Tag Archives: Traitorous Eight

Gordon Moore (1929-2023) – The Accidental Entrepreneur

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Gordon Moore passed away last Friday, March 24, 2023. He was the last of the Traitorous Eight and there is not only one living founding father of Silicon Valley, Arthur Rock.

I could build a short video of the two of them out of the great documentary movie Something Ventured.

The text is interesting and funny: Throughout the 1960s, Fairchild was bleeding talent. The lure of stock options and independence inspired many of the brilliant young engineers to peel off and start their own companies.
But Gordon Moore and Bob Noyce, its two most important founders, remained loyal to their company until May of 1968, when Fairchild’s East Coast management made a fatal mistake.
[Moore] Noyce was the logical internal candidate to be the next C.E.O. But they decided they were gonna look on the outside.
That changed the whole ball game. Noyce said, “I’m gonna leave. Are you interested?”
So I said, “Okay. Let’s do it.”
[Rock] They needed financing, and they called me to see whether I’d be interested.
They came to me with no business plan, other than what they verbally said they wanted to do.
Arthur said he needed something to talk to potential investors with.
Just to give people something.
[Moore] We wrote a business plan, and it was one page- Double-spaced, and that was it.
It just says we were going to make things out of silicon, and some interesting electronic devices.
Oh, I said in general terms we were going to make memories.
[Rock] It has lots of typos in it. I think Bob typed it himself.
It’s not a very profound document, but it’s really kind of cute.
I said, “How much money do you need?”
And they said, “Two and a half million dollars.”
And I said, “Okay.”
“What percentage of the company do you think you’d be happy giving up for two and a half million dollars?”
And they thought and said, “Well, how about half?”
And I said, “That’s fine.” And within a day and a half, I had raised two and a half million dollars.
[Narrator] Intel opened its doors in July of’68,
[Moore] We went public the same day that Playboy Enterprises went public. At the same price.
And a few years later one of the analysts says,”The market has spoken. It’s memories over mammaries, 10-to-1.”

Moore’s law
(From Wikipedia page on Gordon Moore – see above)

In 1965, Moore was working as the director of research and development (R&D) at Fairchild Semiconductor. He was asked by Electronics Magazine to predict what was going to happen in the semiconductor components industry over the next ten years. In an article published on April 19, 1965, Moore observed that the number of components (transistors, resistors, diodes, or capacitors) in a dense integrated circuit had doubled approximately every year and speculated that it would continue to do so for at least the next ten years. In 1975, he revised the forecast rate to approximately every two years. Carver Mead popularized the phrase “Moore’s law”. The prediction has become a target for miniaturization in the semiconductor industry and has had widespread impact in many areas of technological change.

The importance of Gordon Moore and of his law for technological innovation

This “law” is not at all scientific but it has remained self-fulfilling, an objective to be achieved, giving engineers and Silicon Valley strong confidence in the future. We can thus partly understand the regular cycles of growth and speculative bubbles that accompanied it for 60 years, in the semiconductor industry (from the 1960s), in computers and software (from the 1970s), in networks and the Internet (from the 80s), in electronic commerce and mobile telephony (90s) then social networks (2000s). The end of the law was announced several times this decade and one wonders if it will not have the opposite effect as technological innovation seems to have slowed down in recent years. I refer you to a recent article on the disillusions of Silicon Valley and a scientific article that illustrates this possible slowdown: Papers and patents are becoming less disruptive over time.

There are so many things about Gordon Moore that I doubted a little before adding the PDFs that follow. But here is what I found in my archives:
– the 1965 article at the origin of Moore’s law,
– an article on the impact of Fairchild (1998)
– an interview with Gordon Moore (2000)

moore Moore-Fairshield Moore

The Power Law and Venture Capital (part 2) Fairchild and Rock

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Following my previous post about the book The Power Law and Venture Capital, I can only confirm it is a fascinating book about the history of Venture Capital. I have now read chapters 2 & 3 which covers the sixties mainly through Arthur Rock and his funding of Fairchild and the Traitorous Eight.

About Fairchild

Coyle pulled out crisp dollar bills and proposed that every man present should sign each one. The bills would be “their contracts with each other,” Coyle said. It was a premonition of the trust-based contracts – seemingly informal, yet founded, literally, on money – that were to mark the Valley in the years to come. [Page 35]


Source : https://www.sfgate.com/business/article/Tracing-Silicon-Valley-s-roots-2520298.php

Each of the 8 founders put $500 for 100 shares ($500 was two to three weeks of salary), Hayden Stone (through Rock and Coyle) 225 shares at the same price per share and 300 reserved for future managers. Fairchild put $1.4M as a loan to be compared to the initial $5,125, with an option to buy all the stock for $3M. It happened making the founders rich but not as rich as if there had not been that option. Fairchild had made a profit of $2M at the time of acquisition and price to earnings were easily 20x to 30x. SO I had to do my usual cap. table from foundation to exit. Here it is:

What VCs such as Rock looked for

I just scanned pages 48-49 and this is very similar to what you could find in slideshare slides in the previous post.

“Some winning venture capitalists claim to look almost exclusively at the backgrounds and personalities of the founders; others focus mostly on the technology involved and the market opportunity the venture addresses” from The New Venturers, Wilson (1984)

“They look for outstanding people without worrying too much about the details of product and marketing strategy. The right people have integrity, motivation, market orientation, technical capability, accounting capability and leadership. The most important is motivation.
Rock’s style was supportive of entrepreneurs with an implacable will.” from Wilson (1984)

In 7 years, the Davis & Rock $3.4M fund would return $77M or a 22.6x multiple… [Page 50].

If you do not fully understand what I talk about read Mallaby! And of course watch Something Ventured.

The Microchip Revolution (Final Part)

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I just finished reading The Microchip Revolution about which I wrote for posts here, there and there. This is a beautiful recollection of what Silicon Valley brought to the world. The revolution began with the Traitorous Eight who looked like this when young

and like that a few years later (from the New York Times Julius Blank, Who Built First Chip Maker, Dies at 86)

Fairchild Semiconductor’s founders in 1988. Victor Grinich (left), Jay Last, Jean Hoerni, Julius Blank, Eugene Kleiner, Sheldon Roberts, Robert N. Noyce (seated, left,) and Gordon E. Moore. Credit: Terrence McCarthy

I could not finish this history witout some cap. tables, the ones of companies mentioned here, that I could build: Intel, AMD, Cypress, IDT, Lam Research. I desesperately looked for data about Intersil, but neither the SEC nor Thomson Reuters could help me. Will you?





and as a postcript on Oct 13. 2020, Micron Technology, which had every unusual local investors from Idaho with a convertible loan structure:

The Tinkerings of Robert Noyce – again

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I read again The Tinkerings of Robert Noyce for reasons which are not directly related to Silicon Valley or Start-ups. A few days ago, I blogged about an extremely good article from the New Yorker – Our Town by Larissa MacFarquhar. The author illustrates some universal values of humankind through a small community in Iowa. And this reminded me of Tom Wolfe article written for Esquire Magazine in 1983. I found it again online here. It begins with : “In 1948 there were seven thousand people in Grinnell, Iowa, including more than one who didn’t dare take a drink in his own house without pulling the shades down first.” Robert Noyce studied at Grinnell College then left to MIT then to what would become Silicon Valley. Grinnell College was quite advanced in electronics. Tom Wolfe claims: “But MIT had proved to be a backwater… when it came to the most advanced form of engineering, solid-state electronics. Grinnell College, with its one thousand students, had been years ahead of MIT.” And later Grinnell College would invest in Intel, making its endowment unusually successful.

I was about to blog here about Wolfe’s article and (re)discovered, shame on me, that I had blogged about it in 2012! I had mentioneed the piece about the Wagon Wheel bar. Here it is again.

Or else he would leave the plant and decide, well, maybe he would drop in at the Wagon Wheel for a drink before he went home. Every year there was some place, the Wagon Wheel, Chez Yvonne, Rickey’s, the Roundhouse, where members of this esoteric fraternity, the young men and women of the semiconductor industry, would head after work to have a drink and gossip and brag and trade war stories about phase jitters, phantom circuits, bubble memories, pulse trains, bounceless contacts, burst modes, leapfrog tests, p-n junctions, sleeping-sickness modes, slow-death episodes, RAMs, NAKs, MOSes, PCMs, PROMs, PROM blowers, PROM burners, PROM blasters, and teramagnitudes, meaning multiples of a million millions. So then he wouldn’t get home until nine, and the baby was asleep, and dinner was cold, and the wife was frosted off, and he would stand there and cup his hands as if making an imaginary snowball and try to explain to her… while his mind trailed off to other matters, LSIs, VLSIs, alpha flux, de-rezzing, forward biases, parasitic signals, and that terasexy little cookie from Signetics he had met at the Wagon Wheel, who understood such things.

Here is another piece about stock options, which I discussed in another recent post: Rewarding Talent – A guide to stock options for European entrepreneurs by Index Ventures.

From the beginning Noyce gave all the engineers and most of the office workers stock options. He had learned at Fairchild that in a business so dependent upon research, stock options were a more powerful incentive than profit sharing. People sharing profits naturally wanted to concentrate on products that were already profitable rather than plunge into avant-garde research that would not pay off in the short run even if it were successful. But people with stock options lived for research breakthroughs. The news would send a semiconductor company’s stock up immediately, regardless of profits.

There would be so much more to say about this marvelous piece of Silicon Valley and American history. You should read it!

The Innovators by Walter Isaacson – part 2 : Silicon (Valley)

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What I am reading now following my recent post The Complexity and Beauty of Innovation according to Walter Isaacson is probably much better known: Innovation in Silicon Valley at the time of Silicon – Fairchild, Intel and the other Fairchildren. I have my own archive, nice posters from those days, one about the start-up / entrepreneur genealogy, with a zoom on Fairchild and one on Intel and one about the investor genealogy

Entrepreneurs…

SiliconValleyGenealogy-All

SiliconValleyGenealogy-Fairchild

SiliconValleyGenealogy-Intel

“There were internal problems in Palo Alto. Engineers began defecting, thus seeding the valley with what became known as Fairchildren: companies that sprouted from spores emanating from Fairchild.” [Page 184] “The valley’s main artery, a bustling highway named El Camino Real, was once the royal road that connected California’s twenty-one mission churches. By the early 1970s – thanks to Hewlett-Packard, Fred Terman’s Stanford Industrial Park, William Shockley, Fairchild and its Fairchildren – it connected a bustling corridor of tech companies. In 1971, the region got a new moniker. Don Hoefler, a columnist for the weekly trade paper Electronic News, began writing s series of columns entitled “Silicon Valley USA,” and the name stuck.” [Page 198]

… and Investors

WCVCGenealogy-All

WCVCGenealogy-Beginnning

“In the eleven years since he had assembled the deal for the traitorous eight to form Fairchild Semiconductors, Arthur Rock had helped to build something that was destined to be almost as important to the digital age as the microchip: venture capital.” [Page 185] “When he had sought a home for the traitorous eight in 1957, he pulled out a single piece of legal-pad paper, wrote a numbered list of names, and methodically phoned each one, crossing off the names as he went down the list. Eleven years later, he took another sheet of paper and listed people who would be invited to invest and how many of the 500’000 shares available at $5 apiece he would offer to each. […] It took them less than two days to raise the money. […] All I had to tell people was that it was Noyce and Moore. They didn’t need to know much else.” [Pages 187-88]

Rock_List

The Intel culture

“There arose at Intel an innovation that had almost as much of an impact on the digital age as any [other]. It was the invention of a corporate culture and management style that was the antithesis of the hierarchical organization of East Coast companies.” [[Page 189] “The Intel culture, which would permeate the culture of Silicon Valley, was a product of all three men. [Noyce, Moore and Grove]. […] It was devoid of the trappings of hierarchy. There were no reserved parking places. Everyone including Noyce and Moore, worked in similar cubicles. […] “There were no privileges anywhere” recalled Ann Bowers, who was the personnel director and later married Noyce, [she would then become Steve Jobs’ first director of human resources] “we started a form of company culture that was completely different than anything that had been before. It was a culture of meritocracy.
It was also a culture of innovation. Noyce had a theory that he developed after bridling the rigid hierarchy at Philco. The more open and unstructured a workplace, he believed, the faster new ideas would be sparked, disseminated, refined and applied.” [Pages 192-193]

The First Trillion-Dollar Start-up

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Thanks to my friend Jean-Jacques for pointing to a nice historical article about the beginnings of Silicon Valley. According to The First Trillion-Dollar Startup, “measured in today’s dollars, we believe the firm [ Fairchild ] would qualify as the first trillion dollar startup in the world.” I will let you read the other findings and will not relate again a story I mentioned in The fathers of Silicon Valley: the Traitorous Eight.

The authors show that Silicon Valley did not exist in 1957. No company active in semiconductor was based there as the East Coast was still the center of high-tech. But the founders of Fairchild are directly or indirectly responsible for 92 companies in Silicon Valley, today listed on Nasdaq or NYSE, worth over $2’000 billion and employing more than 800,000 people.

Here is a nice illustration of their study,
endeavor-insight-sv-2-retina
but I still love this one, a famous poster created by the author of the term Silicon Valley; I scanned it a few years ago,

the image below is taken from the previous (left and halfway up – corresponding to 1957)

HDSVBSV
The full report can be downloaded in pdf format and I find interesting their 3 lessons:
1. Great companies can develop in unlikely and challenging places.
2. A few entrepreneurs can make a large impact.
3. There is a framework for success that leaders can accelerate: ambition, growth, commitment, reinvestment.
HDSVBSV-acceleration

Something Ventured: a great movie

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I just watched Something Ventured and I loved it. Loved it so much I plan to have it shown to as many EPFL students as possible in the spring! It is a movie about passion, enthusiasm, energy, changing the world and yes… about money. When asked about their hope about the movie, producers Molly Davis Paul Holland said: Our high hope for this film is that every student that wants to be an entrepreneur—at every level, high school, business school, on corporate campuses—sees it. We want to see more young people fall in love with entrepreneurship… And if we have a quieter, more serious goal, it’s that I want policymakers to look at this and say ‘What can we do to make it easier, not harder, for people in this country to start those kinds of businesses?’

I would have said I hope that every student — at every level — sees it. And the producers added we were trying to explain our vision for the movie and said, ‘What we are envisioning is a movie like Reds [Warren Beatty’s 1981 film about the original Bolsheviks], where you go back in time to talk about an exciting period — in that case 1917 Russia — and ask people in the present day what it was like back then. Dan said ‘Ok, so you want to make Reds but without the Communists.’ That is ultimately what came about: A really beautiful dialogue with really interesting men and the people they financed.

“A Film About Capitalism, and (Surprise) It’s a Love Story.”

This is the title of another article about the movie, where the journalist says “moviegoers can see what might be the rarest bird in the documentary world: a genuine love story about capitalism.” Somewhere else, the moviemaker, Dayna Goldfine explains: “I think what compelled us to take this one on, even though it is a positive view of business, was, one, it’s a chance to do this kind of alternative view. But also, what these guys were doing – both the entrepreneurs and the venture capitalists – was creating real products. So much of what has come down in terms of the financial tragedy of the last few years has been caused by the investment bankers –people who were really just creating financial instruments, as opposed to changing the world with technology by creating or funding an Apple Computer, or a Cisco Systems, or a Genentech”. Co-moviemaker Dan Geller adds: “I wouldn’t say that money was incidental – money was important – but the overwhelming enthusiasm was for taking these brilliant ideas and these inchoate technologies and making something earth-shattering with them. That’s the energy, I think, that comes through in these stories.”

Yes it is a movie about capitalism, about business. But it is also a movie about enthusiasm, happiness, failure also. It begins in 1957 with Fairchild and Arthur Rock. It could have begun with French expatriate Georges Doriot. A professor at Harvard who supposedly taught manufacturing (in fact it was about how many glasses to drink at a cocktail party and how to read newspapers – go to obituaries), Doriot did not create venture capital with ARD (even if he funded Digital Equipment – DEC) – Rock created the term later, but Doriot inspired most of the heroes of the movie: Tom Perkins, Bill Draper, Pitch Johnson, Dick Kramlich. And these guys funded Intel, Atari, Apple, Tandem, Genentech, Cisco. (The movie tells stories from the 60s to the 80s, but Google, Yahoo, Amazon, Facebook could have been added). Indeed with the movie, the Social Network, it’s the best movie I have seen about high-tech entrepreneurship. What I had nearly forgotten in The Social Network is the closed Boston society (Zuckerberg desperate efforts to enter high-end social clubs). Here also, the Wild West explains its success through openness and risk taking.

And the authors did not cheat. It is also about painful memories, how Powerpoint ended up in Microsoft hands, maybe because the entrepreneur had found it too tough before or how one of the rare women in this world, Sandy Lerner, the co-founder of Cisco, may have not forgiven her firing from the company she had created: “you gotta understand the game that you’re in. […] Look, there wasn’t a box for me.” So yes, it is also about failures, “living deads”, but there is a “feel good” attitude, funny moments, such as when Valentine visiting the Atari factory does not recognize the cigarette brands he smokes!! Or when Gordon Moore (the famous Moore law) remembers that Intel went public the same day as PlayBoy.

So if you do not know much (or even if you do know a lot) about Fairchild, Intel, Atari, Tandem, Genentech, Apple, Cisco, and even if you do not care about entrepreneurship, run and watch Something Ventured. Hopefully you will care!

The fathers of Silicon Valley: the Traitorous Eight.

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Thanks to a conversation with an EPFL colleague, I was recently reminded the early history of Silicon Valley. I knew about Shockley, Fairchild and the Traitorous Eight. I did not know Shockley had been funded by Beckman (thanks Andrea :-)), that was the point of the recent conversation.

What is interesting is to have a look at the Traitorous 8 also. Their history (cf Wikipédia) is well-known, what may be less known is their background.

The next table gives the origin, education and age of the 8 traitors, the 8 engineers who left Shockley labs to found Fairchild Semiconductor in 1957 (click on it to enlarge).

They can be considered as the real fathers of Silicon Valley. The famous poster entitled Silicon Valley Genealogy is certainly a convincing illustration of it as well as their Post-Fairchild activities.

The next image is extracted from the one above (left, mid-height level, corresponding to 1957).

A few comments:
– 5 were educated on the East Coast, 2 on the West Coast and 1 in Europe.
– Indeed, three were from Europe.
– 6 had a PhD (3 from MIT), all had a bachelor.
– They were between 28 and 34-year old in 1957.

The Man Behind the Microchip

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The Man Behind the Microchip is one of the best biographies about technology and entrepreneurship. This book is a pleasure to read from beginning to end. It is full of important facts about Silicon Valley, its history and its development.

I will just quote Robert Noyce, the hero of this book, founder of Fairchild and Intel:

“Look around who the heroes are. They aren’t lawyers, nor are they even so much the financiers. They’re the guys who start companies”

and also author Leslie Berlin adds:

Noyce testified against an industrial policy managed by the Federal government. He referred to his own experience with Apple to strengthen his argument: “If I was not capable of identifying the future champions of technology, how could we believe that the government could do better?”

This a must-read book for anyone interested in start-ups and high tech.