Arthur Rock (born 1926) was the first venture capitalist. He invested in Fairchild Semiconductor, Intel, Apple Computer, and numerous other high-technology companies. His investments helped create many successful Silicon Valley companies.
Arthur Rock was born in Rochester, New York, on August 19, 1926, the son of Hyman and Reva (Cohen) Rock. He earned a bachelors degree in business administration from Syracuse University in 1948 and a masters degree from Harvard in 1951.
Invented the Term 'Venture Capital'
After graduating from Harvard, Rock joined the Wall Street firm of Hayden Stone & Co., where he worked as a securities analyst in the investment banking department, underwriting new stock issues. He was quite successful at picking applied science stocks in the late 1950s and early 1960s. In discussing that time, Rock said in Charged Bodies: People, Power, and Paradox in Silicon Valley, "It was a different era; there was really no one putting together money to go into high technology. Even the term 'venture capital' was unknown until 1965. I think I was the first one to use it. I can't remember anyone using it before that."
In 1956, engineers Robert Noyce and Gordon Moore helped William Shockley, the inventor of the transistor, set up Shockley Semiconductor Laboratories. One year later, eight engineers walked out on Shockley, fed up with his difficult temperament. The "traitorous eight," as they were called, wanted to set up their own transistor company, but needed investors.
One of the eight young men had a father with an account at Hayden Stone. The man mentioned his son's predicament to someone at the investment banking firm. Soon after, a partner at the firm and Rock flew to California, met with the eight, and agreed to find the financing for their venture. It took Rock 35 tries before he found a company that would supply the money they needed.
Fairchild Camera and Instrument, a company in Syosset, New York, put up $1.5 million in return for the right to buy the new company for $3 million if it succeeded. The company, called Fairchild Semiconductor, did succeed. Two years later Fairchild bought out the founders for $250,000 in Fairchild stock, worth $1.35 million in 1997.
Rock and Hayden Stone got involved with Teledyne soon after the company's founding in 1960 by Henry E. Singleton. Rock found the financing and became a member of the executive committee. Singleton found Rock to be "extremely brainy, perceptive, quick to grasp the essentials and reach a conclusion."
Funded Intel
By 1968, Noyce, Moore, and another Fairchild employee named Andy Grove, were ready to start a new company, Intel. They hoped to produce semiconductors used for computer memory. Noyce called his good friend Rock, with whom he used to hike and camp. Rock described how Intel began. "Bob (Noyce) just called me on the phone. We'd been friends for a long time.... Documents? There was practically nothing. Noyce's reputation was good enough. We put out a page-and-a-half little circular, but I'd raised the money even before people saw it." Rock made 15 phone calls in one afternoon and raised $2.5 million. C. Richard Kramlich, with whom Rock had founded Arthur Rock and Associates in 1969, recalled that it took Rock about two hours to raise the money. The raising of that much money in that short amount of time turned Rock into a legend. Rock was looking for more than investors. He also wanted people who could make a contribution to the company in the way of expertise. Rock himself invested $300,000 in the company and served as its first chairman.
In 1978, Mike Markulla of Apple Computer hooked up Steve Jobs and Steve Wozniak with Rock. Rock bought 640,000 shares of Apple Computer for nine cents a share, an investment of about $57,000, and he became a director of the company. Three years later, when Apple went public, his shares were worth $14 million, a return of 23,000 percent, further enhancing Rock's reputation.
"An Incredible Intuition"
Rock once described the role of a venture capitalist as someone who hunts for entrepreneurial dreamers possessed of "the potential to change the world." Rock analyzed the potential of a young company by focusing on the entrepreneur. "People, people, people," said Rock, in describing how he chooses companies to invest in.
(Source: BookRags.com)
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