Something Ventured

I was in my laboratory probably talking to students.

Here's a call comes out of the blue.

This young guy wanted to know is the technology

ready to be commercialized.

Then he said the magic word.

He says I have access to some money that would allow us

to get started, and I said OK.

I said, where does the money originate?

And he said, I'm a junior member at a venture capital firm.

I went to look up what venture capital meant.

I hadn't heard of it before.

The risks were just enormous.

They came to me with no business plan.

Willing to risk everything.

You have to be a street fighter.

Tick, tick, tick, tick, tick, tick, tick.

We didn't know what we were doing.

Silicon Valley.

Technical break through.

$100,000.

$1 million. MAN: $10 billion.

Intel.

Apple. MAN: Genentech.

Cisco.

Good markets create companies.

Rolling company.

The sky's the limit.

The rest is history.

I don't know how to write a business plan.

I can only tell you how we read them, and we start at the back,

and if the numbers are big, we look at the front.

See what kind of business it is.

You have to look at the way conventional wisdom works

and abandon it.

No one has ever accused me of underestimating myself.

Jobs and Wozniak came up to see me.

Steve Jobs is a national treasure.

He is so visionary and so bright.

I had to fire him, though.

These men didn't always

wield such influence and power.

In the beginning, they barely knew what they were doing.

50 years ago, they were just young guys

from modest means who thought they could help

build innovative companies.

This is the story of a handful of men who stirred up

a revolution in finance and technology

because they saw opportunity where others only saw risk.

Venture capital... I don't think I thought of it first,

but I don't know anyone who used the term before I did.

Back in the spring of 1957,

Arthur Rock was just a Junior banker on Wall Street,

but then one day an unsolicited letter arrived at the office.

The letter was unusual, and no one else at his brokerage firm

knew what to do with it.

It was a cry for help, and it would

forever change the trajectory of Arthur Rock's life.

You gotta be lucky.

Everybody's gonna be lucky at sometime or another.

Thing I'd say is I was lucky to be lucky early.

The letter on Arthur Rock's desk

had come from eight engineers in California,

a group of brilliant young men who had soon become

known as the traitorous eight.

We were young guys, a bunch of young engineers

and scientists mostly, working together

at Shockley Semiconductor.

They were having a hard time with Shockley,

and they were going to leave.

Things had deteriorated at Shockley lab.

He was a very difficult person to work with, and a group of us

started considering the possibility

at least of these leaving.

So anyhow we did write...

This prospectus is to introduce a group of senior scientists

and engineers who have been working together at Shockley.

Semiconductor laboratory.

Shockley had just won a Nobel Prize.

It was probably a little presumptuous of us to think

we could push him aside.

A group feeling arose to the effect

that, rather than leave one by one,

we believe we are much more valuable

to an employer as a group.

These were, by their resumes, very superior people,

and I thought, gee, maybe there's

something here, something more valuable

than just to be an employee.

That something that Arthur

saw inspired him to step out of this ordinary role

as a Wall Street banker.

And that's when we met Arthur Rock.

Arthur came out to meet with a group of us,

and Arthur said, you ought to start your own company,

and we'll find financing for you.

They hadn't thought of this idea themselves.

Nobody thought of starting their own company

in those days.

It was a new idea, but it was a good.

At that time, there was no venture capital,

so starting companies was new.

It was innovative.

Arthur Rock had to get creative about finding capital

for the traitorous eight.

His bank had contacts with rich families

like the Rockefeller's and the Whitney's, but they

weren't interested in backing a start up all

the way out in California.

So we made a list of companies.

In fact, we sat down with the Wall Street Journal.

Looking for companies to ask to invest in these eight fellas

in forming a new company.

I think we had 35 companies.

All of them said no.

No.

The attempt to start a new company

might have ended then and there with the traitorous eight

returning to the job search and Arthur Rock admitting defeat,

but then Arthur received one last lead.

We were pretty much at wits end,

and somebody suggested that I see Sherman Fairchild.

Sherman Fairchild was an entrepreneur himself

and also a very wealthy man.

He right away saw the possibilities

and decided that Fairchild Camera

and Instrument would invest the $1.5 million

we were looking for.

I call myself the accidental entrepreneur.

With the $1.5 million Arthur raised,

the traitorous eight started Fairchild Semiconductor

in Mountain View, California, a sleepy rural town 35

miles south of San Francisco.

Fairchild was the first company to manufacture

the sophisticated silicon chips that would

power computers, rockets, and spacecraft, paving

the way for the high tech age.

In time, the fruit orchards surrounding Fairchild

would give way to electronics companies,

and the area would become famous as the Silicon Valley.

If they hadn't stayed together and formed Fairchild.

Semiconductor, probably there'd be

no silicon in Silicon Valley.

Arthur Rock had gotten a taste of something

exciting and significant, but as it turns out,

he wasn't the only one trying to figure out

how to fund young companies.

Just up the road from Fairchild, a handful of businessmen

were experimenting with their own version of venture capital

together around a lunch table in San Francisco.

In the '50s and '60s,

there were a group of us in San Francisco that

used to get interested in small high tech companies

down the peninsula.

There were, I think, five of us in our group.

We all had jobs.

We had other time on our hands, too.

We decided we'd just put a little investment

club together.

We were just a bunch of young men

in San Francisco who knew each other and respected each other.

What it was like was a very close fraternity.

I guess I can use that word carefully.

We had a table of six or eight for lunch.

None of us had enough money todo an investment by ourselves,

so we had to have help.

If one of us ran across an entrepreneur

who was trying to start a company,

we'd invite him up for lunch.

And after lunch, we'd ask him to step out onto the street corner

for a while, and give was 10 minutes,

and we'd make up our mind as to whether we wanted to invest

in his company or not.

I don't remember that.

We didn't do that.

We were to classy to do that.

That's a little bit quick, I think.

I mean, if the guy's a real nut, you say goodbye to him

without asking to go get a cup of coffee.

Two members of the group

wanted to do even more than gather around a lunch table

every six weeks.

In 1962, Pitch Johnson and Bill Draper

put up all their personal savings,

quit their day jobs to form a partnership,

and hit the streets.

Pitch and I each got a Pontiac leased, and went around,

and knocked on doors, and if it sounded like ABC electronics,

then we'd go in, ask the president to sit down,

and tell us what you do?

You know?

Well, what do you do?

Well, venture capital.

Well, what's that?

My kids would go to school.

What does your dad do?

My dad's a policeman.

My dad's a fireman.

My dad's a banker.

And what does your dad do?

Oh, he's a venture capitalist?