Category Archives: Silicon Valley and Europe

Silicon Valley will soon be 65. Should it be Retired ? – The Darwinian Dynamics of the Region

Silicon Valley will soon be 65. 65? Yes, I usually say that the region began its growth with the foundation of Fairchild Semiconductor in 1957 (even if the name itself was created in 1971).

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The region is increasingly criticized for both good and bad reasons (see for example here and there) and perhaps it is a little out of breath. Too old ? Ten years ago I had looked at its “Darwinian dynamics” in Darwinian and Lamarckian innovation – by Pascal Picq. I had noted there the remarkable dynamics of creation (and destruction) of businesses. “Twenty of the top 40 SV companies in 1982 did not exist anymore in 2002 and twenty one of the 2002 top 40 companies had not been created in 1982.” So I just did the exercise again.

The table below gives the data for 1982 and 2002 again, then those for 2020. I should have waited for 2022 and the 65th birthday of Silicon Valley, but I didn’t have the patience! Ten of the 40 largest companies did not exist in 2000 and seven more did not exist in 1995. Sixteen of the top 40 of 2002 no longer exist in 2021. The region is therefore a little less dynamic but it remains quite remarkable… The retirement seems to me far away in reality !

As a final comment, five years ago, I had mentioned the evolution of the American capitalism in The top US and European (former) start-ups and in particular The Largest Companies by Market Cap Over 15 Years. You could compare it with the dynamics of French CAC40.

Forty Largest Technology Companies in Silicon Valley
(the same data are provided in jpg format at the end of the post)

1982 2002 2021 Revenue Market Cap
1. Hewlett-Packard 1. Hewlett-Packard 1. Apple $294,135 $2,153,363
2. National Semiconductor 2. Intel 2. Alphabet e $182,527 $1,169,351
3. Intel 3. Cisco b 3. Facebook d $85,966 $787,268
4. Memorex 4. Sun bc 4. Intel $77,867 $194,491
5. Varian 5. Solectron c 5. HP Inc. $57,667 $31,545
6. Environtech a 6. Oracle 6. Cisco $48,026 $192,007
7. Ampex 7. Agilent b 7. Oracle $39,403 $191,539
8. Raychem a 8. Applied Materials 8. Tesla d $24,578 $77,574
9. Amdahl a 9. Apple 9. HP Enterprises $26,866 $15,677
10. Tymshare a 10. Seagate Technology 10. Netflix e $24,996 $236,117
11. AMD 11. AMD 11. Gilead $24,689 $74,058
12. Rolm a 12. Sanmina-SCI 12. SYNNEX $23,757 $6,588
13. Four-Phase Systems a 13. JDS Uniphase c 13. PayPal e $21,454 $277,047
14. Cooper Lab a 14. 3Com c 14. salesforce.com e $21,252 $208,200
15. Intersil 15. LSI Logic 15. Applied Materials $18,202 $78,716
16. SRI International 16. Maxtor b 16. NVIDIA $16,675 $328,615
17. Spectra-Physics 17. National Semiconductor c 17. Western Digital $16,327 $16,183
18. American Microsystems a 18. KLA Tencor 18. Adobe $12,868 $241,275
19. Watkins-Johnson a 19. Atmel b 19. Uber d $12,078 $93,549
20. Qume a 20. SGI c 20. Lam Research $11,929 $69,264
21. Measurex a 21. Bell Microproducts bc 21. eBay e $10,713 $36,576
22. Tandem a 22. Siebel bc 22. AMD $9,763 $115,364
23. Plantronic a 23. Xilinx bc 23. Square d $9,498 $106,173
24. Monolithic 24. Maxim Integrated b 24. Intuit $7,717 $99,872
25. URS 25. Palm bc 25. Opendoor d $7,324 $1,221
26. Tab Products 26. Lam Research 26. Sanmina $6,875 $2,117
27. Siliconix 27. Quantum c 27. KLA Tencor $6,073 $40,492
28. Dysan a 28. Altera bc 28. Equinix e $5,999 $63,238
29. Racal-Vadic a 29. Electronic Arts b 29. Electronic Arts $5,670 $41,368
30. Triad Systems a 30. Cypress Semiconductor bc 30. NetApp $5,590 $14,480
31. Xidex a 31. Cadence Design b 31. Agilent $5,530 $36,607
32. Avantek a 32. Adobe Systems b 32. Intuitive Surgical e $4,551 $92,762
33. Siltec a 33. Intuit b 33. ServiceNow d $4,519 $110,315
34. Quadrex a 34. Veritas Software bc 34. Juniper e $4,445 $7,478
35. Coherent 35. Novellus Systems b 35. Workday d $4,318 $57,934
36. Verbatim 36. Yahoo bc 36. Synopsys $3,821 $39,023
37. Anderson-Jacobson a 37. Network Appliance b 37. Autodesk $3,790 $67,066
38. Stanford Applied Eng. 38. Integrated Device 38. Palo Alto Net. d $3,783 $33,851
39. Acurex a 39. Linear Technology 39. Twitter d $3,716 $44,436
40. Finnigan 40. Symantec b 40. Airbnb d $3,378 $94,765


NOTES: This table was compiled using 1982 and 2002 Dun & Bradstreet (D&B) Business Rankings data and Blommberg data for 2020. Companies are ranked by sales.
a – No longer existed by 2002.
b – Did not exist before 1982.
c – No longer existed by 2021.
d – Did not exist before 2000.
e – Did not exist before 1995.

Same table in jpg format

Charles Geschke, co-founder of Adobe, dies at 81

Charles Geschke may not be as famous as many Silicon Valley entrepreneurs, but he is really a legend of technology and software. With John Warnock, he cofounded Adobe in 1982 and he is an exception in the group of founders as he was in his early 40s when he left Xerox to create the company which developed Postcript, PDF, Adobe, Photoshop and so many more products. He died on April 16, 2021.

I had read about Geschke (and Warlock) in a good number of books and blogged about him here:
In the company of Giants in November 2008
A success story: Adobe Systems – John Warnock and Charles Geschke in March 2009

I found yesterday this very interesting short video that you should watch (or read the transcipt below).

Here is the transcript: “when John and I started Adobe we had a sort of simple thought in mind in terms of how we wanted to organize the business

we wanted to build a company that we would like to work at and we sort of used that principle in terms of how we defined the management structure, the operational organizational thoughts that we had about how to put the company together and part of that recognition was that we had constituencies that every business has that need to be balanced

we had our shareholders we had our employees we had our customers and of course the communities in which we operated and if you think about running a business all four of those constituencies are mildly in conflict what’s good for one may not be good for the other and to be successful as a business and to retain the kind of quality employees that you want to have it’s extremely important that you continually monitor how those four constituencies are being served and keep them in balance

a couple other principles people would often ask as they worked at Adobe

well what will it take for me to enhance my career and both John and I would tell them well the first thing you have to figure out is how to fire yourself by hiring someone to work for you who can do your job better than you do and there’s no alternative but to get promoted once you do that

and the second piece of philosophy which is frankly the most critical one building particularly a high technology business is to tell every engineer and every manager that your job is to hire people who are smarter than you are as it’s a much larger population from which to choose and those turned out to in fact have been extremely important in building a business

and again I want to comment that without my relationship with John and our partnership it’s hard to imagine that we could have achieved what we did over the past twenty seven years and we’re extremely pleased with this award and the opportunity to have served our industry

thank you very much

the really cool thing about this award is it’s from engineers we’ve gotten entrepreneur awards before but they’re from business guys and getting award for entrepreneurship from engineers is very very cool

Chuck and I when we started the company weren’t on a get-rich-quick scheme we were frustrated at Xerox and our major frustration is we knew we could invent great technology but no one would ever use it and it would never see the marketplace and I think our major motivation in starting Adobe and continuing with Adobe was to make stuff that people would use a lot of people would use and I think inside of every engineer is that basic need to have your stuff used so that was the primary motivation behind what we did

the other thing in the hardest thing about building a business and keeping a business sustained and going on is continuing to innovate and we’ve never figured out how you institutionalize innovation innovation is a very sort of remarkable thing that sometimes happens sometimes doesn’t but the best you can do is build an environment where people are happy they’re doing an adventure they’re trying to create and hopefully in that process great things will happen”

The largest technology companies in Europe and the USA in 2020

I regularly look at the largest technology companies in the USA and Europe and obviously this year, I had the impact of Covid in mind. Here are the tables I build once a year (and that you could compare to the ones published in January 2020 here or in 2017 here.

I am adding below their PS (price to sales, ratio of market cap to revenues) and PE (price to earnings, ratio of market cap to profits when positive) as well as the growth of the market cap. and revenues. There are 3 new companies I had not studied last year (Airbnb, Paypal and AMD) for which the growth is therefore not mentioned.

There would be many comments to give btu I will be fast:
– The GAFAs are the clear leaders, 4 of them are trillion dollar companies. Facebook is a little surprinsingly not as impressive and Tesla is appearing on top.
– The COVID did not have a big impact, not to say it had a positive impact on technology companies (in financial more than in economic terms)
– Again, looking at averages we see Europe is lagging in market caps, employement, sales and profits by factors close to 10…

The Microchip revolution (part III) : the maturity

You will find part I here and part II there. If the 60s were the early days which ended with the oil crisis in 73, the maturity came in the 80s with a second crisis coming from Japanese competition.

There was still a lot of uncertainty as the authors show in the chapters dedicated to Cypress, IDT, Micron. For example:

Another example about the uncertainty around which technology was superior for memory products at the time is that in 1986, when I was a founder of a semiconductor startup company with a business plan predicated on making bipolar RAM products. This was Synergy Semiconductor. We were funded by two premier Sand Hill Road venture capital firms, Sequoia Capital and Mayfield Funds. Even these supposedly smart VC partners couldn’t predict the superiority of the MOS technology in the memory chip business. Rodgers and Cypress made the correct bet on CMOS. It is also interesting that Sequoia Capital invested in Synergy with bipolar technology and Cypress with CMOS technology, thereby covering their bets. (Synergy never went public, struggled for 10 years and was eventually bought by Micrel.)

Intel didn’t believe that they needed CMOS for their memory or processor products for years. They knew that CMOS was a more complex process, and therefore more expensive, and they were not yet dealing with the high-power limitations of their process. Intel did not switch to CMOS for memory products until 1986. [Page 260]

Entrepreneurship is the ability to face these uncertainties and also to act by taking risks:

I already knew that [Rodgers] was a special guy, very smart, in great shape, from running every day and probably a risk taker, but this was nuts [diving in a dangerous place in Hawaii]. What if the timing was wrong and he gets sucked into the tube? How will I get help, it is a 15-minute walk over lava. But he did it. And then he jumped it. He did it twice! This event defines Rodgers. He is self-assured, even egotistical, but able to back up his decisions with actions and willing to take risks even if the parameters are not totally known. Shortly after the lava leaping escapade, he quit AMD and started Cypress Semiconductors. [Page 252]

While he was still at AMD, [Rodgers] got a call from a venture capitalist who was doing reference checks on an executive and inventor while at Fairchild and who also trying to raise money to start a new business. This got Rodgers thinking: “If this guy can raise money and start a new business, why can’t I do it?” And he began exploring the possibility of doing just that. [Page 253]

This reminds one of my favorite quotes ever, from Tom Perkins the famous P in KPCB (Kleiner, Perkins, Caufield and Byers): The difference is in psychology: everybody in Silicon Valley knows somebody that is doing very well in high-tech small companies, start-ups; so they say to themselves “I am smarter than Joe. If he could make millions, I can make a billion”. So they do and they think they will succeed and by thinking they can succeed, they have a good shot at succeeding. That psychology does not exist so much elsewhere.

The Microchip revolution (part II) : the very early days

If you missed Part I, it’s here. All the culture of Silicon Valley was born in these early years. Here are a few examples.

In the early days of the semiconductor, it was mainly about high-quality research: With an absentee boss, Sherman Fairchild, on the East Coast, the group could focus mainly on doing pure research, with no boss to bug them. Their main direction came from intense competition between each other. No VC or corporation would finance anything like this now! [Page 14] The authors are right. Only Google maybe is doing it with or without VC or boss approval and peer pressure is similar.

They finally make and ship their first product in 1958, 100 transistors to IBM. [Page 17]

Jack Kilby was awarded the Nobel prize in physics in 2000 for the invention of the integrated circuit. Unfortunately Bob Noyce had died 10 years earlier and Jean Hoerni passed away 3 years earlier. The Nobel prize is never awarded posthumously. The scientific community informally agreed that both Kilby and Noyce had invented the chip and that they both deserved credit. [Page 21]

Chapter 2 is about a non-startup, Hughes Research Labs, based in Los Angeles.

We did not have stock options; few of us even knew what they were. [Page 48]

Having dynamic leaders who gave free rein to ambitious young engineers and scientists meant that the engineers and researchers were stimulated by competition among themselves rather than by management layers above, which helped create an explosion of papers and patents. However, in both cases [at Fairchild and Hughes RL], the transfer of technologies from R&D to production was not easy. Although they were distinctly different organizations, both were very large corporate structures. But in the case of HRL, having R&D and production in the same physical location meant that discussions between the two groups were quite frequent.

Another difficulty was the lack of stock option program at HRL. This definitely caused significant personal turnover, especially among the non-attached young scientists who were hearing about the new utopic world, and its lucrative stock option packages, up in Silicon Valley. [Page 67]

Chapter 3: Intersil, a lost opportunity.

Another genealogy of Silicon Valley and extracted, the impact of Jean Hoerni.

Intersil was founded by Jean Hoerni, one of the eight traitors. The early days are best described as a mix of genius and chaos. The two most versatile personalities were Jean Hoerni and Don Rodgers, the VP Sales and also ex-Fairchild. Hoerni with 2 PhDs in physics was a shy genius quite the introvert but given to unpredictable mood swings. Rodgers was an extrovert. He came from the rough and tumble, hard-drinking, hard-living Fairchild sales team of the 1960s. One of the early frustrations was the ineffectiveness of the marketing department. [Page 71]

Hoerni’s contentious and rebellious personality often appealed to the young managers and engineers who were also looking for the next opportunity and also rejected conformism and authority, in part to the traumatism of the Vietnam war.

When I [Luc Bauer] started working with Hoerni, he strongly advised me not to be blindly loyal to any company, but only to my own ambition and goals. He said that if your employer doesn’t help you reach them, then you better change companies or start your own because life is too short.
[Page 74]

But Bauer talks about a missed opportunity and the reason follows: just have a look at the revenue growth of Intersil (founded in 67, IPO 72) and Intel (founded in 68, IPO 71):

Joe Rizzi, one of Intersil founders summarized his seven years at Intersil with two words: Lost opportunity. He said that all, or most of the seven product categories could have become sizeable businesses on their own, given enough care and focus to nurture their growth.
At the time, uncertainty in the market pushed to diversity of products. Intel’s narrow product focus was a risky gamble.
[Page 102]. Intersil had $572M in sales in 2014 and was acquired by Renesas in 2017. Intel is now a $71.9B business…

The Microchip Revolution by Bauer and Wilder (part I)

I felt a but of nostalgia when I received the following email : “The idea of doing a book on semiconductor startup had been teasing me for a while, I finally found a longtime buddy who has been okay with doing this book over the past 2 years. We were greatly assisted in this mission by the Computer History Museum (CHM) in Mountain View, CA. The book focuses on the period from the late 1950s to the late 1990s, about the development history of MOS and CMOS industrial processes mainly but not only from the point of view of managers, but also workers in fab and fab managers that we were at the time. We describe the development of 9 companies that we knew well and that had developed original technologies: Fairchild, Hughes, Intersil, Eurosil, Intel, AMD, IDT, Cypress, and Micron. The title is The Microchip Revolution – A Brief History.” [1]

I met Luc Bauer in the early 2000s when investing in a startup he was a business angel in and a mentor. I remember how he lectured me saying that Kleiner Perkins was much more professional than we were! Luc is a gentleman which does not mean he cannot be tough when he is frustrated; when people have been working hard in Silicon valley like he did, they can be really tough! But we stayed in touch and I was so happy to begin reading his book a few days ago.

SiliconValleyGenealogy-All

This is a poster about the Silicon Valley Genealogy of semiconductor startups from the mid 50s to the mid 80s. This is what Luc is writing about through 9 companies which I am pretty sure are on this poster. By the way, Luc is there too.

His book begins with Fairchild and the Traitorous Eight and it makes sense as it is at the beginning of the genealogy. By the way the book is dedicated to one of the eight traitors, Jean Hoerni, A Swiss national and one of the rare people I have heard about with 2 PhDs. Luc has the same double culture and double education (BS, EPFL Lausanne and MS, PhD Caltech)

So here are a few excerpts: “A good part of our motivation [for writing the book] was to relive the intensity in our lives when we started in this industry: the endless and stressful hours of looking for yield crash factors, the great excitement and shouts of joy when you see a brand new integrated circuit product coming alive and functioning perfectly when the “hot out of the furnace” processed wafer is put for the first time on the electrical test prober. Another great motivator for us was to propagate an important story to younger generations, that working in high technology fields is hard and exhausting, but also a source of joy and pride as it is easy to see the impact of your hard work on the company you work for and possibly on the workd you live in.”

Let me put this again below, in bold this time:

Another great motivator for us was to propagate an important story to younger generations, that working in high technology fields is hard and exhausting, but also a source of joy and pride as it is easy to see the impact of your hard work on the company you work for and possibly on the workd you live in.

More to come I am sure!

[1] The real email was in French: “L’idée de faire un livre sur le démarrage des semi-conducteurs me taquinait depuis un moment, j’ai finalement trouvé un copain de longue date qui a été d’accord de faire ce livre avec mois ces 2 dernières années. On été beaucoup aidé dans cette mission par le Computer History Museum (CHM) de Mountain View, CA. Le livre se concentre sur la période entre la fin des années 50 jusqu’à la fin des années 90, sur l’histoire de développement des processus industriels MOS et CMOS principalement mais pas seulement du point de vue des chefs, mais aussi des travailleurs de fab et managers de fab que nous étions à ce moment. On décrit le développement de 9 compagnies que nous connaissions bien et qui avaient développé des technologies originales: Fairchild, Hughes, Intersil, Eurosil, Intel, AMD, IDT, Cypress, et Micron. Le titre est The Microchip Revolution – A Brief History.”

Theranos, the (not so)-Silicon Valley biggest scandal ever

Bad Blood by John Carreyrou is a thriller and an amazing document about Silicon-Valley based Theranos, a medtech startup that is probably the biggest scandal ever about a technology startup, and its cofounder Elizabeth Holmes. But it is not so much about Silicon Valley, as I will discuss below, but about where extremes of hubris, lack of ethics, can drive human nature.

This is a thriller, a page-turner, but this is reality, unfortunately. In the end Carreyrou is not really puzzled about Holmes: Was she manipulated, did she lose control, but he has his answers (pages 372-73): Holmes knew exactly what she was doing and she was firmly in control. When one former employee interviewed for a job at Theranos in the summer of 2011, he asked Holmes about the role of the company’s board. She took offense at the question. “The board is just a placeholder,” he recalls her saying: “I make all the decisions here.” … A sociopath is often described as someone with little or no conscience. I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass was badly askew.

This is a thriller because Carreyrou introduces many individuals who suffered from the company’s total lack of ethis and secretive methods. Theranos did not hesitate to threaten these and used the most expensive lawyers who know how to intimidate. Homes knew how to seduce, to convince: She is also part of this terrible mentality that had been killing us for the last 20 years : if you are not (totally) with me, then you are my ennemy and I will crush you. A must-read!

Now Theranos was based in Silicon Valley but is not an illustration of what Silicon Valley is. People do not have to love Silicon VAlley, but using Theranos as a a reason why is a mistake: Silicon Valley, at least the one I know or I knew and appreciate is a place where trust and honesty are paramount values. This would take to long to explain but here is another quote of why Theranos is really an outlier (not the only one, but they are not so many:

Ah yes, the cap. table. My favorite exercise! Difficult to do here because there is very little information. Here is what I was able to build.

The largest technology companies in Europe and the USA in the last 10 years

It’s just after reading on Twitter that Google had just become a trillion dollar company (In honor of Google becoming a $1T company today), and also after reading Nicolas Colin’s concerns about European technology companies (Will Fragmentation Doom Europe to Another Lost Decade?) that I remembered I used to compare US and European tech former startups.

So here are my past tables and also a short synthesis in the end. The full data in pdf in the end too.

USA vs. Europe in 2020

USA vs. Europe in 2018

USA vs. Europe in 2016

USA vs. Europe in 2014

USA vs. Europe in 2012

USA vs. Europe in 2010

USA vs. Europe: the Synthesis over the decade

If you prefer to download it all and a little more: Top US Europe (in pdf)