ANDY SERWER: Maybe you should explain exactly what a tech incubator does, how it works. How does that model?

BILL GROSS: Well at Idealab, what we do is we look at big problems in the world. And we try and find technological solutions that can solve them. So we brainstorm all these ideas. I try to write down an idea every day. At the end of each month, figure out what's the best single idea that we have that we could turn into a company.

We'll prototype it to see if there is traction. And then we'll recruit a team and give them equity in the company and give them capital to get it started. And it's really, really been exciting to see how much that can grow, how much learning we can share from one company to another, having done it so many times, and how many lessons learned that you can share with companies, as they're growing, to try and help them have a higher success rate.

Our success rate is much higher because we put the companies through a big filter before we even start them. That's how we've been able to make it work for so long.

ANDY SERWER: But it's a very competitive business now?

BILL GROSS: Well, right now, we just see so much opportunity in every area. Obviously, climate change is the biggest area that I'm passionate about. But in biotechnology, in robotics, in AI, I don't see competition, I see opportunity everywhere.

ANDY SERWER: But what about the economic environment, Bill? Particularly with higher interest rates, isn't that going to be a headwind for what you're trying to do?

BILL GROSS: I would say what's happening right now is valuations are coming down, but the opportunity is as big as ever. I've always said to the entrepreneurs that we help start companies, be success-sensitive not dilution-sensitive. So if you have to give up a little bit more percentage of your company to make it work right now in these times, so what? As long as the company is successful, that's what matters in the long run.

ANDY SERWER: What do you think the environment's like for average retail American investors who are investing in publicly traded equities? What's the environment like to you there?

BILL GROSS: Well, it's definitely challenging. Things are so volatile. Until things settle down with what's happening in the geopolitical situation, until things settle down with what's happening with interest rates and inflation, it's challenging. But I still see, in particular with Heliogen, with the energy transition that's going on in the world right now, there's a multitrillion-dollar opportunity.

This is bigger than the Industrial Revolution, what's about to happen. It's even bigger than the Digital Revolution what's about to happen to our energy system. So I see a big opportunity.

ANDY SERWER: And final question, Bill, how did you transition from being an incubator guy to a sustainability guy? Or are they of a piece.

BILL GROSS: They're of a piece. A little-known fact, I was in love with sustainability even when I was a teenager. I started a little small company called Solar Devices, because I lived through the energy crisis, the Arab oil embargo in 1973. I was a teenager.

And I made a little mail-orde r company where I sold plans and kits in the back of "Popular Science" magazine. And that paid my way through Caltech. It paid my way through college. So I was able to use the early successes of Idealab to fund my renewed effort in climate change right now. And I'm so lucky to be able to do that. I think it's a big impact for the world. And I'm very happy to be here.