Silicon Valley Local Magazine - Issue 1

FALL/WINTER 2011/2012

silicon valleylocal Steve Jobs and Steve Wozniak

HP’s Garage

Your Silicon Valley Connection

Photos Courtesy of Piero Scaruffi

Stanford Mem orial Church

Original Fairchild Buildi ng

Cisco Systems’ First Office

From the Birth of Silicon Valley Comes Innovation and Inspiration

From the birth of

Silicon Valley comes innovation and inspiration

I

t started with a financial dilemma.

Roughly 60 years ago, Stanford University had run into a series of financial problems. Try as they might, a solution did not appear-until the authorities at the university decided to lease part of the college’s land for a period of 99 years. The 8,000 acres that had been granted to the university by Leland Stanford were given with the provision that they never be sold-but leasing it was a way around this dilemma. The beleaguered university drew up a contract and Stanford Industrial Park was founded. This park was initially limited to only high tech companies that

Started by a twist of fate, Silicon Valley would soon grow fast to become the equivalent of the tenth largest city in the US. could provide some sort of benefit to Stanford University. The lease was signed in 1951 and the first company moved in just two years later. From financial ruin a new legend had begun: that of Silicon Valley.

It was born, alright, yet without a lawfully recognized name. Before it became Silicon Valley, the area had been known under the name: the Valley of Heart’s Delight. How many of you possibly knew that? Full of orchards, yes, the area little resembled the behemoth of technology and business that 24

Silicon Valley Local

it is today. Ralph Vaerst, an entrepreneur in Central California, first coined the term Silicon Valley. A friend of his, Don Hoefler, used the nickname in a January 1971 newspaper article of the time. The series was entitled “Silicon Valley in the USA.” Silicon was a reference to the number of computer companies in the area who used silicon to make semiconductors. From that newspaper issue onward, the name of Silicon Valley replaced the former appellation.

Started by a twist of fate, Silicon Valley would soon grow fast to become the equivalent of the tenth largest city in the US. Where once apple, plum, and cherry orchards had been, high tech firms sprung up and law firms also grew, as they were needed to address the new technology’s legal demands.

The area began initially to take shape as early as 1848 when gold seekers flooded the area. The countryside that was settled during the gold rush gradually turned into an agricultural community, thus all the many orchards.

In 1881, Stanford University was started with a land grant from the former governor, Leland Stanford. By the end of World War II, new students began to flood the rolls of the university. Struggling to cope with the financial strain, Stanford leased out the 8,000 acres bequeathed by its founder and formed Silicon Valley. A center for ingenuity, it attracted technology startups and fostered an atmosphere of collaborative effort. This tradition of collaboration and entrepreneurial spirit set Silicon Valley up to be the world’s foremost center of cutting edge technology.

Among the first companies to spring up in the new facilities include some big names that are still recognizable today. Among others, Fall/Winter 2011/2012

Varian Associates, General Electric, Shockley Transistor Laboratory of Beckman Instruments, Hewlett-Packard, Eastman Kodak and Preformed Line Products were the first to make their entrance into the new industrial park.

The first tenant of these was Varian Associates, a company founded back in the 1930s with the intent of making radar components for the military. In time, it also provided venture capital for technology start-ups in the civilian sector, a taste of what was soon to come, and in a way that would swiftly transform the world.

The companies that started at the Stanford Industrial Park began with short-term, five year leases. One of the most notable of these early companies was Hewlett-Packard. Now the largest personal computer manufacturer in the world, it began its story of success with the release of the first ink jet printer in 1984.

Two of the other initial companies, Eastman Kodak and General Electric, ultimately transformed the Stanford Industrial Park into a center of the technology sector in the 1990s.

Originally famous for the silicon semiconductor, Stanford Industrial Park has grown to encompass a number of businesses that have made strides with internet services and software. The rise to software prowess in Silicon Valley began with Xerox and Doug Englebart, the inventor of the mouse. In the 1970s and 1980s, Xerox was essential in the creation of Ethernet, graphical user interfaces, laser printers, PostScript, and object-oriented programming. These inventions inspired and led to the creation of 3Com and Adobe Systems. Indirectly, it helped to bring about the inventions and technology of Cisco, Microwww.svlocalmag.com

The Hewlett-Packard garage Photos courtesy of Piero Scaruffi

soft and Apple Computer. The world that we had known has almost overnight changed us forever. Our new world had been born, and technology has sprouted, like never before.

Right here in what has become Silicon Valley, we have been witness to where the past has met head on with the future, and relatively speaking, in the span of but just a few years, we clearly have left one era behind and have embarked truly into another. Many things that were, are no more ... many things that are, weren’t just a few years ago.

Indeed, perhaps it can come from one person, a special idea, as many now have, bringing forth such change, worldwide, paradigm shifts, and in what used to take perhaps ten to a hundred years to unfold ... now, but in an instant. Such has become the storied history from Silicon Valley ... and, because of this birth, all the innovation and inspiration coming with it, comes this new world.

Everyone looks here first for a reason, many very special reasons.

Important to note, for what a difference, no matter how vital the technology, it is unlikely to succeed without vital funding. Due to Your Silicon Valley Connection

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this, venture capital mantra often heard has become the in Silicon Valley. The backbone of Silicon culture of failure Valley. The venture runs strong here; capital industry failure rate of new began on Sand Hill businesses is 1 out Road with the develof 20. In the case of opment of Kleiner Bill Coleman, failPerkins in 1972. ure and taking the The $1.3 billion IPO opportunity to learn of Apple Computer from his mistakes caused the availtaught him how to ability of venture run a successful busicapital to explode in ness. Coleman went December 12, 1980. through a succesFamed companies sion of two startupsof the valley such as Visicorp and Dest Amazon and Google Systems-before he were all originally became successful started with venwith BEA Systems. ture capital moneyIn 2009, he sold BEA Amazon and Google Systems to Oracle both took losses for for a cool $8.5 bilthe first few years of lion. business. In the early Although Bill 1970’s, a number of Coleman’s story is the computer firms, Steve Wozniak (standing) and Steve Jobs encouraging, his tale programming comis not the only inspipanies and semiconrational one to come ductor businesses out of Silicon Valley. were able to form startups using similar funding The company, Google, went through its own methods. share of struggles in order to create the world Also, other types of technology have develfamous search engine and assorted programs oped and come to be. From the silicon comput- it runs today. It started with its founders, Larry er chip to the personal computer, Silicon Valley Page and Sergey Brin. They sought to create has been behind some of the top technology a search engine akin to the ancient Library of of the 20th century. Adobe Systems, the World Alexandria in its complexity and richness. The Wide Web and Xerox all got their start within two visionaries had met while in college and the valley along with a number of dot.com had started on the project of search engine rakfirms. The current trend towards nanotech and ing as part of their thesis project. As they regubiotech has been the key factor in driving the larly brought down Stanford’s internet, the buzz valley’s success. Along with these new technolo- around their project grew. Page and Brin finally gies, the advent of green technology has found decided to take the leap and strike out in busia growing market. As a leader of the drive ness on their own. The results were legendary. towards green technology, Silicon Valley is well Google brought in a total of $29,321,000,000 in placed to take advantage of the push for greener revenue in 2010. lifestyles in the upcoming years.

Real Estate prices are also an important The birth of Silicon Valley has created an factor of what makes Silicon Valley tick. With inspiration from mega companies to individual a high average income, it is to be expected entrepreneurs. “Fail early and fail quickly” is a that the cost of houses within the valley are 26

Silicon Valley Local

Fall/Winter 2011/2012

Looking to the future, the same entrepreneurial spirit and innovation will continue to raise the bar for the new generation. equally high. In September, Silicon Valley real estate sales had a median price of $570,000 which brought down the $628,000 median sale price for the year to date. While prices in Silicon Valley have taken a hit since the housing bubble burst, they are still selling for far higher than the national median of $177,000.

From August to September, re-sales of singlefamily homes fell 15.3%, although year-todate homes sales are up 0.3%. It may be a while until Silicon Valley sees a resurgence of home values, but it is still doing rather well compared to the rest of the country.

Before the real estate bubble burst, Silicon Valley went through a different kind of bubble, the internet bubble or dot-com bust. It would be assumed that any business based on a culture of failure should be a warning sign for the cautious investor, but that has not always been so. For the 1995-2000 Internet bubble, investors put an inordinate amount of money into dotcom startups only to lose it after the March 10, 2000 climax of stock values. The stock market ended up having a number of over-valued stocks that did not pay out. The excess price of the stocks fueled a further stream of investment until, eventually, the market could not support it anymore and resulted in the inevitable crash.

The ability of companies to receive venture capital and the market confidence in companies’ ability to turn a profit all further contributed to the Internet bubble that developed.

Indeed, Silicon Valley has left more than a technological legacy for the world. Reinventing itself every ten years, it has been at the forefront of the biotech, nanotech, software and green technology booms. With 33% of the United States’ venture capital funds going towards businesses in the valley, an entrepreneurial precedent has been set. Across the world, delegates have arrived in Silicon Valley with the aim of copying the success story that www.svlocalmag.com

The Fairchild Building

lies behind it. From the first personal computer to an IPod, entrepreneurs in Silicon Valley have set an example that will be a hard act for any other city or nation to follow.

Challenges certainly lay ahead. Staying at the top of its game will be a struggle for Silicon Valley in the years to come. As the technology field shifts towards the production of green technology, startups will be hard pressed to find a place. When the Stanford Industrial Park first started, a startup could begin with relatively little capital investment and have the prospect of becoming a household name. Regulations on green industry, electricity and biofuels will make the selling and creation of products far more difficult than it has been in the past.

Insurmountable challenges, however, are all just a part of the Silicon Valley story. Looking to the future, the same entrepreneurial spirit and innovation will continue to raise the bar for the new generation ... for the present (that changes and is updated it seems almost daily, or by the moment) ... and who knows what the future will look like, i.e. a year or two from now, let alone 10 to 20 years from now. stories@svlocalmag.com Your Silicon Valley Connection

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