Some entrepreneurs find one company isn't enough

Juggling appointments can be tough enough for a busy startup founder, but that isn't stopping a growing number from a more extreme balancing act: launching a second company and sometimes a third while still working on their first.

Take Kevin Rose and Jay Adelson of the popular online news-ranking site Digg, who last month announced that they are barreling forward with a second company called Revision3, an Internet television network that produces its own content.

It was a surprising development to many. A new company, managed by a young team whose first company is not quite two years old, hasn't been acquired, and doesn't appear to be on the verge of going public or being sold?

But Rose, 29, who founded Digg, and Adelson, 36, who joined Rose soon after as CEO, are unusual only in going public about their multitasking. The reality is that cheap startup costs, the insatiable appetite of investors for hot Internet companies, and an unpredictable market that encourages entrepreneurs to hedge their bets is creating a spate of what might best be called ``hyperentrepreneurs.''

``Basically, everyone I know is involved in five or six projects right now,'' said Scott Rafer, 38, formerly CEO of the search engine Feedster and now CEO of blog tracker MyBloglog.com, cofounder of Mashery.com, a stealth-mode company aiming to help Web developers, and chairman of WiFinder.com, a Wi-Fi hotspot directory. ``VCs spread their risk across numerous companies,'' said Rafer. ``Why shouldn't we?''

George Zachary, a venture capitalist at Charles River Ventures on Sand Hill Road, compared the climate to Hollywood. ``It's like how multiple people get involved in multiple movie projects as insurance. Entrepreneurs are responding to the hits-driven nature of the industry, where only a few big acquisitions are happening every year.''

Not everyone sees the movement as healthy, including those who have gone through it. Said the CEO of two startups who asked not to be named, ``It's hard to lead two separate constituencies. People are giving their workaday life for you. They want to look at you and think, he's mine; he's got my back.''

Sam Yagan, who cofounded the file-sharing service eDonkey in 2002 and the online dating site OkCupid in 2003 (the former was shuttered in late summer), said that ``No question there's a loss when the CEO isn't around. If someone came to me with a great [second] startup idea now, I wouldn't do it.''

But others are still trying. Serial entrepreneur Ariel Poler, for example, founded the Web application development company Mastil several years ago. While he remains involved in the company, he also cofounded TextMarks earlier this year, a startup that aims to make money off the ever-ballooning number of text messages sent between mobile users. Both are in San Francisco.

Evan Williams, the cofounder of two-year-old Odeo, is also testing out a new company, Twitter, from his offices in San Francisco. Roughly eight months old, Twitter was born out of an effort to make Odeo which lets PC users find and subscribe to podcasts accessible over cell phones.

However, as it evolved into an online service that invites people to send mobile updates to their friends, the two concepts had even less to do with one another. Ultimately, ``we just decided to build it on the side, get it to a launchable state,'' said Williams, who has been down this path before. Williams also cofounded the project-management software company Pyra Labs, which spawned a spin-off, the popular blogging platform Blogger.

Neither Poler nor Williams is currently seeking funding, but they might encounter mixed reactions if they did. Angel investor Ron Conway, a shareholder in Odeo as well as in Digg and Revision3, said that he was eager to back Rose and Adelson a second time. ``I'm betting on the entrepreneurs.''

Zachary, meanwhile, whose firm invested in Odeo but recently parted ways with Williams, said, ``As an investor, I like to see someone who is 100 percent committed to one company.''

Indeed, most observers agree that a committed business partner is critical to make running more than one company work. ``The entrepreneurs I've studied have found partners who complement the entrepreneur very nicely and who devote fuller attention to an individual venture,'' said Noam Wasserman, an assistant professor at Harvard Business School.

Dedicated staffs also appear to be a prerequisite. ``Originally, we were sharing our engineers and our CFO,'' said Rose. Today, both Digg and Revision3 has its own full-time team.

But it's attractive economics that are making second companies more plausible than ever. Digg cost Rose less than $3,000 in initial expenses. And venture capitalists, who gave Web companies $262 million in just the first half of this year, are only sweetening the picture.

The good news for hyperentrepreneurs: that second challenge sometimes proves the better bet. Though Williams slaved over Pyra, Blogger, developed as ``a side project, a trivial thing,'' wound up the catalyst to an outcome for which most entrepeneurs long. Google bought it.