VC by Tom Nicholas

Author:Tom Nicholas
Language: eng
Format: epub
Publisher: Harvard University Press

The Intel Investment

If Scientific Data Systems was among the most important investments in venture capital history, what was to come next was to have even more significance to the growing development of venture capital, and Rock’s reputation as a people-based investor. In 1968, Davis & Rock dissolved their partnership as it had come to the end of its seven-year lifespan. In 1969, Davis went on to cofound the Mayfield Fund, another prestigious west coast venture capital firm. Meanwhile, Rock revisited his longstanding relationship with members of the traitorous eight.

By the mid-1960s, the east coast management style at Fairchild Camera had become increasingly problematic for the founders of Fairchild Semiconductor, which itself was struggling to compete in a world where integrated circuit prices were falling sharply. By the late 1960s, Noyce and Moore were the only ones of the original eight who remained. Although Noyce was the de facto head of Fairchild Semiconductor, and the division generated virtually all of Fairchild Camera’s profits, Noyce was passed over for promotion to CEO of the parent company. He and Moore decided at that point to sell their equity and leave. Moore was head of research and development at the time and had grown frustrated with a lackluster product pipeline.71

Rock and Noyce had remained close friends since the initial Fairchild Semiconductor investment and had talked on and off about business options for some time. In fact, Rock had actually encouraged Noyce to leave Fairchild Semiconductor. Rock later remembered: “In 1968, Noyce called me and said, ‘Gee, I think maybe Gordon and I do want to leave Fairchild Semiconductor and go into business for ourselves.’ And so we talked about it for a while and I asked him how much money they needed and he said $2.5 million. And I said, ‘Well how much money are you guys willing to put up?’ He thought about it for a while and said, ‘Well, we’ll each put up $250,000’ which represented a fairly good portion of their net worth at the time.”72

The idea Noyce and Moore had was to make computer memory from silicon devices, an area of R&D that Moore had already been working on at Fairchild. But it was yet to be commercialized even though other firms, including IBM, were interested in the space. Both Noyce and Moore felt the idea was technically and economically feasible and that it could form the basis of a standalone company. In 1965, Moore had articulated what became known as “Moore’s Law” based on the observation that the number of transistors per square inch on integrated circuits had doubled every year since their invention. This level of increasing sophistication meant that integrated circuits could potentially act as memories for computers. Rock realized how difficult the task would be, yet, he later recalled, “I was absolutely 100 percent sure [the new firm] would be a success because of Moore and Noyce.”73

In July 1968, NM Electronics was incorporated, soon to be renamed Intel as shorthand for “integrated electronics.” Noyce was forty years old and Moore was thirty-nine.

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