A History of Silicon Valley (Chapter 14 Summary)

During the course The Energy of Silicon Valley, we are reading the book; "A History of Silicon Valley" written by Arun Rao. We are assigned different readings from the chapters within the book. We were asked to read chapter 14, which talks about; Helpers: Lawyers and Investment Bankers in Silicon Valley (1970-2000.) Rao states from the beginning of the chapter that, talking about the helpers that help start up companies are under appreciated. Pg. 158) I find this to be rather interesting that Rao mentions this because discusses through out the chapter about how these "helpers" feel. One lawyer by the name of Larry Sonsini, states that Rao means, "These companies are synergistic groupings of entrepreneurs, venture capitalists, lawyers, accountants coming together to really build enterprises.” (Pg. 158)

As enterprises were being built, large broker-dealer banks, started to buy out these smaller enterprises. Sonsini got the reputation of the most feared/sought-after lawyer. (Pg. 159) Sonsini was so strong of an advocate, that he boldly state, "We would start to develop the recipe for how to build companies, and I was becoming part of the recipe." (Pg. 159) One of the most popular methods of being successful in the 1960s was co-investing. Long-term investments were other ways that capital ventures could make money from owning a portion of a company. Companies could make money from methods of licensing, distribution, intellectual property protection and property litigation.

Eventually companies began to shift their focuses. Companies believed that, "if you started an enterprise and failed at it, you probably make yourself more valuable as an entrepreneur." (Pg. 161) On page 164, we see that many banks located in Silicon Valley, could no longer stay independent but rather fall under a larger bank or corporation. Larger banks from Wall Street, are some of the ones to take over first. The banks started to face Depression-era regulations; which would result in companies to be sold out before senior partners could cash out. Lastly, stocks that were originally issues, could be sold almost twice or even triple the initial value! (Pg. 165) Overall, Rao takes us through the helpers and the roles that they played on shaping the Valley we know today.


Source: 

Rao, A., & Scaruffi, P. (2013). Helpers: Lawyers and Investment Bankers in Silicon Valley (1970-2000). In A history of the Silicon Valley the greatest creation of wealth in the history of the planet : 1900-2013 (2nd ed., pp. 158-165). Palo Alto, California: Omniware group.