Silicon Valley's history

Senator Stanford
Early Stanford University

There have been many theories over the years as to what created the economic region known as the Silicon Valley. Some of these theories point to the ‘Wild West’ or cowboy ethic, the risk taking of gold miners or whatever the newest technology was that transformed the Valley or the world.

The seminal seed of Silicon Valley was planted by a former U.S. Senator, who himself could be called a serial entrepreneur. Like all seedlings, it takes other conditions to take root and grow. In this case, the original seedling was Leland Stanford, Sr.

Stanford grew up in New York, earned a law degree, and moved to Wisconsin to practice law. Stanford’s father gave him the reward of an outstanding law library. When his law office and library burned to the ground in 1852, Stanford, and later his wife Jane Lathrop, followed his five brothers to Sacramento, California, to run a business selling supplies to the gold prospectors.

With the determination to build a university for his late son, the entrepreneurial Stanford was going to build a university that would teach practical knowledge; create a place of learning where a student could immediately apply his new learned knowledge to the outside world.  The Stanfords traveled to universities on the East Coast in search of like-minded professors and college administrators. This was an age where philosophy and ancient Greek, not practical knowledge, were common studies.

When Stanford University was finally opened, tuition was free. A different kind of higher education was available for the first time; practical knowledge that could and should be applied outside of the classroom. Senator Stanford died during the first year of Stanford University’s existence.

In 1909, a Stanford engineering graduate, Cyril Elwell, formed an early “high technology” company in Palo Alto.  Federal Telegraphy Company would develop the first reliable long distance radio transmissions with financial backing from the Stanford University faculty and Stanford President, David Starr Jordan. This company would set the standard model for future start-ups in what would become Silicon Valley. Two employees from Federal Telegraph would leave the company to found Magnavox in Napa, California.

Stanford University was the seed that became Silicon Valley.
Fred Terman
William Shockley

Fred Terman was a graduate of Palo Alto High School and Stanford University. In 1924, he was awarded a doctorate in Electrical Engineering at the Massachusetts Institute of Technology (MIT). Terman’s academic advisor at MIT, Vannevar Bush, wanted Terman to remain at MIT as a professor. Terman accepted the offer but returned to Stanford for the summer. He came down with tuberculosis and was unable to return to MIT. During his convalesce near Stanford University, Terman was able to teach a course or two in between his rest. He eventually decided to remain at Stanford where he built up the Engineering Department at the University as a world-class facility.
Terman is recognized as the person that convinced Bill Hewlett and Dave Packard to form “HP.” Here are a few other lesser-known facts about Terman:
1.    During World War II, Terman was asked to work on the East Coast on secret military projects by his former adviser, Vannevar Bush. It was during this time that Terman was able to witness firsthand, how the U.S. military awarded research grants to universities. Once WWII was over, Terman made certain that Stanford University would be one of the select universities to receive military research grants.
2.    In 1952, William Shockley was one of the recipients of the Nobel Prize for the invention of the transistor. Shockley announced his intention to start a company to commercialize the transistor. Shockley had grown up in the town of Palo Alto and recognized its positive attitudes about risk and the formation of new companies. Before choosing a location for the new company, Fred Terman wrote Shockley a letter that asked him to consider starting his company in Palo Alto. When Shockley started Shockley Semiconductor in Palo Alto, Stanford engineering students became part of the original
3.    When Stanford Business Affairs Vice President Al Brandin introduced the idea of a Stanford Research Park, it was Fred Terman who ran with the idea to make it a fantastic success. As Dave Packard commented, ”We and Fred had sort of a game. Fred would tell these companies what a great place this was going to be and we would back him up with that. The old one-two punch!”

4.    When the Traitorous Eight left Shockley to start Fairchild Semiconductor, they chose to stay in Silicon Valley because of the weather and the business climate. When the name Silicon Valley was adopted as the name of the economic region, it also must be understood that the business environment of the region was already unique to entrepreneurs. Now it finally had a name.

As a confirmation of the entrepreneurial impact that Leland Stanford created, in a recent survey, the revenues of companies that were founded by Stanford University students equal the gross national product of the world’s 10th largest economy. University graduates have created an estimated 5.4 million jobs and generate annual revenues of $2.7 trillion, based on responses to the 2011 Alumni Innovation Survey, sponsored by the venture capital firm Sequoia Capital.

One of the most unique phenomenon in Silicon Valley is that failure is often a building block to success. Risk takers fail more often than succeed, but with each failure comes invaluable knowledge to help the next venture to become successful. Risk takers and their inevitable failures are admired much more than the avoidance of taking a risk.



Where is Silicon Valley?

Located in the United States — in Northern California — the heartland of Silicon Valley runs from San Carlos and Redwood City through Menlo Park, Palo Alto, Mountain View, Sunnyvale, Cupertino, Santa Clara, San Jose, and Milpitas. Strong outposts are in Fremont, Hayward, San Leandro, Emeryville, Berkeley, San Ramon, Pleasanton, San Rafael, South San Francisco, Scotts Valley, and Monterey.

Given today's digitized home offices and telecommuting (or the local tradition of starting a business in one's garage), power centers might also be found in such lush foothills residential towns as Hillsborough, Woodside, Portola Valley, Atherton, the Los Altos area, Saratoga, Monte Sereno, and Los Gatos.