The Santa Clara Valley covers 450 square miles that run southeast from the San Francisco Bay between the Santa Cruz Mountains to the west and the Diablo Range to the east. It was given its name by Father Junipero Serra, a Spanish missionary who arrived in 1777 to establish the Mission Santa Clara de Assisi. The mission was destroyed several times, but was always rebuilt, and it still stands on the campus of Santa Clara University. Until the middle of the twentieth century, the valley was largely rural and agricultural, a region of orchards, vineyards, and light industry—canning, bottling, and transport operations. After World War II, high tech firms in electronics, computing, and aeronautics began to populate the northern portion of the valley, in the vicinity of Stanford University. Today, the region is better known as Silicon Valley.
In 1885, Railroad tycoon and politician Leland Stanford and his wife, Jane, drew up plans for a co-educational, non-denominational university to be built in Palo Alto, California. They intended the institution to honor their son, Leland Stanford, Jr., who died suddenly the previous year at the age of fifteen, from typhoid fever contracted in Florence, Italy. Leland Stanford, Jr. University opened its doors in 1891. It eventually became one of the leading universities of the American West, and a center of innovative research and development activity. Technologies invented on the Palo Alto campus have driven the growth of Silicon Valley since the 1950s.
In 1925, having earned a doctorate in engineering at MIT under the tutelage of Vannevar Bush, who later became the nation's first presidential advisor on science policy, twenty-five-year-old Frederick Terman joined Stanford University to teach electrical engineering. Later, as a university dean and provost, he encouraged students to start businesses in California. They did, and Terman built an administrative and material infrastructure to promote and support technology transfers from the university to the private sector. By the time his academic career drew to a close, Terman was known as the "Father of Silicon Valley." A culture of entrepreneurship has flourished around Stanford for decades, thanks in large measure to Terman’s vision for the school and the region.
In 1937, in the garage of a duplex at 367 Addison Avenue in Palo Alto, two of Frederick Terman’s students, William Hewlett and David Packard, formed a partnership and began manufacturing an audio-oscillator, an instrument that generates pure tones at specified frequencies. Hewlett had designed the machine at Stanford, for his PhD thesis in engineering. As a tool for measuring audio frequencies, it was useful in the production and maintenance of radios, telephones, and other audio devices. Walt Disney purchased one of the first of devices built in the garage, and used it in the production of the classic animated film, Fantasia. In 1939, the partners formally incorporated the Hewlett-Packard Company, which went on to become an astonishing commercial success, a household name in American business and consumer culture, and an anchor for the development of high technologies in Silicon Valley.
The Stanford Research Institute (SRI) was founded in 1946 by the trustees of Stanford University as a non-profit contract research organization with a mission to provide technical support for regional economic development. The organization established research capabilities in chemicals, energy, electronics, mechanical engineering, and biomedical and pharmaceutical sciences. In 1970, after the Stanford faculty and student body protested SRI’s involvement in defense-related research, the institute formally separated from the university and incorporated as an independent non-profit entity.
In 1948, electrical engineers and brothers Russell H. and Sigurd F. Varian founded Varian Associates in San Carlos, California, with physicists William Webster Hansen and Edward Ginzton. The founders had worked together at the Sperry Gyroscope Company, in a group that conducted research on vacuum tubes and electronic circuitry. Varian Associates’ first product was the klystron, an electronic tube capable of generating electromagnetic waves at microwave frequencies. The Varian brothers had invented the device and created the first working prototype in 1937. In 1953, the company relocated to Palo Alto to become the first tenant of the new Stanford Research Park.
Frederick Terman, Dean of the School of Engineering at Stanford University, spearheaded the formation of the Stanford Research Park in the early 1950s. The development was located in Palo Alto, on 700 acres of university property stretching south from El Camino Real across Page Mill Road and Foothill Expressway to the intersection of Arastradero Road and Deer Creek Road. Terman promoted the park as “a center of high technology near a cooperative university.” Construction began in 1951. Varian Associates became the first tenant in 1953, followed shortly by Hewlett-Packard, General Electric, Eastman Kodak, and Lockheed.
With financial help from industrialist Arnold Beckman, and at the behest of Frederick Terman, Stanford University’s Dean of Engineering, William Shockley left Bell Labs to establish the Shockley Semiconductor Laboratory in Mountain View, California. He intended to revolutionize the electronics industry by developing the next generation of solid-state transistors. He recruited a talented crew of young engineers, including Robert Noyce and Gordon Moore, who later started Intel, and Eugene Kleiner, who went on to become one of Silicon Valley’s most successful venture capitalists.
Just a year after joining the Shockley Semiconductor Laboratory startup, eight of the company’s best engineers became fed up with the boss’s dictatorial management style and decided to strike out on their own. Led by Robert Noyce, they secured funding from defense industry magnate Sherman Fairchild and started Fairchild Semiconductor in 1958, with plans to make transistors out of silicon. For their disloyalty to Shockley, they become known as “The Traitorous Eight.” Fairchild Semiconductor later produced a second wave of entrepreneurs. The practice of spinning out innovative ventures from established companies became a defining feature of Silicon Valley’s business culture. It encouraged the concentration of risk capital in the region and sustained the vitality of local high-tech industries.
General William H. Draper, Jr., H. Rowan Gaither, and Frederick L. Anderson, Jr. founded an unusual company in Palo Alto, California in 1958—a venture capital firm. Draper, Gaither & Anderson was the first professional venture capital outfit on the West Coast, and the first anywhere to be structured as a limited partnership. Draper had a background in investment banking, but had maintained a parallel career in the army and politics. He earned a master’s degree in economics at NYU, and then signed up immediately for military service. He became a major in the infantry during World War I. Afterwards, he moved into finance, but remained in the Army Reserves, eventually becoming Chief of Staff of the 77th Division. At the end of World War II, he was assigned to the Economics Division of the Allied Control Council, to assist in the reconstruction of Germany, and he later served as the first undersecretary of the Army and the first U.S. Ambassador to NATO. Gaither worked as a San Francisco attorney, Assistant Director of MIT’s Radiation Laboratory, and President of the Ford Foundation. In 1948, he founded the Rand Corporation. Anderson was a retired Air Force General, formerly Deputy Commander of U.S. Strategic Air Forces in Europe during World War II.
In 1958, engineers Jack Kilby of Texas Instruments and Robert Noyce of Fairchild Semiconductor invented integrated circuits that were nearly identical in design. The idea of circuit integration is attributed to a British radar engineer, Robert Dummer. In 1952, Dummer envisioned a wireless electronic processing instrument constructed as a block of “insulating, conducting, rectifying and amplifying materials.” Six years later, Kilby produced a working prototype made of germanium. His California competitor followed shortly with an improved design. Kilby earned a Nobel Prize in Prize in Physics, in 2000, but Noyce was granted the key patent. The invention eventually permitted electronics manufacturers to install millions of transistors and other circuit elements on a single “chip” or wafer of silicon. The year of 1958 marked the eclipse of Boston’s electronics and computing industries by Western upstarts. The center of high tech gravity began moving to Silicon Valley.
On July 30, 1958, President Dwight D. Eisenhower signed the Small Business Investment Act into law, in order to improve the national economy by stimulating capital flows and creating long-term loan funds for small businesses. The law boosted the formation of venture capital pools by providing private equity firms with tax breaks and opportunities to borrow from the US Small Business Administration. In the 1960s and 1970s, when scientific entrepreneurs began to emerge from universities and other academic research institutions with new inventions, many relied on venture capitalists for seed funding. In the history of modern high technology, policy decisions that influence processes of capital formation have frequently marked decisive turning points.
Bill Draper III and Franklin “Pitch” Johnson formed the Draper and Johnson Investment Company in California in 1962. They were good friends and had previously worked together at Inland Steel—Draper as a salesman and Johnson as a plant foreman. They parted ways just three years later to start new private equity firms. Draper founded Sutter Hill Ventures with Paul Wythes, and Johnson established a company called Asset Management. They went on to finance hundreds of high tech startups and to become known as leading Silicon Valley venture capitalists.
In 1968, Silicon Valley pioneers Gordon Moore and Robert Noyce left Fairchild Semiconductor to begin a new enterprise in Mountain View, California, called NM Electronics. Within a year, Moore and Noyce changed the name to Integrated Electronics, Inc., or Intel, for short. A third Fairchild expatriate, Andrew Grove, assisted in the role of Chief Operating Office. Grove was appointed CEO in 1987, and led the company through a period of high velocity growth. Intel’s initial products were memory chips. With the introduction of personal computers in the 1980s, the company shifted its R&D focus to the design and manufacture of innovative microprocessors. Millions of units were shipped and incorporated into PCs that found their way to every corner of the globe. Through the 1980s and 1990s, Intel and other leading tech firms rode a wave of progress that originated in Silicon Valley and sent ripples of change outward in all directions. The latter half of the 20th century witnessed the move of high technologies to center stage in every sphere of late modern life—economic, cultural, social, and political.
California entrepreneur Ralph Vaerst coined the phrase "Silicon Valley" in 1971. The term first appeared in print in a series of articles entitled “Silicon Valley, USA,” authored by Vaerst’s friend, Don Hoefler, in the local trade weekly Electronic News.