COMPARED TO MANAGING an established company, running a venture firm " is almost upside down," says Robert Adams, ’61, a 29-year Xerox veteran picked to head up its venture operation. "When you’re in a new venture, there are no rules. There is no path. You cannot look at where you’ve been to figure out where you want to go. You cannot look at someone else who’s doing it already. You have to invent as you go along.

Adams should know. With XTV, Xerox’s venture capital operation, he started nine new companies using ideas for innovations that simply didn’t fit the Xerox mold. Given $30 million, two partners, and free access to all of Xerox’s intellectual assets, he waded through nearly 150 discarded ideas and picked some winners.

Even after years of experience, Adams can offer no simple formula to help spot marketable ideas; he compares it to a batter’s instinct to swing at the strikes. “Picking the pitch is almost entirely intuitive. You can have people help you, you can do focus groups, or market research of one kind or another, but at some point you’ve got to decide on some basis that this is going to work for me,” he says.

Xerox’s interest in start-ups came with the realization that the culture that led them to the top of the industry did not always capitalize on new ideas. For years Xerox technology was leaking out of the company. Industry rumor has it that the Macintosh, Ethernet, laser printers, and mouse pointers all originated at–and slipped out of–Xerox. “It’s not as true as the press would make it out to be,” Adams asserts, but “it’s true enough that we made a move to combat it.”

To keep some Xerox-born ideas in the family, the company launched XTV to identify top ideas, secure outside venture funding, and provide guidance as the companies grew, and they picked Adams to run the show. He had joined Xerox in 1969 when it bought the computer company he worked for, Scientific Data Systems. When Xerox got out of the computer business in 1975, Adams shifted gears and worked to develop and market a high speed plain paper laser printer. He held several other positions, and by 1985 he was an executive vice president and responsible for planning all of Xerox’s long-range mergers strategy.

When he took the helm of XTV, Adams and his associates selected nine ideas that became companies. Xerox held all of the stock; twenty percent of it was set as aside to be used as stock options for employees. A small nucleus of employees came out of Xerox, and they were given shares in the new company in exchange for waiving the legal right to demand a job from Xerox if the new company failed. “Then we would sign intellectual asset agreements with the new company and leave the organization on Xerox premises for a little while, until things got rolling,” Adams explains. “At some point we’d tell the them to get a dose of reality and find them some linoleum floors and steel desks and make them a start-up.”

Two of the companies have gone public; the most successful is Documentum, Inc., a company that makes enterprise-wide document management software. Documentum was founded in 1990, went public in early 1996, and has attracted considerable attention along the way. The January 12 issue of Forbes described Documentum’s growth in the past three years as “eye-catching,” and revenues have been rising steadily, from $10 million in 1994 to more than $75 million in 1997.

You might say the semi-independent XTV has been a victim of its own success. Xerox has seen the light and rethought its position on ventures, Adams says, and has decided to bring the function in-house when XTV’s contract expires next year. “A couple of things have happened to get Xerox to take a different approach,” Adams explains. The company has “substantially changed the way they look at new business. Quite literally, product development was regarded as a way to provide new vitality to sales and service, what they considered the major strength of the company. Now they are willing, if the business looks interesting enough, to develop new channels of distribution.”

With the end of XTV, Adams is eyeing the playing field, looking for the next good pitch. Although he mentions retirement as an option, he begins speaking animatedly about a new project in the San Fernando Valley that would allow film makers to digitize their work in progress and send it from one place to another over a high-speed network.
Don’t leave the ball park yet. Bob Adams still has home runs in him.

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