Margaret O’Mara had a great piece in the NYT yesterday, about the history of Silicon Valley and its roots in the defense industrial complex. People not familiar with the area tend to think that Silicon Valley started with the tech boom, in the 1990's.
Defense contracts during and after World War II turned Silicon Valley from a somnolent landscape of fruit orchards into a hub of electronics production and innovations ranging from mainframes to microprocessors to the internet.
It's always been a near-perfect symbiosis. The federal government pumps a ton of money into Stanford University and in turn, the University churns out a ton of innovative technology that benefits the government's niche application, but often times provides a much larger benefit to society.
Silicon Valley built elegant miniaturized machines that could power missiles and rockets, but that also held endless possibilities for peaceful use, in watches, calculators, appliances and computers...
Of course if that is all there was to it, then there would be little Silicon Valley's all over the United States. What separated Silicon Valley from the pack was Kleiner Perkins Caufield & Byers, the preeminent venture capital firm (itself with ties back to the defense work of Fairchild Semiconductor) with a focus on incubation and early stage business development. Its location just off the Stanford Campus is no accident.
The Pentagon remained the only place with the resources and the patience to fund blue-sky research that the market wasn’t quite ready for yet.
While that's true, the government did not fund (with rare exceptions) startups. That's where venture capital came in, with the resources (not just money) needed by entrepreneur teams in order to continue innovating and commercializing their technology, long after the government well had run dry. Venture capital was the bridge between government money and Wall Street, and that bridge is the major reason we have all the big tech names that we have today, along with thousands more that nobody knows about. Yet.