Feeds

How a Rock started the venture capital biz in the Valley

Money monopoly

The Essential Guide to IT Transformation

Arthur Rock once savored a monopoly over the minds and money flowing through Silicon Valley.

One struggles these days to imagine anything less than a steel cage, death match as myriad venture capital firms rush to fund the latest and greatest start-ups. Investors fall all over each other, hoping to strike it rich in a flash. This is the Tipping Point mentality promoted by author Malcolm Gladwell and worshipped by lottery aficionados.

Rock and his partner Tommy Davis worked in simpler, murkier times. They started to define the Silicon Valley venture capital culture back in 1961, using Rock's past investment in Fairchild Semiconductor and $5m as proof of their credentials. Back then, $5m bought you plenty of attention.

"We were the only game in town, so they all came to us," Rock said last night, during an event here at the Computer History Museum. "We didn't have to go looking."

On one level, Rock is best known for that Fairchild deal.

While working for an investment bank in New York, he learned of seven unhappy researchers at the Shockley Semiconductor Lab in Mountain View. The workers wanted to leave en masse and find a company willing to employ the entire group. (Fairchild and Intel co-founder Robert Noyce later joined the seven, forming the so-called "Traitorous Eight".)

In 1957, it proved tough to find a company willing to adopt the Shockley workers. Rock pitched 35 businesses, and they all declined.

"These companies all had order and form and none of them could see how they could set up a separate division and give people operating that division a larger profit than their own employees were getting," Rock recalled. "It just wasn't in their mindset. Options were practically unknown in those days."

Eventually, Sherman Fairchild grasped the opportunity at hand, slotting in the eight workers at Fairchild Camera and Instrument. Each of the researchers took 10 per cent of the new operation, while Rock took 20 per cent.

"That is where the famous 80/20 came from," Rock said. "All the venture capitalists in the room can thank me for your 20 per cent."

Fairchild charged the transistor market and thrived off Noyce's integrated circuit discovery. Eventually, however, management failed to keep up with the entrepreneurial spirit of its workers, opening the door for Noyce and Moore to start another venture.

With Rock by their side, Noyce and Moore fired up Intel in 1968, using a two-and-a- half page (double spaced) business plan "designed to say nothing" and $2.5m. Rock remained a director at Intel for three decades.

Boost IT visibility and business value

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.