Silicon Valley was born through the intersection of several contributing factors, including a skilled science research base housed in area universities, plentiful
venture capital, permissive government regulation, and steady
U.S. Department of Defense spending.
Stanford University’s leadership was especially important in the Valley's early development. Together these elements formed the basis of its growth and success. The
United States was more friendly than other countries to business investment, charging much lower taxes on
capital gains since the
Revenue Act of 1921, and featuring particularly loose
free market controls over new business. In 1953, the
Small Business Administration was created to foster
startups, giving a boost to entrepreneurs.
Northern California was even more welcoming, with a group of venture capitalists actively seeking high-tech business ideas, clustered on
Sand Hill Road in
Menlo Park and
Palo Alto.
California's civil code undermined the usual
non-compete clauses that effectively tied employees to their companies in other states, allowing California workers to freely apply the knowledge they gained from their previous employer. This gave Silicon Valley an advantage over other American
tech hubs such as
Massachusetts Route 128 curving around
Boston.
Early military origins in
Sunnyvale/
Mountain View has played a strategic role in Silicon Valley's evolution, researching and developing key technologies, first for the
U.S. military and then for
NASA. Today it hosts the
Ames Research Center. The
San Francisco Bay Area had long been a major site of
United States Navy research and technology. In 1909,
Charles Herrold started the first
radio station in the United States with regularly scheduled programming in
San Jose. Later that year, Stanford University graduate
Cyril Elwell purchased the U.S. patents for
Poulsen arc radio transmission technology and founded the Federal Telegraph Corporation (FTC) in
Palo Alto. Over the next decade, the FTC created the world's first global radio communication system, and signed a contract with the Navy in 1912. In 1933,
Air Base Sunnyvale, California, was commissioned by the
United States Government for use as a Naval Air Station (NAS) to house the airship
USS Macon in
Hangar One. The station was renamed NAS
Moffett Field, and between 1933 and 1947, U.S. Navy blimps were based there. A number of technology firms had set up shop in the area around Moffett Field to serve the Navy. When the Navy gave up its airship ambitions and moved most of its west coast operations to
San Diego, the
National Advisory Committee for Aeronautics (NACA, forerunner of
NASA) took over portions of Moffett Field for
aeronautics research. Many of the original companies stayed, while new ones moved in. The immediate area was soon filled with
aerospace firms, such as
Lockheed, which was the area's largest employer from the 1950s into 1980s.
Role of Stanford University played the central role in the emergence of Silicon Valley, both through its academic programs and through its real investments into the local tech ecosystem, such as with the
Stanford Research Park. A powerful sense of regional solidarity shaped the outlook of inventors and engineers in California; contrasting markedly from the insular and competitive environment of engineering firms on the
East Coast of the United States. From the 1890s, Stanford University's
leaders saw its mission as service to the (American)
West and shaped the school accordingly. At the same time, the perceived exploitation of the West at the hands of eastern interests fueled
booster-like attempts to build self-sufficient local industry. Thus regionalism helped align Stanford's interests with those of the area's high-tech firms.
Frederick Terman, as Stanford University's dean of the school of engineering from 1946, encouraged faculty and graduates to start their own companies. In 1951 Terman spearheaded the formation of Stanford Industrial Park (now
Stanford Research Park, an area surrounding
Page Mill Road, south west of
El Camino Real and extending beyond
Foothill Expressway to Arastradero Road), where the university leased portions of its land to high-tech firms. Terman nurtured companies like
Hewlett-Packard,
Varian Associates,
Eastman Kodak,
General Electric,
Lockheed Corporation, and other high-tech firms, until what would become Silicon Valley grew up around the Stanford University campus. , dubbed the "Birthplace of Silicon Valley", where
Bill Hewlett and
David Packard (founders of
Hewlett-Packard) began developing their
audio oscillator in 1938. Their business philosophy, called
The HP Way, soon spread throughout Silicon Valley. In 1951, to address the financial demands of Stanford's growth requirements, and to provide local employment-opportunities for graduating students,
Frederick Terman proposed leasing Stanford's lands for use as an
office park named the
Stanford Industrial Park (later
Stanford Research Park). Terman invited only high-technology companies. The first tenant was
Varian Associates, founded by Stanford alumni in the 1930s to build military-radar components. Terman also found
venture capital for civilian-technology start-ups.
Hewlett-Packard became one of the major success-stories. Founded in 1939 in
Packard's garage by Stanford graduates
Bill Hewlett and
David Packard, Hewlett-Packard moved its offices into the Stanford Research Park shortly after 1953. In 1954 Stanford originated the Honors Cooperative Program to allow full-time employees of the companies to pursue graduate degrees from the university on a part-time basis. The initial companies signed five-year agreements in which they would pay double the tuition for each student in order to cover the costs. Hewlett-Packard has become the largest personal-computer manufacturer in the world, and transformed the home-printing market when it released the first thermal drop-on-demand
ink-jet printer in 1984. Other early tenants included
Eastman Kodak,
General Electric, and
Lockheed.
Rise of Silicon as the first high-tech company in what would become Silicon Valley In 1956,
William Shockley, the co-inventor of the first working
transistor (with
John Bardeen and
Walter Houser Brattain), moved from
New Jersey to
Mountain View, California, to start
Shockley Semiconductor Laboratory to live closer to his ailing mother
May in
Palo Alto. Shockley's work served as the basis for many electronic developments for decades. Both Frederick Terman and
William Shockley are often called "the father of Silicon Valley". Unlike many other researchers who used germanium as the semiconductor material, Shockley believed that
silicon was the better material for making transistors. Shockley intended to replace the current transistor with a new three-element design (today known as the
Shockley diode), but the design was considerably more difficult to build than the "simple" transistor. In 1957, Shockley decided to end research on the silicon transistor. As a result of Shockley's abusive management style, eight engineers left the company to form
Fairchild Semiconductor; Shockley referred to them as the "
traitorous eight". Two of the original employees of Fairchild Semiconductor,
Robert Noyce and
Gordon Moore, would go on to found
Intel. plant in California, established in
San Jose in 1943 Following the 1959 inventions of the monolithic
integrated circuit (IC) chip by
Robert Noyce at Fairchild, the first commercial MOS IC was introduced by
General Microelectronics in 1964. The first single-chip microprocessor was the
Intel 4004, designed and realized by
Federico Faggin along with
Ted Hoff,
Masatoshi Shima and
Stanley Mazor at Intel in 1971. In April 1974,
Intel released the
Intel 8080, the second
8-bit microprocessor designed and manufactured by
Intel.
Origins of the Internet , the predecessor to the
Internet, began to be developed in 1966 by the
U.S. Department of Defense and four research universities in California, including Stanford. On April 23, 1963,
J. C. R. Licklider, the first director of the
Information Processing Techniques Office (IPTO) at
The Pentagon's
ARPA issued an office memorandum addressed to
Members and Affiliates of the Intergalactic Computer Network. It rescheduled a meeting in
Palo Alto regarding his vision of a computer network, which he imagined as an electronic commons open to all, the main and essential medium of informational interaction for governments, institutions, corporations, and individuals. As head of IPTO from 1962 to 1964, "Licklider initiated three of the most important developments in information technology: the creation of computer science departments at several major universities, time-sharing, and networking."
Emergence of venture capital By the early 1970s, there were many
semiconductor companies in the area,
computer firms using their devices, and programming and service companies serving both. Industrial space was plentiful and housing was still inexpensive. Growth during this era was fueled by the emergence of
venture capital on
Sand Hill Road, beginning with
Kleiner Perkins and
Sequoia Capital in 1972; the availability of venture capital exploded after the successful $1.3 billion
IPO of
Apple Computer in December 1980. Since the 1980s, Silicon Valley has been home to the largest concentration of venture capital firms in the world. In 1971,
Don Hoefler traced the origins of Silicon Valley firms, including via investments from
Fairchild's eight co-founders. The key investors in Kleiner Perkins and Sequoia Capital were from the same group, directly leading to
Tech Crunch 2014 estimate of 92 public firms of 130 related listed firms then worth over US$2.1 trillion with over 2,000 firms traced back to them.
Banking Another important pillar of the Valley's success was
Silicon Valley Bank (SVB), founded in 1983 by a group of former
Bank of America executives. In contrast to traditional banks, who focused their commercial lending on already-established businesses, SVB specialized in lending money to small startup companies in the "preprofit" stage. As of 1999, there were 2,400 lawyers practicing law in Palo Alto, a city of only 50,000 people, "the densest concentration of lawyers" in the United States outside of
Washington, D.C. By the year 2000, large
law firms from all over the world were rushing to establish offices in the mid-Peninsula region on or near Sand Hill Road, and Silicon Valley law firms had become global trendsetters in that they were the first legal services employers to adopt
business casual apparel (in imitation of their startup clients). During this era, lawyers evolved from their relatively narrow conventional role as protectors of intellectual property into business advisers, intermediaries, and dealmakers, and thereby acquired great prominence in Silicon Valley. For young entrepreneurs new to the Valley's mysterious ways, their lawyer often served as their first coach, mentor, teacher, friend, and cheerleader who helped connect them to the Valley's startup ecosystem. As of 2023, the San Jose-Sunnyvale-Santa Clara metropolitan area had the highest average wage for lawyers in the United States, at $268,570.
Above the Law occasionally publishes lists of top-performing Silicon Valley law firms, which it calls the "white sandal elite", a parody of the "
white-shoe firm" descriptor traditionally applied to certain
East Coast professional services firms.
Rise of computer culture was a highly influential computer hobbyist group in the 1970s and 80s that produced many influential tech founders, like
Steve Jobs and
Steve Wozniak. Pictured is the invitation to its first meeting in 1975. The
Homebrew Computer Club was an informal group of electronic enthusiasts and technically minded hobbyists who gathered to trade parts,
circuits, and information pertaining to
DIY construction of computing devices. It was started by
Gordon French and
Fred Moore who met at the Community Computer Center in
Menlo Park. They both were interested in maintaining a regular, open forum for people to get together to work on making computers more accessible to everyone. The first meeting was held as of March 1975 at French's garage in
Menlo Park,
San Mateo County, California; which was on occasion of the arrival of the
MITS Altair microcomputer, the first unit sent to the area for review by
People's Computer Company.
Steve Wozniak and
Steve Jobs credit that first meeting with inspiring them to design the original
Apple I and (successor)
Apple II computers. As a result, the first preview of the
Apple I was given at the Homebrew Computer Club. Subsequent meetings were held at an auditorium at the
Stanford Linear Accelerator Center.
Advent of software Although semiconductors are still a major component of the area's economy, Silicon Valley has been most famous in recent years for innovations in software and
Internet services. Silicon Valley has significantly influenced computer operating systems,
software, and user interfaces. Using money from
NASA, the
US Air Force, and
ARPA,
Douglas Engelbart invented the
mouse and hypertext-based collaboration tools in the mid-1960s and 1970s while at
Stanford Research Institute (now SRI International), first publicly demonstrated in 1968 in what is now known as
The Mother of All Demos. Engelbart's
Augmentation Research Center at SRI was also involved in launching the
ARPANET (precursor to the
Internet) and starting the
Network Information Center (now
InterNIC).
Xerox hired some of Engelbart's best researchers beginning in the early 1970s. In turn, in the 1970s and 1980s, Xerox's
Palo Alto Research Center (PARC) played a pivotal role in
object-oriented programming,
graphical user interfaces (GUIs),
Ethernet,
PostScript, and
laser printers. While Xerox marketed equipment using its technologies, for the most part its technologies flourished elsewhere. The diaspora of Xerox inventions led directly to
3Com and
Adobe Systems, and indirectly to
Cisco,
Apple Computer, and
Microsoft. Apple's
Macintosh GUI was largely a result of
Steve Jobs' visit to PARC and the subsequent hiring of key personnel. Cisco's impetus stemmed from the need to route a variety of protocols over
Stanford University's
Ethernet campus network. founder
Steve Jobs introducing the
iPhone in 2007
Internet age Commercial use of the Internet became practical and grew slowly throughout the early 1990s. In 1995, commercial use of the
Internet grew substantially and the initial wave of internet startups,
Amazon.com,
eBay, and the predecessor to
Craigslist began operations. Silicon Valley is generally considered to have been the center of the
dot-com bubble, which started in the mid-1990s and collapsed after the
NASDAQ stock market began to decline dramatically in April 2000. During the bubble era, real estate prices reached unprecedented levels. For a brief time,
Sand Hill Road was home to the most expensive commercial real estate in the world, and the booming economy resulted in severe
traffic congestion. The
PayPal Mafia is sometimes credited with inspiring the re-emergence of consumer-focused Internet companies after the
dot-com bust of 2001. After the dot-com crash, Silicon Valley continues to maintain its status as one of the top research and development centers in the world. A 2006
The Wall Street Journal story found that 12 of the 20 most inventive towns in America were in California, and 10 of those were in Silicon Valley. San Jose led the list with 3,867 utility patents filed in 2005, and number two was Sunnyvale, at 1,881 utility patents. Silicon Valley is also home to a significant number of "
Unicorn" ventures, referring to
startup companies whose
valuation has exceeded $1 billion
dollars. ==Economy==