Friday, October 24, 2008

The Startup Scene

Innovation past and future: Remembering Alex d’Arbeloff

Last Friday, MIT hosted a celebration of the life of Alexander d’Arbeloff, one of New England’s great technology entrepreneurs, and MIT’s eighth chairman. Alex is best known for co-founding semiconductor test equipment giant Teradyne Inc., an early and sustaining New England technology success. D’Arbeloff nurtured local technology in many ways — teaching at MIT and serving on the boards of many public, private and nonprofit cornerstones of the regional economy. Less visibly, he acted as an angel investor and mentor to countless local startups. I first met him 20 years ago, when he invested in one of my clients. And that’s how I came to speak to him most recently, when he recommended me a few months ago to another one of the many young entrepreneurs he took under his wing during his long and productive career.

Though Alex’s story is great, it was not unique — and I use my selection of tense advisedly. When I think of d’Arbeloff, I recall other legendary local technology founders, like Ken Olsen (Digital Equipment Corp.), Edson deCastro (Data General) and An Wang (Wang Laboratories). During their heyday, they ruled the minicomputer world. 

There were other entrepreneurial visionaries, though, who never ran a computer lab but were equally responsible for placing Route 128 on the global technology map--forces of nature like Dick Testa, founder of Testa, Hurwitz & Thibeault and the go-to legal/business adviser for a generation of entrepreneurs and VCs alike. It was Dick who escorted both d’Arbeloff and Olsen to Wall Street to register their IPOs on the New York Stock Exchange.

And also Gen. Georges Doriot, a great friend and ally of Dick’s, who traveled to America from his native France to earn an MBA, who stayed to teach at Harvard Business School and who then became the “Father of Venture Capital.”

Doriot founded American Research and Development Corp., the first institutional venture fund. The value of the $70,000 investment he made in Olsen’s fledgling company rocketed to $355 million when DEC went public. Investors noticed that, and by the time I came to work for Dick Testa (and for his clients ARD and DEC ) in 1982, there were scores of VC funds in New England, most of which traced their genealogies directly or indirectly back to ARD.

What most distinguishes these great entrepreneurs? To my mind, two things. Each led his startup from formation through to its recognition as a world leader in its class. And each was determined to create a lasting institution.

Throughout my career, I have asked the founder of every new startup client at our first meeting what they hoped to achieve. For years, the answer was always, “To build a great company.” But ever since Netscape completed its wildly successful IPO only 16 months after it was incorporated, the invariable answer became, “To grow it fast and sell it quick.”

Over the years, it seems, we have become driven to build great returns rather than great companies. Or perhaps we have simply been seduced by the appeal of a system that permits new ideas to be so rapidly conceived, funded and then monetized, simply by feeding them into the maw of a perpetually consolidating industry. Whatever the reason, I miss the days when entrepreneurs — and even venture capitalists — wanted not only to reap great profits, but to build great institutions as well.

Will we ever see those days again? The answer to that question is easy: It’s all up to you.

Andrew Updegrove is a partner at Boston law firm Gesmer Updegrove LLP, and has been representing startups since 1979. He can be reached at andrew.updegrove@gesmer.com