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The Indicator from Planet Money

How venture capital built Silicon Valley

The Indicator from Planet Money

NPR

Business

4.79.2K Ratings

🗓️ 2 March 2023

⏱️ 10 minutes

🧾️ Download transcript

Summary

In 1957, a group of scientists fed up with their boss set the modern venture capital model in motion. Today, the story of the unconventional investment idea behind Silicon Valley startup culture and so much of the technology we use today.

For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.

Transcript

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0:00.0

NPR.

0:07.0

Today's story starts in 1957 with seven scientists working in the semiconductor industry

0:17.7

in Northern California.

0:19.6

The seven scientists were working at a company called Shockley Semiconductor.

0:24.9

Sebastian Meloby told the story of the scientists in his book The Power Law.

0:29.0

William Shockley, the founder, was a brilliant Nobel Prize-winning scientist, but an absolute

0:36.0

jerk to work for.

0:37.8

One of the seven had the idea to send a letter to an investment firm in New York, where

0:42.1

he had a personal connection.

0:43.8

And they weren't asking for money.

0:45.4

Rather, this was a desperate attempt to network.

0:48.4

They figured that they're going to be more likely to invent something of consequence

0:52.0

if they stick together as a team.

0:54.0

They were working with semiconductor chips, which, as we know, are fundamental to electronic

0:59.1

devices we use today.

1:00.8

But it was early days then, and these scientists were collaborating on what materials should

1:06.4

even be used.

1:07.7

And so their idea is, maybe we can find another company that would hire us as a squad

1:13.8

and keep us together.

1:15.0

And so this letter ends up in the hands of a guy called Arthur Rock at the investment firm,

1:19.5

but Arthur doesn't have a job lined up for them, does he?

1:23.0

Yeah, but he has a better idea.

...

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