The 10 employees based in the new London office will work on generating Internet companies that cater to Europeans.
"This allows us to tap into the talent pool in Europe," said Howard Morgan, Idealab's vice chairman. "Entrepreneurship is just becoming available. People who are interested in taking risks and starting Internet companies are just beginning to happen."
Last month, the firm said it raised $1 billion in investments to develop new Internet businesses, acquire strategic assets and increase its stake in select Idealab companies.
The group's first overseas client will be CarsDirect.com, an online car dealership that also is looking to expand its services to Europe.
Idealab also hopes to bring a "wireless-related" company to life, Morgan said without elaborating.
"Wireless is strong in Europe; it's much more popular and widespread (than in the United States)," he said.
Lawrence Gross, formerly a senior vice president at Cendant Software, will direct the London office.
Idealab, founded in 1996 and based in Pasadena, Calif., has about 50 businesses in various stages of development in the United States. The widely regarded incubator has spawned such successes as GoTo.com, eToys and CitySearch.