Arthur Rock

Arthur Rock (born 1926) was the first venture capitalist. He invested in Fairchild Semiconductor, Intel, Apple Computer, and numerous other high-technology companies. His investments helped create many successful Silicon Valley companies.

Arthur Rock was born in Rochester, New York, on August 19, 1926, the son of Hyman and Reva (Cohen) Rock. He earned a bachelors degree in business administration from Syracuse University in 1948 and a masters degree from Harvard in 1951.
Invented the Term 'Venture Capital'
After graduating from Harvard, Rock joined the Wall Street firm of Hayden Stone & Co., where he worked as a securities analyst in the investment banking department, underwriting new stock issues. He was quite successful at picking applied science stocks in the late 1950s and early 1960s. In discussing that time, Rock said in Charged Bodies: People, Power, and Paradox in Silicon Valley, "It was a different era; there was really no one putting together money to go into high technology. Even the term 'venture capital' was unknown until 1965. I think I was the first one to use it. I can't remember anyone using it before that."
In 1956, engineers Robert Noyce and Gordon Moore helped William Shockley, the inventor of the transistor, set up Shockley Semiconductor Laboratories. One year later, eight engineers walked out on Shockley, fed up with his difficult temperament. The "traitorous eight," as they were called, wanted to set up their own transistor company, but needed investors. One of the eight young men had a father with an account at Hayden Stone. The man mentioned his son's predicament to someone at the investment banking firm. Soon after, a partner at the firm and Rock flew to California, met with the eight, and agreed to find the financing for their venture. It took Rock 35 tries before he found a company that would supply the money they needed. Fairchild Camera and Instrument, a company in Syosset, New York, put up $1.5 million in return for the right to buy the new company for $3 million if it succeeded. The company, called Fairchild Semiconductor, did succeed. Two years later Fairchild bought out the founders for $250,000 in Fairchild stock, worth $1.35 million in 1997.
Rock and Hayden Stone got involved with Teledyne soon after the company's founding in 1960 by Henry E. Singleton. Rock found the financing and became a member of the executive committee. Singleton found Rock to be "extremely brainy, perceptive, quick to grasp the essentials and reach a conclusion."
The San Francisco Bay Area was where all the high technology deals were taking place, so Rock moved to San Francisco in 1961. He set up a business with Thomas J. Davis, Jr. as his general partner. To fund the business, Rock assembled capital of $3.5 million from 25 limited partners, including Henry E. Singleton and Fayez Sarofim, a Harvard classmate. Davis & Rock existed from 1961 to 1968. This company was the first limited venture capital partnership.
Davis & Rock invested in 15 companies, including Anadex Instruments, Inc., General Capacitor, Astrodata, Teledyne, Benrus Watch Co., and Scientific Data Systems (SDS), founded by the mathematician Max Palevsky. Rock's company put $257,000 into SDS; the investment rose in value to $60 million and the company's sales went from $1 million to $100 million. The incredible success of SDS earned Rock a reputation as a great prognosticator of high-tech companies in which to invest. SDS was acquired by Xerox Corporation in 1969. Rock's share of Xerox stock was worth $4.6 million in 1970.
Rock, who does not have a technical background, chose SDS because he had confidence in Palevsky's drive to succeed. Rock recalled in Business Week, "I was convinced that he was going to make money. Very few people turn me on the way he did." Palevsky said that Rock's talent is "an ability to listen, not so much to what people say, because that may be technical, but to what people are expressing about themselves. He has a great deal of intuition."
Funded Intel
By 1968, Noyce, Moore, and another Fairchild employee named Andy Grove, were ready to start a new company, Intel. They hoped to produce semiconductors used for computer memory. Noyce called his good friend Rock, with whom he used to hike and camp. Rock described how Intel began. "Bob (Noyce) just called me on the phone. We'd been friends for a long time.... Documents? There was practically nothing. Noyce's reputation was good enough. We put out a page-and-a-half little circular, but I'd raised the money even before people saw it." Rock made 15 phone calls in one afternoon and raised $2.5 million. C. Richard Kramlich, with whom Rock had founded Arthur Rock and Associates in 1969, recalled that it took Rock about two hours to raise the money. The raising of that much money in that short amount of time turned Rock into a legend. Rock was looking for more than investors. He also wanted people who could make a contribution to the company in the way of expertise. Rock himself invested $300,000 in the company and served as its first chairman.
In 1978, Mike Markulla of Apple Computer hooked up Steve Jobs and Steve Wozniak with Rock. Rock bought 640,000 shares of Apple Computer for nine cents a share, an investment of about $57,000, and he became a director of the company. Three years later, when Apple went public, his shares were worth $14 million, a return of 23,000 percent, further enhancing Rock's reputation.
In the late 1970s, Rock began working on his own under the name Arthur Rock & Co. His only employee was his secretary of many years, Marie Getchel. Rock helped launch Diasonics, a manufacturer of medical instruments. He was the company's founding chairman. When it went public in 1983, it was worth over $1 billion. Rock made $3.1 million when he sold 150,000 shares at the initial public offering. Rock also invested in ELXSi International, a computer company, and Rational Machines, a company that sells computer systems used to design software.
"An Incredible Intuition"
Rock once described the role of a venture capitalist as someone who hunts for entrepreneurial dreamers possessed of "the potential to change the world." Rock analyzed the potential of a young company by focusing on the entrepreneur. "People, people, people," said Rock, in describing how he chooses companies to invest in.
Larry Mohr, a Silicon Valley venture capitalist, described what Rock looked for in an entrepreneur: "He wants to see fire in the belly and intellect. A lot of people would invest in just intellect. Not Arthur. He hates sloppiness and does not suffer fools gladly." Once Rock invests in a venture, he is very loyal. He often joins the board of directors and provides a steady stream of advice. "His individual contribution has been the difference between success and failure for us," said Paul Levy, co-founder of Rational.
Rock has few private investors as clients. He invests his own fortune and the money of a few friends, making three or four deals a year. The companies he finances are close to his office so he does not have to travel much. Rock searches for ideas, people, and products that together would create a new industry. He makes up his mind quickly, acts decisively, and moves silently. Palevsky said of him, "Arthur has an incredible intuition. His nose never ceases to amaze me."
Concerned with Social Problems
Rock married lawyer Toni Rembe, his second wife, on July 19, 1975. They have a home overlooking San Francisco Bay. The couple has no children. Rock spends much of the winter in Aspen, Colorado, where he and his wife own a three-story condominium. He exercises for an hour every morning and skis most of the winter. Rock is a great fan of the San Francisco Giants baseball team. He also supports San Francisco's opera, ballet, and Museum of Modern Art. His personal art collection includes works by Robert Motherwell and Hans Hofmann. Rock enjoys hosting dinner parties with guests such as Opera Impresario Kurt Herbert Adler and Rolling Stone magazine editor Jann Wenner.
Rock has become very wealthy as a venture capitalist. In 1984, his personal fortune was estimated at $200 million, but he does not like discussing it. He told Time, "I don't like people to count my money. That isn't what turns me on." Rock does not like publicity and is so secretive "that he amounts to a sort of mysterious force in the financial world," according to journalist Michael Moritz.
Rock's main interest outside of work has been social problems. As far back as 1970 he spent time advising minority businesspeople. In 1998, he told Forbes, "Most successful men and women give generously to their universities, but it seems to me that those gifts increase the distance between the haves and the have-nots. We need to be doing something about inner-city education at early levels."

Így történt ez 1957-ben is, amikor újabb nyolc mérnöknél telt be a pohár: úgy döntöttek, hogy új céget alapítanak. Mivel ők elsősorban műszaki szakemberek voltak, rábírták Arthur Rockot, a fiatal befektetési bankárt, hogy szerezzen nekik befektetőt. Arthur Rocknak nem volt könnyű dolga, mivel a nyolc mérnök olyan befektetőt keresett, aki egyrészt pénzt ad, másrészt teljes önállóságot annak elköltésére. 35 próbálkozás után találta meg végül Rock az igazit, a Fairchild Camera & Instrument céget, amely 1,5 millió dollárt fektetett be a Fairchild Semiconductors nevű új vállalatba, fenntartva magának a jogot a visszavásárlásra, amennyiben a vállalkozás sikerrel jár.

Ez volt az az idő, amikor a részvényopció - egyelőre csak a felsővezetőkre vonatkozóan - színre lépett. A Fairchild Semiconductors munkatársai az alapításból meggazdagodott nyolcak példája által inspirálva az 1960-as években új cégeket alapítottak. "Robert Noyce kezdett ráeszmélni, hogy opciókat kell adnia ezeknek az embereknek, hogy megtartsa őket" - így emlékezik Arthur Rock, aki akkoriban költözött San Franciscóba úttörő kockázati tőkebefektetőként. A Fairchild felsővezetése azonban megakadályozta ezt, mivel nem látta értelmét a felsővezetői szint alatt dolgozó alkalmazottak részvényopciókkal történő bérkiegészítésének. Ezt azóta alaposan megbánhatták, mert 1968-ra elveszítették a versenyt a kisebb versenytársakkal szemben, akik liberális opciós politikájukkal el tudták csábítani a kulcsembereket. Végül Noyce is feladta, és a kutatás-fejlesztési vezetővel, Gordon Moore-ral együtt, aki szintén benne volt az alapító nyolcakban, elhagyta a céget. Ők ketten Arthur Rock finanszírozási segédletével megalapították az Intelt, s nem bántak szűkmarkúan az opciókkal. "Nem vettünk bele mindenkit, de majdnem mindenkit" - mondta Moore, aki idén májusban vonult vissza az Intel elnöki székéből.

Jobs és Wozniak megalapítja az Apple Computer vállalatot. A társ Mike Markkula foglalja el a cég elnöki székét. Feltérképezve a piaci lehetőségeket, Markkula befektet $250,000-t a fiatal, de igéretes vállalkozásba. Később további befektetőcsoport érkezik a vállalathoz, többek közt a Venrock Associates, Arthur Rock és az Associates and Capital Management Corp.