Silicon Valley: A Breeding Ground for Entrepreneurs

The garage and the entrepreneurial spirit represented are an enduring part of local lore.
By: Ellen Lee

It all started in a garage.

In 1937, Bill Hewlett and Dave Packard rented a garage in Palo Alto for $45 a month and started developing the first instruments that would establish Hewlett-Packard as a major electronics maker and put Silicon Valley on the map as a hub for high-tech innovation.

More than 70 years later, HP is one of the foremost brands in consumer electronics, manufacturing laptop and desktop computers, printers, hand-held gadgets and calculators. Inspired by the duo's success, many more Silicon Valley technology companies, from Apple to Google, have launched from similarly humble beginnings — not always literally in a garage, but in bedrooms and dorm rooms and on kitchen tables — and have become dominant forces in the industry.

Since then, the garage and the entrepreneurial spirit it represents have become an enduring part of Silicon Valley lore.

"I think the garage is a symbol of the idea that 'anyone can do this,' and so it has a cherished place in the Silicon Valley legend," said Leslie Berlin, project historian for the Silicon Valley Archives at Stanford University.

Silicon Valley gets its name from the building blocks of electronics, the silicon transistor. Today, Silicon Valley, concentrated in Santa Clara County and extending to the rest of the San Francisco Bay Area, doesn't just produce computers and chips, but all manners of technology, from video games to cell phones to social-networking websites.

Calling Silicon Valley home are some of the world's most well-known, high-tech companies, including Google, Yahoo, eBay, YouTube and Facebook. It's the birthplace of the iPod, iPhone and the Macintosh computer, made by Cupertino's Apple Inc. TurboTax, the software that helps you file your taxes each April, and Norton AntiVirus software, to protect your home computer, are also developed here. Silicon Valley's identity, and in turn, the San Francisco Bay Area's, is undeniably linked to technology and innovation.

The Silicon Valley Support System

How did this happen? Success begat success, Berlin said. Early companies such as HP and Shockley Semiconductor Laboratory bred the next generation of entrepreneurs, who left to start their own businesses.

A system started to form in Silicon Valley, one that remains strong today. Around the entrepreneurs a network was built, a support crew of specialized law firms, equipment vendors, manufacturing plants and other suppliers. Stanford and the University of California, Berkeley, trained and produced a fresh, top-notch workforce. Venture capitalists and investors, many of them entrepreneurs themselves, supplied the funds for startups. Once the startup succeeded — and granted, many failed — they turned around and used the money to seed another young company.

Years later, Silicon Valley's reputation as a mecca for high-tech development continues to draw eager dreamers.

Paul Bragiel, the 31-year-old CEO of Lefora, a startup that develops online forum technology, likens Silicon Valley for high-tech entrepreneurs to Los Angeles for actors. "This city is full of transplants looking to make it happen," he said.

PayPal's Family Tree

Max Levchin is an example of how the powerful Silicon Valley machine works. During college in the 1990s, the immigrant from Ukraine recalls how he kept hearing about people moving to Palo Alto to start high-tech companies. "It was like living in a space port where every couple of months a new ship would depart for new planets," the 33-year-old said.

So he decided to embark on the same trek. After graduating from the University of Illinois, Urbana-Champaign in 1997, he packed his bags and drove cross-country. He co-founded PayPal, the online payment service, in 1998, which went public in 2002 and was acquired by eBay for $1.5 billion. Next, in 2005, Levchin started a new Internet company, Slide, which develops applications such as photo slide shows for social networking sites such as Facebook and MySpace. He also invested in Yelp, a Web site for people to review local businesses and connect with one another.

Levchin and others from PayPal's early days, in fact, are referred to as the "PayPal mafia" because they went on to launch new companies with the help of each other. Chad Hurley and Steve Chen, PayPal alumni, created YouTube, the popular online video sharing site that was acquired by Google for $1.65 billion in 2006. Yelp was started by Jeremy Stoppelman, formerly the vice president of engineering at PayPal, and Russel Simmons, lead software architect for PayPal. Reid Hoffman, executive vice president of PayPal, founded LinkedIn, a social networking site for professionals. And Peter Thiel, co-founder and CEO of PayPal, is now a venture capitalist who has funded a series of high-tech startups, including LinkedIn and Slide.

Silicon Valley 2.0

Of course, it hasn't been smooth. The dot-com bust in 2000 led to painful bankruptcies, vast quantities of lost investments and thousands of job cuts. But despite such setbacks, the region has bounced back. Several years later, a new era of the Internet, aptly named Web 2.0, was born, with many of the architects of the dot-com boom starting anew. Remember and the sock puppet? After the company shuttered, its CEO, Julie Wainwright, took a break, worked at a few other companies, then went on to found SmartNow, a site for women in their 40s.

Yet even as Silicon Valley evolves, one element that remains the same is its brand of play hard, work hard culture.

Employees at Google — as well as Facebook and other startups — work long hours, but also enjoy free food and drinks, at the company's expense. In between writing software and developing new technology, they play Ping-Pong and video games such as Guitar Hero. For many, their idea of a party is to gather at a person's home and collaborate and write code all night.

And who knows? Maybe the next big idea is about to be born in someone's garage.

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