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opinion | Jon Auerbach

History shows unpredictable nature of startups

The Genzyme Center.
The Genzyme Center.Peter Vanderwarker/Globe Freelance

LESS THAN a century ago, the Valley of Heart’s Delight boasted 8 million fruit trees, 18 fruit canneries, and 13 dried-fruit packing houses. The region achieved national fame as a leading supplier of fresh and processed apricots, prunes, cherries, and nuts.

Across the country in Cambridge, “Nowhere Square” was a former salt marsh that had put itself on the map as home to one of the largest producers of fire hoses and bicycle tires in the country.

Today, the story looks a bit different. The Valley of Heart’s Delight has rebranded itself as Silicon Valley, and many of those fruit trees have been replaced by buildings housing technology companies. Nowhere Square is now Kendall Square, arguably the densest cluster of biotech and tech companies in the world.

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A section of 43 acres that were cleared to make way for NASA Electronic Research Center and private industrial development. Ultimately, building of the center was abandoned, with both tech and biotech centers moving in instead.
A section of 43 acres that were cleared to make way for NASA Electronic Research Center and private industrial development. Ultimately, building of the center was abandoned, with both tech and biotech centers moving in instead.Jack O’Connell/Globe Staff/File 1964/Boston Globe

Why should we care about history? We should make it our business to remember because it underscores the unpredictable nature of the world of startups and technology. Any new leader of the Greater Boston Chamber of Commerce should be familiar with the fast-moving waters of the region’s startup ecosystem.

The factors that caused Silicon Valley and Kendall Square to develop into the two leading tech centers of the country were complex, with a large part of the success traced to Stanford, MIT, and Harvard. But in both regions a key piece of each equation was completely random. Silicon Valley arguably emerged as a tech mecca because of a case of tuberculosis. And Kendall’s rise has as much to do with Richard Nixon as it does with MIT.

Most historians give credit for the development of Silicon Valley to Fred Terman, the Stanford professor who helped launch Hewlett Packard, Fairchild Semiconductor, and other tech cornerstones. Terman attended Stanford as an undergrad. Like many engineers at the time, he headed east to MIT, where he earned his PhD in 1924. That summer, Terman developed tuberculosis, which kept him bedridden in California for the next year.

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After he recovered, Terman stayed at Stanford, where he worked his way up in the department of electrical engineering. To keep talented undergrads from leaving California, Terman encouraged students to start companies near Stanford. Two of his students, Bill Hewlett and Dave Packard, were lured back with Terman’s encouragement. Later, a handful of Terman’s students would start Fairchild Semiconductor, which spawned numerous startups and modern Silicon Valley.

In Cambridge, things were similarly unpredictable. Though MIT had moved to Kendall Square in 1916 (from downtown Boston), the area retained its manufacturing and service roots. The area was, in fact, named for the Kendall Boiler and Tank Company.

In the early 1960s, John F. Kennedy spearheaded a plan to move NASA headquarters to Kendall Square, and used the power of eminent domain to clear 29 acres for NASA’s Electronics Research Center. Richard Nixon put a stop to the project. The land remained in federal hands, and in the 1980s, as the technology boom began in the United States, biotech and tech companies moved in. Today, more than 500 startups — many housed in traditional office space built by MIT in the 1960s — call Kendall Square home.

As the startup market hits yet another peak, the lesson should be clear. Things change quickly and landscapes are reshaped regularly, often because of a random set of events. We’ll have winners, losers, and possibly some new playing fields. It’s a dynamic picture — one that holds bracing challenges for anyone who hopes to infuse Boston’s business roundtable with bold ideas.

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Jon Auerbach is a general partner at the venture capital firm CRV.