A History of Silicon Valley

Silicon Valley
Christine Johnson
October, 2013

©  2013 SAP AG or an SAP affiliate company. All rights reserved. 2
What’s so special about the San Francisco Bay Area?
Image from : http://www.siliconvalleyindex.org/index.php/component/content/article?id=101
9 counties
+ San Francisco,
Oakland & San
Jose metros
Home to approximately
7.15million
the largest driver of
population growth in CA
Known for its:
§  Natural beauty
§  Progressive
thinking
§  Liberal politics
§  Entrepreneurship
§  Diversity
The largest city in the area
San Jose10th most populous city in the US,
oldest city in CA and its first capital
San Mateo and Santa Clara are 2 of the top 25
wealthiest counties in the US

Great schools fuel great minds
Stanford University graduates have
created an estimated 5.4 million jobs
and generate annual revenues of $2.7
trillion*
The revenues of companies that were
founded by Stanford University
students equal the gross national
product of the world’s 10th largest
economy.
71 Nobel Laureates from UC Berkeley.
52 Nobel Laureates from Stanford.
* Based on responses to the 2011 Alumni Innovation Survey, sponsored by the venture capital firm Sequoia Capital.
§  20 private colleges including University of San
Francisco, Stanford and Santa Clara University
§  6 public universities including UC Berkeley, UC
San Francisco, SJSU, SFSU
§  30 community colleges in the greater Northern
California area

Silicon Valley
Silicon Valley was originally named
“The Valley of Heart’s Delight.”
Orchards of apricots, prunes, cherries
and other agricultural products
dominated the early landscape.
The first technology innovators formed
the beginnings of what we now know as
Silicon Valley in the 1950’s.
The area was first nicknamed
“Silicon Valley” in a 1971
Electronic News article by
journalist Don Hoefler.*
• Computer History Museum, http://www.computerhistory.org/revolution/digital-logic/12/328/1401
• http://www.morganhilltimes.com/articles_from_gilroy/andy-s-orchard-featured-in-sunset-magazine-spread/article_28d12001-1e11-53cc-a5f0-7e616228d558.html?mode=image
• http://www.marianinut.com

Silicon Valley today: A scientific/commercial renaissance
Gene splicing and gene cloning
discoveries at Bay Area universities have
spurred advances in biotechnology.
Other advances mark Silicon Valley as a
unique place whose creative energies have
changed the world.
§  Lasers
§  Nuclear magnetic resonance
§  Random access computer storage
§  Disk drives
§  Integrated circuits
§  Personal computers
§  Open-heart surgery
§  Inkjet printers
Source: http://en.wikipedia.org

What are the top strengths of doing business in SV?
Source: Poll by SVLG (Silicon Valley Leadership Group) of 177 innovation economy CEOs and Senior Officers
access to
skilled labor
71%
entrepreneurial
mindset60%
44%
proximity to
customers
and competitors

The Venture Capital Capital
There are more VCs in Menlo Park
than any other city in world.
Sand Hill Road has been known as
“the street of dreams” for seekers of
venture funded capital.
An entrepreneurial spirit and
forgiveness of failure culture are the
norm here.
Hewlett Packard started with $500
Atari started with $250 by Nolan
Bushnell’s own money. People
thought playing games on a TV set
was one of the stupidest ideas ever.

Some of the companies founded here
Acuson Corp
Adobe
Advanced Micro Devices
Apple
Applied Materials
Atmel Corp
Bloom Energy
Conner Peripherals
Cypress Semiconductor
ETrade
Food Machinery Corporation
Genentech
Hewlett Packard
Intuit
Intuitive Surgical
KLA Tencor
Lam Research
Maxim Integrated
Rambus
Quantum Corporation
MIPS Technologies
NVIDIA
Oracle
Palm Inc.
Xilinx
Trimble Navigation
Rolm Communications
Silicon Graphics
SRI International
Sun Microsystems
Tesla Motors
SLAC National Accelerator Laboratory
Intel
Ebay PayPal
Google
Facebook
Cisco
Twitter
Electronic Arts
Atari
NetFlix
Symantec
Yahoo!
Yelp

“Even after the collapse of the
dot-com bubble, about 4,000
IT-related companies located
along Highway 101 from San
Francisco to San Jose
generate approximately $200
billion in IT-related revenue
annually.”
Gregory R. Gromov, The Roads
and Crossroads of Internet History.
Highway 101 – The tech industry’s Madison Avenue
San Francisco
San Jose
Google
Computer History Museum
Microsoft Labs
Hacker Dojo
Violin Memory
NASA Ames
eBay/PayPal
NetApp
Yahoo!
Bloom Energy
McAfeeCisco/WebEx
EMC
Intel
Oracle
US
101

The early years
1953: William Shockley left Bell Labs in a disagreement over the
handling of the invention of the transistor.
1956: Shockley creates Shockley Semiconductor Laboratory in
Mountain View, California, dedicated to research around using silicon,
instead of germanium, for transistors and diodes.
1957: Shockley wins the Nobel prize in Physics and the "
traitorous eight" engineers leave the company to form
Fairchild Semiconductor.
1971: Two of the original employees of Fairchild Semiconductor,
Robert Noyce and Gordon Moore, go on to found Intel and create the
first microprocessor, the Intel 4004.
1975: Steve Wozniak, builds a home computer from a cheap
microprocessor, and shows it to the Homebrew Computer Club in
Menlo Park.
1976: Woz and his friend and fellow club member, Steve Jobs, form
Apple Computer in Steve's garage in Cupertino and Apple's first
personal computer, the Apple I, is sold for $666.66.
Sources: Wikipedia, www.computerhistory.org/revolution Image sources: Wiki Commons?
Moore’s Law

The early years
1977: The Apple II, Commodore PET and the RadioShack TRS-80
launched the first wave of personal computers.
1979: Xerox’s Palo Alto Research Center (PARC) was a hotbed of
innovation in the ’70’s. In 1979, Xerox gave Apple access to some new
ideas in graphical user interface, which were reflected in the first Mac.
1981: Adam Osborne founds Osborne Computer Company and debuts
an early “luggable” computer that cost $1,795 and weighed 23.5
pounds.
1982: Three Stanford grads and 1 UC Berkeley grad started Sun
Microsystems, originally manufacturing powerful graphic workstation
computers, later developers of software including Java. Sun was sold to
Oracle in 2009 and their flagship campus is now home to Facebook.
1994: Jim Clark and Marc Andreessen were the founders of Netscape.
Netscape’s Navigator and Microsoft’s Internet Explorer browsers went
head to head to capture the burgeoning internet market.
1995: Netscape’s successful IPO in 1995 kicked off the Internet Boom
that continued into the early 2000’s.
Source: www.computerhistory.org/revolution

The heady ’90s of high flying stocks & bonuses
In the ’90s, many tech companies paid
their employees in stock options.
As stock rose, the late ’90s became a
time of irrational exuberance.
Offices sported Foosball tables and video
games.
Secretaries had options worth millions.
Companies had signing bonus mania,
giving away free house cleaning, or even
BMWs, to new employees.
Source: http://www.thebubblebubble.com/dot-com-bubble/

The dot-com bubble
The historic speculative bubble of
1997–2000 was known as the dot-com
bubble, or the dot-com boom & bust,
or the Internet bubble, take your pick!
The collapse of the bubble took place
during 2000-2001.
Some companies failed completely.
Some lost a significant portion of
their market caps.
Some recovered and surpassed their
bubble peaks.
Cisco’s
stock
declined
86%
Amazon’s
stock went
from $107 to
$7 per share…
Microstrategy’s
stock slid from
$3,500 to $4
per share
…but a
decade
later it
exceed
$200
Source: http://en.wikipedia.org/wiki/Disk_drive, http://en.wikipedia.org/wiki/Amazon.com, http://en.wikipedia.org/wiki/Cisco

Some memorable dot bombs
Boo.com
Lycos
GeoCities
Pets.com
Excite@Home
InfoSpace
Webvan
WorldCom
Inktomi
and closed
ten months
later.
Boo.com – spent $188m
in just 6 months in an
attempt to create a global
online fashion store
Pets.com – ran a $1.2
million Super Bowl
commercial in 2000
featuring their famous
sock puppet mascot,
GeoCities – purchased
by Yahoo for $3.6 billion
then closed by Yahoo 10
years later.

CASH
Cash or stock, you make the call
Even vendors were offered stock in lieu of cash.
This created more than one “collateral” millionaires,
for example, David Choe.
Choe is Korean-American muralist and graffiti artist
who grew up rough in Los Angeles. A bad-boy street
artist known for doing cover art for
a Linkin Park album. In 2005 Choe was commissioned
to paint murals at the first Facebook headquarters.
He was offered the choice of cash or Facebook stock.
He said the very idea of Facebook seemed “ridiculous
and pointless” at the time, but he chose the stock.
Now estimated worth $500m.
STOCK

Cash or stock, you make the call
Alas, the story of Pejman Nozad.
In 2005, Facebook founding President
Sean Parker approached him about renting
165 University Ave. in Palo Alto, a property
owned by Mr. Nozad's partners.
The deal came with a chance to buy
$50,000 of stock in the fledgling social
network – but with strings attached to the
lease.
Mr. Nozad's partners said no. "We put on
our real-estate hat, rather than our
investment hat," he remembers. By his
math, those shares in Facebook would be
valued at about $50 million today.
Source: http://online.wsj.com/article/SB10001424052702303360504577412031389480536.html

X=The largest 15
digit perfect square
palindrome.
A win/win way to recruit in Silicon Valley
The race for talent in Silicon Valley is
highly competitive.
Big and small companies alike have to
compete pre-IPO start-ups and companies
like Facebook and Google who offer
incredible compensation packages
including stock and top shelf benefits.
“It’s very difficult to compete on comp, especially right
now when a huge element of compensation is stock.
When you’re competing with the promise of pre-IPO
companies it’s just driving your compensation up. We’re
going to have to introduce a disparity in our internal
equity. We should pay what it takes for amazing critical
talent.”
Nellie Peshkov, VP of global talent acquisition at Electronic Arts
Source: http://www.ere.net/2012/07/20/recruiters-ponder-pay-metrics-and-relocation-in-californias-silicon-valley/
RocketFuel’s clever Hwy 101
billboard recruits engineers with
a challenge, solve the puzzle to
get the address of their company.

2011: Largest venture capital deals
Greater Bay Area

2011: Largest IPOs in the Greater Bay Area
Zynga LinkedIn Pandora Media Solazyme Jive Software
$1 billion
$353m
$235m
$198m
$120m

2012: Largest venture backed companies
Greater Bay Area

2012: Largest IPOs in the Greater Bay Area
$16 billion
$732m
$264m $260m
$120m $115m $94m
Facebook Workday Splunk Palo Alto
Networks
Infoblox Guidewire
Software
Vocera
Communications

Silicon Celebrities
Silicon Valley pioneers are honored at
The Computer History Museum Fellows Awards and
The SV Forum Visionary Awards.
Ÿ  Robert Noyce
Ÿ  Gordon Moore
Ÿ  Andy Grove
Ÿ  Bill Hewlett
Ÿ  Dave Packard
Ÿ  Steve Jobs
Ÿ  Steve Wozniak
Ÿ  Guy Kawasaki
Ÿ  Scott McNealy
Ÿ  Larry Ellison
Ÿ  John Doerr
Ÿ  Don Valentine
Ÿ  Charles Schwab
Ÿ  Linus Torvalds
Ÿ  Marc Andreessen
Ÿ  Jerry Yang
Ÿ  Sergey Brin
Ÿ  Larry Page
Ÿ  Marissa Mayer
Ÿ  Carly Fiorina
Ÿ  Meg Whitman
Ÿ  Mark Zuckerberg
Ÿ  Sheryl Sandberg
Ÿ  Elon Musk
Source: http://www.computerhistory.org/fellowawards/hall/, https://svforum.org/Visionary-Awards , http://www.huffingtonpost.com/2011/07/26/celebrities-silicon-valley-lady-gaga_n_909494.html
“Timberlake To Gaga: Celebrities Go
Silicon Valley With High-Tech Investments”
Huffington Post 07/26/11
Some reach celebrity status beyond the valley…
Even Hollywood wants in on the act…

SAP – Celebrating 20 years in Silicon Valley
SAP Labs, LLC was
incorporated
1996
SAP established the
first development
group outside of
Walldorf, Germany
in Foster City, CA
1993
Changed the name
of SAP Technology
to SAP Labs and
moved the facility
to Palo Alto
1997

SAP Silicon Valley today
Over 3,500 employees in four Bay Area locations
One of the most diverse locations with 40+
nationalities and languages spoken
74 of the 313 managers are women*
Palo Alto EBC hosted 1,404 meetings in 2012 and
1,047 meetings In 1H 2013
SAP Silicon Valley Products and Technologies
include Business Applications, Database &
Technology, Mobility, Cloud, and Analytics
Home of SAP HANA, Startup Focus, Western Sales,
SAP Ventures, Ecosystems & Channel, User
Experience, and Mobility Design Center
* SAP Palo Alto, August 2013

SAP Palo Alto: Sustainability Front-Runner
§  650 solar panels
§  3 telepresence rooms
§  100% renewable energy
§  18 charging stations
§  Rectifier, air-side
economizer and 380v DC
data center
§  LEED Gold Building
§  LEDs & intelligent lighting
systems
§  Bioswale & garden
§  Sustainable food services

SAP Ventures: Investment Front-Runner
Help innovative and disruptive companies with SAP’s expertise, relationships and
geographic reach in addition to capital (partial list)

©  2013 SAP AG or an SAP affiliate company. All rights reserved.
Thank you
Contact Information:
Christine Johnson
Sr. Director, SAP Community Relations
@SAPBayArea
My Blog: http://scn.sap.com/people/christine.johnson/blog
LinkedIn: www.linkedin.com/pub/christine-johnson/2/155/101

A History of Silicon Valley

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