StartUp Ecosystems

The Creation of Silicon Valley

Robert Rissé, 16 December 2020

Back in the early 1980’s when I was an engineering graduate student at Stanford, there was a constant flow of political, education, and business leaders visiting the Termin Engineering Center on campus and wanting to understand how to recreate the Stanford-Silicon Valley magic in their home cities and regions. During the previous decades, the fruit orchards around Stanford/Palo Alto and south to San Jose had been transformed to into industrial parks filled with silicon wafer manufacturing plants, and computer equipment manufacturers. Everyone wanted to understand the secret sauce that fostered the technology and business miracle that became known as Silicon Valley.

Its widely recognized that Stanford’s Dean of Engineering, Frederick Terman was the founder and catalyst to Silicon Valley. Terman was well regarded for his mentoring of engineering students and leveraging Stanford resources to assist students to fostering technological innovation and entrepreneurship. Terman was the catalyst for the creation of many companies, but the best known was Hewlett-Packard (HP). William Hewlett and David Packard were very promising engineering students at Stanford. Terman recognized their talent and encouraged them to start and build a company.

“Bill Hewlett and Dave Packard hung around the lean Stanford electronics laboratory talking about “someday” having their own company.(Note 2) Upon graduation in 1934, however, Packard took a job at General Electric in New York, while Hewlett stayed on for a year of graduate study with Terman before leaving for MIT, where he received a master’s degree. Hewlett returned to Stanford in 1936 to work on an electrical engineering degree.
“I did a number of little things then to help get their business started,” Terman said. “A new idea in electronics (the so-called `resistance-tuned oscillator’) turned up. I told Bill, `It looks to me as if you could use this to make an instrument. It would be a lot simpler and cheaper than anything on the market. But you’ll have to solve a couple of problems to make it function.’ Bill came up with an absolutely perfect solution. He designed and built an audio oscillator, a device that generates signals of varying frequencies.”(Note 3) To remove serious instability, Hewlett took advantage of the nonlinear resistance-temperature characteristic of a small light bulb. The addition of one standard and inexpensive component turned a balky laboratory curiosity into a reliable, marketable instrument.
Money was a problem, but by great effort and a bit of luck, Terman was able to get some money together for the project, including a $1,000 grant from Sperry Gyroscope.(Note 4) “We spent $500 for materials and $500 for Packard’s salary. You didn’t just get on a plane in those days to hop across the country. In the autumn of 1938, Packard took a leave of absence from his job at GE (which paid $110 a month) to come back here (for $55 a month).”(Note 5)
Packard and his wife rented the lower floor of a duplex, and the two young entrepreneurs went to work in the small garage behind the house. Hewlett moved into a backyard cottage at the same address. Packard later said that after he’d been back three or four weeks, he knew Hewlett was right and that he’d never return to the East. Terman could always tell how the new young firm was doing: “If the car was in the garage, there was no backlog, but if the car was parked in the driveway, business was good.”(Note 6) Their first large order was from Walt Disney Productions. It was for four oscillators to be used in making the motion picture Fantasia.
That modest garage shop housed the beginnings of the Hewlett-Packard Company, which was incorporated in January 1939. Today, Hewlett-Packard is one of the world’s largest producers of computers and electronic measuring devices and equipment. It currently employs more than 80,000 people worldwide (22,000 in Santa Clara County) and has sales of more than $6 billion per year.”
Stanford Computer Forum

In 1951, Terman spearheaded the creation of the Stanford Industrial Park on university land which later became known as Stanford Research Park.

“It can be said that one of the cornerstones of Silicon Valley was laid when Varian Associates broke ground as Stanford Research Park’s first company in 1951. The Stanford Industrial Park, as it was first called, was the brainchild of Stanford University’s Provost and Dean of Engineering, Frederick Terman, who saw the potential of a University-affiliated business park that focused on research and development and generated income for the University and community.”
Stanford Research Park

By the time I was an undergraduate at Stanford, the surrounding area had become known as “Silicon Valley”; the elites of the growing Venture Capital industry were opening offices on Sand Hill Road, the south perimeter of campus: and Steve Jobs was starting a company in the garage of his family’s small Palo Alto home.

“Stanford Research Park is a community of and for people who seek to invent the future. We support innovative companies in their R&D pursuits by providing modern facilities in a beautiful natural landscape, offering sustainable transportation programs, forging connections with Stanford University’s talent and resources, and fostering collaboration.”
Stanford Research Park

Now, 35 years later, Silicon Valley is home to nearly 2 million people and includes the San Jose metro area, Stanford University, Palo Alto, Google’s headquarters in Mountain View, Facebook Headquarters in Menlo Park, and Apple HQ in Cupertino. More than half of the world’s technology billionaires live in the area. The Valley’s economic output, pegged at $275bn by the federal Bureau of Economic Analysis, is higher than Finland’s.

The Creation of Silicon Valley

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