IBD-Rock
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Copyright 2009 Investor’s Business Daily Inc. INVESTOR'S BUSINESS DAILY WEDNESDAY, APRIL 22, 2009 A3 BY REINHARDT KRAUSE INVESTOR'S BUSINESS DAILY Arthur Rock had his own way to take the measure of a man. When money-seeking startups knocked on his door, Rock looked for “intellectual honesty” in wanna- be entrepreneurs, not just promis- ing business plans. Rock’s money smarts and guiding hand turned feisty Silicon Valley startups into some of the nation’s biggest technology companies. The venture capitalist played a key role in launching Fairchild Semicon- ductor, one of the first chipmakers; tech conglomerate Teledyne; and in- dustry giants Intel and Apple. An investment banker before turn- ing venture capitalist, Rock didn’t have an engineering resume that might’ve sparked his tech startups. He graduated from Harvard Busi- ness School in 1951, then joined the corporate finance department of banking firm Hayden, Stone & Co. in New York City. Chipping Away Rock, now 82, had a knack for find- ing gems in the business rough. “I invest in people, not in technolo- gy,” Rock said in “Done Deals,” a book from the Harvard Business School Press. “I was always interest- ed in investing in people. So I spent a lot of time with would-be entrepre- neurs to see whether they were mo- tivated and whether they were intel- lectually honest.” Among the scientists and engi- neers Rock believed had fire in their belly: Fairchild co-founders Gor- don Moore and Robert Noyce, both of whom launched Intel in 1968; and Apple co-founders Steve Jobs and Steve Wozniak. In a 2007 interview at the Comput- er History Museum, Rock shared his startup evaluation: “I’m not enough of a technologist to be able to understand what most of these en- trepreneurs are about technically. The way I went about it was to spend a lot of time with these would- be entrepreneurs. The main thing is are they honest? By honest I don’t mean taking money out of your pocket, but intellectually honest. Do they see things the way they are and not the way they want them to be?” Rock’s role didn’t end with provid- ing capital, advising on strategy and recruiting management. As an early-stage board member at a few firms, he showed startups how to build a business and aim for industry leadership. With Intel, he served as its first board chairman and was a director for 30 years, all the while attending staff meetings. “Art consistently tried to build great companies and did,” Pitch Johnson, co-founder of venture firm Draper & Johnson Investment and founder of Asset Management, told IBD. “Great venture capitalists, and Art is among those, know how to share a commitment to success. It’s a sports coaching type of skill, motivating and building a desire to compete and win. “Art could provide capital and pro- vide advice and guidance. But he also had a third role, by showing commitment — devoting yourself for success, disciplining yourself for success, to make the right decisions to be successful. That helped him build great companies.” Silicon Valley, where Rock landed in the early 1960s, was 3,000 miles from Rochester, N.Y., where he grew up. Born in 1926, he was an only child. His father, Hyman, a Rus- sian immigrant, operated a candy store, where the boy worked as a sales clerk and stocked shelves. He also peddled magazines in town. After graduating from high school, Rock served in the Army for a year as World War II wound down. He attended Syracuse University on the GI Bill, graduating with a bache- lor’s degree in business administra- tion before earning his MBA. In 1957, Rock still worked for Hay- den when he tried to raise money to start Fairchild Semiconductor. Eight scientists left Shockley Semi- conductor to start the new outfit. Rock persuaded Sherman Fair- child, founder of Fairchild Camera & Instrument, to bankroll the start- up. The scientists were called the Traitorous Eight after leaving Shockley, and helping unhappy campers start anew was brazen, says Spencer Ante, author of “Cre- ative Capital: Georges Doriot and the Birth of Venture Capital.” “In the late 1950s, there was a com- pletely different business culture,” Ante said. “Back then if you left a company (to form a startup) it was a sin. Arthur Rock was the first finan- cier to appreciate the importance of technology, and now leaving compa- nies to innovate is viewed as a posi- tive thing.” In 1961, Rock left Hayden and moved to California to form a new outfit, a venture capital partnership with Tommy Davis, a vice president at Kern County Land Co. in charge of its investment diversification pro- gram. Over the next seven years, Davis & Rock invested $5 million and returned $100 million to their 15 or so investors. Venture capital- ists make money when startups go public or are acquired. Davis & Rock invested in about 15 firms, including Scientific Data Sys- tems, acquired by Xerox in 1969. Rock built trust with key Silicon Valley people. When Moore and Noyce grew tired of Fairchild, Rock wrote up a business plan for Intel. “I raised the money (for Intel) just on the telephone in something like two days,” he said. Apple In His Eye He founded San Francisco-based Arthur Rock & Co. in 1969, and in a few years faced competition from tech-savvy venture capitalists. Rock had one big deal left in him. Mike Markkula, a former marketing VP at Intel, asked Rock to hook up with Apple’s Jobs and Wozniak. At first, Rock was put off by the two computer geeks. But a 1977 visit to the Homebrew Computer Show in San Jose convinced Rock that Jobs and Wozniak were for real. “In this big auditorium, all these companies were there showing off their gear,” Rock said. “Everybody at the show was around the Apple booth. I could not even get close to see them. At that point, I knew, well, maybe we had something.” 3 TAKE ACTION: Goals are nothing without action. Don’t be afraid to get started. Just do it. 3 Many news stories feature layoffs and dismal unemploy- ment numbers. But more than 90% of Americans are still employed. These folks are dealing with the loss of their col- leagues and the burden of extra re- sponsibilities for no additional pay. Right now, a manager’s toughest job is energizing his staff, keeping workers as productive as possible, says Steve Zaffron, CEO of global consulting firm Vanto Group. In “The Three Laws of Performance,” which he recently co-authored, he shows how to achieve that goal. Zaffron has advised 300 firms in 20 countries on this topic. San Fran- cisco-based Vanto’s clients include Apple, GlaxoSmithKline and Heinz Northern Europe. He and Clotaire Rapaille, a medical anthropologist and psychologist, share tips. 0 0 Clear it up. “Share information with people with whom you don’t normally share,” Zaffron said. Speak to employees directly and make sure you address what’s on their minds. Otherwise, they’ll be- lieve the rumors they hear. 0 0 Consider perceptions. When we do something, it usually makes complete sense to us. But when oth- ers make choices that puzzle us, we might ask, “Why are they doing that? It doesn’t make any sense.” Understand that situations appear differently to each of us. Put your- self in employees’ shoes. Then their responses or actions will make more sense. Zaffron suggests asking yourself: “What processes, dia- logues and meetings can I arrange so that people can feel like co-au- thors of a new future, not merely re- cipients of others’ decisions?” 0 0 Pay attention. Listen for oppor- tunities from stakeholders at all lev- els and functions, inside and out- side the firm, Zaffron says. He once worked with Reebok when it faced falling market share. He advised the CEO to sit down with departments to listen to their ideas. Those ideas led to expansion outside of shoes, into new fitness areas. 0 0 All for one. Teach employees that by doing their jobs well, they’re helping lift the firm. “Remember, leadership isn’t a function of posi- tion,” Zaffron said. “Leadership can be provided by anyone.” At the Ritz-Carlton hotel chain, former President Horst Schulze treated each employee’s job as key to achieving the goal — pleasing the customer, Rapaille told IBD. When the Ritz opened a new hotel, Schulze would work as doorman for part of the day, then wash dishes and clean rooms alongside employ- ees. He’d talk to them about how their job performance directly im- proved customer satisfaction and the entire hotel chain’s success. He taught them that each was a leader. 0 0 Commit to integrity. Do what you say. It sounds easy, but many companies don’t, says Rapaille, who wrote “The Culture Code.” Years ago, Rapaille consulted with AT&T, where the motto was “right on time.” But its managers frequent- ly started meetings 20 minutes late. “Do you really care about ‘right on time’ or not?” he asked. “The airlines are a bad example of this,” Rapaille said. “They say they’re concerned with security, but then someone tests their system by easily walking on board with a gun. So customers know they’re not really concerned about security.” Gloria Lau IBD’S 10 SECRETS TO SUCCESS Investor’s Business Daily has spent years analyzing leaders and suc- cessful people in all walks of life. Most have 10 traits that, when com- bined, can turn dreams into reality. Each day, we highlight one. LEADERS & SUCCESS Energize The Employed A Gem Among Venture Capitalists Get Out Front: Arthur Rock saw early that Intel and Apple were winners Rock,atCalifornia’sComputerHisto- ry Museum in 2007, spotted Apple’s wizardry at a computer show in 1977 and knew “we had something.” Rock’s Keys What: Helped land the money to start chipmakers Fairchild Semiconductor and Intel. How: “Art understood what semiconductors could mean back in the late ’50s,” said Pitch Johnson, venture capitalist. 1000 new accounts a day New Accounts claim based on internal E*TRADE FINANCIAL Corp. metrics for average daily gross new E*TRADE Bank and E*TRADE Securities accounts between 2/1/08–1/31/09. Net new accounts were in excess of 150,000 over the same period. 1. The Power E*TRADE Pro trading platform is available at no additional charge to Power E*TRADE active trader customers who execute at least 30 stock or options trades during a calendar quarter. To continue receiving access to this platform, you must make at least 30 stock or options trades by the end of the following calendar quarter. 2. Commission-free trade offer applies to new Power E*TRADE accounts opened with $1,000 minimum deposit. The new account holder will receive a maximum of 100 free trade commissions for each stock or options trade executed within 30 days of the opening of the new qualified account and deposited funds have cleared. You will pay the Power E*TRADE commission rate at the time of the trades ($9.99 for stock and options trades—plus an additional 75¢ per options contract). Your account will be credited $9.99 per stock or options trade within eight weeks of qualifying (excluding options contract fees). Other commission rates apply to customers who trade less than 30 times a quarter or maintain less than $50,000 in linked E*TRADE Securities or E*TRADE Bank accounts. Account must be opened by December 31, 2009. Securities products and services offered by E*TRADE Securities LLC, Member FINRA/SIPC. Excel (TM) is a product of Microsoft Corporation. System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance and other factors. ©2009 E*TRADE FINANCIAL Corp. All rights reserved. GETPOWERETRADE.COM 1-800-ETRADE-1 UNLEASH UNLIMITED. STREAM real-time market data. Accomplish unlimited tasks with Excel Manager in Power E*TRADE Pro. 1 EXECUTE stock and options orders. CUSTOMIZE conditional orders. ANALYZE historical market data. 2
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Here's a story published recently in Investor's Business Daily about legendary investor and venture capitalist Arthur Rock. The writer interviewed me for the profile and kindly included a quote from me in the story.
Transcript of IBD-Rock
Copyright 2009 Investor’s Business Daily Inc.
INVESTOR'S BUSINESS DAILY WEDNESDAY, APRIL 22, 2009 A 3
B Y R E I N H A R D T K R A U S EINVESTOR'S BUSINESS DAILY
Arthur Rock had his own way totakethemeasureof aman.When money-seeking startups
knocked on his door, Rock lookedfor “intellectual honesty” inwanna-be entrepreneurs, not just promis-ingbusinessplans.Rock’s money smarts and guiding
hand turned feisty Silicon Valleystartups into some of the nation’sbiggest technologycompanies.Theventure capitalistplayedakey
role in launchingFairchildSemicon-ductor, one of the first chipmakers;techconglomerateTeledyne;andin-dustrygiants Intel andApple.Aninvestmentbankerbefore turn-
ing venture capitalist, Rock didn’thave an engineering resume thatmight’ve sparked his tech startups.He graduated from Harvard Busi-ness School in 1951, then joined thecorporate finance department ofbanking firm Hayden, Stone & Co.inNewYorkCity.
Chipping AwayRock,now82,hadaknackfor find-
inggems in thebusinessrough.“I invest inpeople,not in technolo-
gy,” Rock said in “Done Deals,” abook from the Harvard BusinessSchoolPress. “Iwasalways interest-ed in investing in people. So I spentalotoftimewithwould-beentrepre-neurs to seewhether theyweremo-tivatedandwhether theywereintel-lectuallyhonest.”Among the scientists and engi-
neersRockbelievedhad fire in theirbelly: Fairchild co-founders Gor-donMoore and Robert Noyce, bothofwhomlaunchedIntel in1968;andApple co-founders Steve Jobs andSteveWozniak.Ina2007interviewat theComput-
er History Museum, Rock sharedhis startup evaluation: “I’m notenough of a technologist to be able
tounderstandwhatmostoftheseen-trepreneurs are about technically.The way I went about it was tospenda lotof timewiththesewould-be entrepreneurs. Themain thing isare they honest? By honest I don’tmean taking money out of yourpocket,but intellectuallyhonest.Dothey see things theway they are andnot thewaytheywant themtobe?”Rock’s roledidn’tendwithprovid-
ing capital, advising on strategy andrecruitingmanagement.As an early-stage boardmember at
a few firms, he showed startupshow to build a business and aim forindustry leadership. With Intel, heserved as its first board chairmanand was a director for 30 years, allthewhileattendingstaffmeetings.“Art consistently tried to build
great companies and did,” PitchJohnson, co-founder of venturefirmDraper & Johnson Investmentand founder of Asset Management,told IBD. “Great venture capitalists,and Art is among those, know howto share a commitment to success.It’s a sports coaching type of skill,motivating and building a desire to
competeandwin.“Artcouldprovidecapitalandpro-
vide advice and guidance. But healso had a third role, by showingcommitment — devoting yourselffor success, disciplining yourself forsuccess, tomake the right decisionsto be successful. That helped himbuildgreat companies.”Silicon Valley, where Rock landed
in the early 1960s, was 3,000 milesfrom Rochester, N.Y., where hegrew up. Born in 1926, he was anonlychild.His father,Hyman,aRus-sian immigrant, operated a candystore, where the boy worked as asales clerk and stocked shelves. Healsopeddledmagazines in town.After graduating fromhighschool,
Rock served in the Army for a yearas World War II wound down. Heattended Syracuse University ontheGIBill, graduatingwithabache-lor’s degree in business administra-tionbeforeearninghisMBA.In 1957,Rock stillworked forHay-
denwhenhe tried to raisemoney tostart Fairchild Semiconductor.Eight scientists left Shockley Semi-conductor to start thenewoutfit.Rock persuaded Sherman Fair-
child, founder of Fairchild Camera& Instrument, to bankroll the start-up. The scientists were called theTraitorous Eight after leavingShockley, and helping unhappycampers start anew was brazen,says Spencer Ante, author of “Cre-ative Capital: Georges Doriot andtheBirthofVentureCapital.”“Inthe late1950s, therewasacom-
pletely different business culture,”Ante said. “Back then if you left acompany (to forma startup) itwas asin. ArthurRockwas the first finan-cier to appreciate the importance oftechnology,andnowleavingcompa-nies to innovate is viewed as a posi-tive thing.”In 1961, Rock left Hayden and
moved to California to form a newoutfit, a venture capital partnershipwithTommyDavis, a vicepresidentat Kern County Land Co. in chargeof its investmentdiversificationpro-gram. Over the next seven years,Davis & Rock invested $5 millionand returned $100 million to their15 or so investors. Venture capital-ists make money when startups gopublicorareacquired.Davis & Rock invested in about 15
firms, including ScientificData Sys-tems, acquiredbyXerox in1969.Rock built trust with key Silicon
Valley people. When Moore andNoyce grew tired of Fairchild, Rockwroteupabusinessplan forIntel.“I raised themoney (for Intel) just
on the telephone in something liketwodays,”hesaid.
Apple In His EyeHe founded San Francisco-based
Arthur Rock & Co. in 1969, and in afew years faced competition fromtech-savvyventurecapitalists.Rock had one big deal left in him.
MikeMarkkula, a formermarketingVP at Intel, asked Rock to hook upwithApple’sJobsandWozniak.At first, Rock was put off by the
twocomputer geeks.But a 1977 visitto the Homebrew Computer Showin San Jose convinced Rock thatJobsandWozniakwere for real.“In this big auditorium, all these
companies were there showing offtheir gear,” Rock said. “Everybodyat the show was around the Applebooth. I could not even get close toseethem.At thatpoint, Iknew,well,maybewehadsomething.”
3 TAKE ACTION:Goals are nothingwithout action. Don’t be afraid toget started. Just do it.
3Many news stories featurelayoffsanddismalunemploy-ment numbers. But morethan 90% of Americans arestill employed. These folks
aredealingwiththe lossof theircol-leagues and the burden of extra re-sponsibilities fornoadditionalpay.Right now, a manager’s toughest
job is energizing his staff, keepingworkers as productive as possible,says Steve Zaffron, CEO of globalconsulting firm Vanto Group. In“The Three Laws of Performance,”which he recently co-authored, heshowshowtoachieve thatgoal.Zaffron has advised 300 firms in
20countriesonthis topic. SanFran-cisco-based Vanto’s clients includeApple, GlaxoSmithKline andHeinzNorthern Europe. He and ClotaireRapaille, a medical anthropologistandpsychologist, share tips.00 Clear it up. “Share informationwith people with whom you don’tnormally share,” Zaffron said.Speak to employees directly andmake sure you address what’s ontheir minds. Otherwise, they’ll be-lieve therumors theyhear.00 Consider perceptions. Whenwe do something, it usually makescomplete sense tous.Butwhenoth-ersmake choices that puzzle us, wemight ask, “Why are they doingthat? Itdoesn’tmakeanysense.”Understand that situations appear
differently to each of us. Put your-self in employees’ shoes. Then theirresponses or actions will makemoresense.Zaffronsuggests askingyourself: “What processes, dia-logues and meetings can I arrangeso that people can feel like co-au-thorsof anewfuture, notmerely re-cipientsofothers’decisions?”00 Pay attention. Listen for oppor-
tunities fromstakeholders at all lev-els and functions, inside and out-side the firm, Zaffron says. He onceworked with Reebok when it facedfallingmarket share.Headvised theCEO to sit down with departmentsto listen to their ideas. Those ideasled to expansion outside of shoes,intonewfitnessareas.00 All for one. Teach employeesthat by doing their jobswell, they’rehelping lift the firm. “Remember,leadership isn’t a function of posi-tion,”Zaffron said. “Leadership canbeprovidedbyanyone.”At the Ritz-Carlton hotel chain,
former President Horst Schulzetreated each employee’s job as keyto achieving the goal — pleasing thecustomer, Rapaille told IBD.Whenthe Ritz opened a new hotel,Schulze would work as doormanforpart of theday, thenwashdishesand clean rooms alongside employ-ees. He’d talk to them about howtheir job performance directly im-proved customer satisfaction andthe entire hotel chain’s success. Hetaught themthateachwasa leader.00 Commit to integrity. Do whatyou say. It sounds easy, but manycompaniesdon’t, saysRapaille,whowrote“TheCultureCode.”Years ago,Rapaille consultedwith
AT&T, where the motto was “rightontime.”But itsmanagers frequent-ly startedmeetings 20minutes late.“Do you really care about ‘right ontime’ornot?”heasked.“The airlines are a bad example of
this,” Rapaille said. “They saythey’re concerned with security,but then someone tests their systemby easily walking on board with agun. So customers know they’re notreallyconcernedaboutsecurity.”Gloria Lau
IBD’S 10 SECRETS TO SUCCESSInvestor’s Business Daily has spent years analyzing leaders and suc-cessful people in all walks of life. Most have 10 traits that, when com-bined, can turn dreams into reality. Each day, we highlight one.
LEADERS & SUCCESS
Energize The Employed
A Gem Among Venture CapitalistsGet Out Front: Arthur Rock saw early that Intel and Apple were winners
Rock,atCalifornia’sComputerHisto-ryMuseum in 2007, spotted Apple’swizardryat a computer show in1977andknew“wehad something.”
Rock’s KeysWhat:Helped land themoneyto start chipmakers FairchildSemiconductor and Intel.How: “Art understoodwhatsemiconductors couldmeanback in the late ’50s,” said PitchJohnson, venture capitalist.
1000 new accounts a day
New Accounts claim based on internal E*TRADE FINANCIAL Corp. metrics for average daily gross new E*TRADE Bank and E*TRADE Securities accounts between 2/1/08–1/31/09. Net new accounts were in excess of 150,000 over the same period.1. The Power E*TRADE Pro trading platform is available at no additional charge to Power E*TRADE active trader customers who execute at least 30 stock or options trades during a calendar quarter. To continue receiving access to this platform, you must make at least 30 stock or options trades by the end of the following calendar quarter.2. Commission-free trade offer applies to new Power E*TRADE accounts opened with $1,000 minimum deposit. The new account holder will receive a maximum of 100 free trade commissions for each stock or options trade executed within 30 days of the opening of the new qualifi ed account and deposited funds have cleared. You will pay the Power E*TRADE commission rate at the time of the trades ($9.99 for stock and options trades—plus an additional 75¢ per options contract). Your account will be credited $9.99 per stock or options trade within eight weeks of qualifying (excluding options contract fees). Other commission rates apply to customers who trade less than 30 times a quarter or maintain less than $50,000 in linked E*TRADE Securities or E*TRADE Bank accounts. Account must be opened by December 31, 2009.Securities products and services offered by E*TRADE Securities LLC, Member FINRA/SIPC.Excel (TM) is a product of Microsoft Corporation.System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance and other factors.©2009 E*TRADE FINANCIAL Corp. All rights reserved.
GETPOWERETRADE.COM 1-800-ETRADE-1
UNLEASHUNLIMITED.
STREAM real-time market data.
Accomplish unlimited tasks with Excel Manager in Power E*TRADE Pro.1
EXECUTE stock and options orders.
CUSTOMIZE conditional orders.
ANALYZE historical market data.
2
