Something Ventured

I was in my laboratoryprobably 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 somemoney 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 memberat 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 cameto me with no business plan.

Willing to risk everything.

You haveto be a street fighter.

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

We didn'tknow what we were doing.

Silicon Valley.

Technical break through.

$100,000.

$1 million.MAN : $10 billion.

Intel.

Apple.MAN : Genentech.

Cisco.

Goodmarkets 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 readthem, and we start at the back,

and if the numbers arebig, we look at the front.

See what kind of business it is.

You have to look at the wayconventional wisdom works

and abandon it.

No one has ever accused meof 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 barelyknew 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 ahandful of men who stirred up

a revolution in finance and technology

because they saw opportunitywhere others only saw risk.

Venture capital-- I don'tthink I thought of it first,

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

Back in the spring of 1957,

Arthur Rock was just aJunior banker on Wall Street,

but then one day an unsolicitedletter arrived at the office.

The letter was unusual, and noone else at his brokerage firm

knew what to do with it.

It was a cry for help, and it would

forever change the trajectoryof Arthur Rock's life.

You gotta be lucky.

Everybody's gonna be luckyat 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 youngmen 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 personto 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 introducea group of senior scientists

and engineers who have beenworking together at Shockley

Semiconductor laboratory.

Shockley had just won a Nobel Prize.

It was probably a littlepresumptuous 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 stepout 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 oughtto start your own company,

and we'll find financing for you.

They hadn't thought of this idea themselves.

Nobody thought ofstarting 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 getcreative about finding capital

for the traitorous eight.

His bank had contacts with rich families

like the Rockefeller's andthe 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 withthe Wall Street Journal.

Looking for companies to askto 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 andthere with the traitorous eight

returning to the job search andArthur Rock admitting defeat,

but then Arthur received one last lead.

We were pretty much at wits end,

and somebody suggested thatI 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 startedFairchild 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 orchardssurrounding Fairchild

would give way to electronics companies,

and the area would becomefamous as the Silicon Valley.

If they hadn't stayedtogether and formed Fairchild

Semiconductor, probably there'd be

no silicon in Silicon Valley.

Arthur Rock hadgotten 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 theirown 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 insmall 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 eachother 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 tostep out onto the street corner

for a while, and give was 10 minutes,

and we'd make up our mind asto 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 realnut, you say goodbye to him

without asking to go get a cup of coffee.

Two members of the group

wanted to do even more thangather 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 Pontiacleased, and went around,

and knocked on doors, and if itsounded 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?