Case In Point: The Fairchildren and their Offspring

If venture capital is the engine that runs Silicon Valley, then Arthur Rock may be its James Watt–the guy who figured out how to harness steam. He once said, “I want to build great companies. That’s how I get my kicks. I look for people who want the same thing.” Rock’s story starts in the spring of 1956 when William Shockley, who co-invented the transistor in 1947 while working at AT&T’s Bell Laboratories, founded the Shockley Semiconductor Laboratory near Palo Alto, California and Sand Hill Road.

Despite his brilliance as a physicist Shockley was a disaster as a business manager. Eventually, Shockley’s core team could not stand it anymore. The renegade engineers–nicknamed the “Traitorous Eight” decided to leave and form a new venture.

The eight were Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce, and Sheldon Roberts. They contacted the New York investment banking firm of Hayden, Stone & Company because Kleiner’s father had an account there.

They asked the bank to help them find a corporation interested in hiring the group of them to help establish a semiconductor operation, preferably, on the San Francisco Peninsula. This attracted the attention of Rock, an analyst at the investment bank. Rock in turn introduced them to Sherman Fairchild, who at that time was IBM’s largest shareholder. Fairchild was interested in redirecting his camera company towards the field of electronics and data processing. Together they created Fairchild Semiconductor in Palo Alto in 1957, the first venture to work solely with silicon.

Over the years, the departing “Fairchildren” helped to create the semiconductor industry. Between 1966 and 1969, no less than 27 new chip ventures were formed by Fairchild émigrés. Two the eight, Noyce and Moore, started Intel Corporation in 1968 and Rock also funded them with $2.5 million.

Perkins and Kleiner founded Kleiner Perkins Caufield & Byers, one of the most influential and central venture capital firms in the world today. Together, the Fairchildren established the central philosophy of Silicon Valley–anyone with a good enough idea can get the capital, the workforce and the markets to make it a reality.

SOURCE: Roadmap To Entrepreneurial Success