Where Bill Is Putting His Pocket ChangeRichard Brandt and Dori Jones Yang
The second-richest man in the U.S. doesn't like to spend money. He has even been known to drive around for half an hour looking for a parking spot rather than pay $12 for a garage space. Sure, William H. Gates III has had lapses, such as the $600,000 Porsche he bought a few years ago and the $20 million estate he's building on Seattle's Lake Washington. But, he points out, the house will double as a technology showcase and meeting place for Microsoft Corp. Other than that, his only real extravagance is a fondness for cashmere V-neck sweaters.
Gates also hates to waste time on activities outside Microsoft. He takes few vacations and even married a Microsoft manager. "Ninety percent of my net worth is in Microsoft," he says. "That leaves me with some reasonable amount of money--less than 1%--to invest in other things."
So when Gates puts money and time into startups, the interest has to be intellectual, as well as financial. The answer: biotech. "It's a hobby of mine," he says. "Other than computers with great software, it's the thing that's going to change the world the most." Gates is intrigued by the challenge of unraveling genetic codes. "The gene is by far the most sophisticated program around," he says.
Gates also likes to keep his money close to home--in Washington State. In late 1992, he gave $12 million to the University of Washington to start a molecular biotechnology department, thus luring Leroy E. Hood from the California Institute of Technology. Hood is a pioneer in creating computers that map the molecular structure of genes.
Hood subsequently became a co-founder of Darwin Molecular Corp. in Bothell, Wash., in the hopes of using those maps to find cures for genetic diseases. Among the company's goals: AIDS treatments and a "killer gene" to attack tumors. Gates invested $5 million in May, along with Microsoft co-founder Paul G. Allen. With over 10% each, they are its largest shareholders.
Gates is also the biggest shareholder in ICOS Corp., a biotech company near Darwin that studies the way cells communicate with one another on the theory that many diseases develop when cells give each other "bad advice," such as overreacting to a foreign substance. Gates's $6.35 million gives him a 7.5% stake and a board seat.
His investment that has made the biggest headlines is the one in which Gates is least involved. In March, he joined cellular king Craig O. McCaw to fund Teledesic Corp. The Kirkland (Wash.) startup plans to create a wireless phone network by launching 840 satellites. Gates put up $5 million based on pal McCaw's advice but has no board seat and has never even met the company's president, W. Russell Daggett. "The regulatory, financial, and technical hurdles make it a real long shot," says Gates. "But it's very cool if it works."
GOOD QUESTIONS. The only company aside from Microsoft Gates has started from scratch is Bellevue (Wash.)-based Continuum Productions Corp., which has been buying digital rights to artworks and licensing them for educational programs or other uses by software makers. Gates won't say what he has invested in Continuum.
It's too soon to tell how Bill's bets are paying off. ICOS, the company closest to putting out a product, has hit a snag. The Food & Drug Administration is holding up clinical trials of its multiple sclerosis drug pending more information. And once Continuum President Stephen D. Arnold began creating interesting interactive programs, Microsoft acquired the technology and brought Arnold on board.
If his investments don't pay off, it won't be because Gates hasn't done his homework. "Bill understands biotechnology extremely well for someone not in the field," says Darwin's Hood. "The questions he asked us about Darwin were better than those of some of the veteran venture-capital investment bankers and large pharmaceutical companies." But then, he's investing his own money, not someone else's.