Net incubator Idealab runs out of ideas

While the Pasadena, Calif. company will continue to support the three companies operating out of its Palo Alto, Calif offices, it told employees in that office Tuesday that it will no longer launch new companies there, according to Bob Kavner, vice chairman of the company.

The move is a sign of how quickly times have changed for the company, which has been a bellwether of the Internet boom and bust and is known for launching Internet retailers such as eToys, which announced last week that it would shut down its Web site and file for bankruptcy protection.

In March of last year just before Internet stocks crashed, the company was valued at about $7.9 billion by investors who poured $1 billion into the company. In October the company withdrew plans to go public and raise as much as $300 million.

Brian Steel, president and chief executive of Idealab Silicon Valley, said the 33 employees would be given the chance to work at one of the three local companies but there may be some layoffs of employees who don't find a job at one of those companies. He said in three months he expects there to be about 11 employees in the Palo Alto office.

He added that the creation of the network of offices which includes incubators in Boston, New York and London was something of an experiment to see how well the firm could leverage the idea-generating capacity of Bill Gross, who founded the company in 1996 and is based in the Pasadena headquarters near Los Angeles. "I think in retrospect there was certainly more Pasadena-centrism to the model than we originally thought," he said.