Striking It Rich: A new breed of risk takers is betting on the high-technology future

(3 of 9)

In 1813, Francis Cabot Lowell, a Boston merchant, created the first modern textile factory to combine yarn spinning and cloth weaving under one roof. He traveled to Britain to study established operations, took on some partners and raised $400,000 in venture capital from family and friends. Lowell then sold his cloth through a few large wholesale outlets in New England. He added to his profits by selling copies of the machines he developed to make the cloth. By 1817 his business had annual sales of more than $34,000, and Lowell paid his investors a dividend of 17%.

George Westinghouse, the son of a farm-equipment manufacturer, speeded the growth of two modern industries. The airbrake that he invented in 1869 at age 22 made highspeed railroad travel safe for the first time. Then, 17 years later, he formed the Westinghouse Electric Co. to develop alternating current and make the first big generators and transformers. These made possible the wide-scale use of electricity. By 1900, Westinghouse's enterprises were valued at $120 million and employed about 50,000 workers. Then, as now, risk takers can run into trouble. Westinghouse was forced out as head of the companies during the financial panic of 1907.

Edwin Land, a tinkering scientist, founded the Polaroid Corp. in 1937 to make nonglare lenses. In 1948 he marketed a new camera that could produce pictures immediately. Competitors like Eastman Kodak thought it was a gimmick, but the product was an overwhelming success and opened up a whole new industry. When Land retired as head of the company in 1980, he had accumulated Polaroid stock worth more than $75 million.

Certain regions of the U.S. have always seemed to lure venturesome people more than others. At the beginning of the 20th century, many automotive pioneers came to Detroit. There they found a deep-waterport and a good railroad system that gave easy access to supplies of coal and iron and a convenient way to ship their new cars back to local markets. They also found a prosperous wagon-making industry with a pool of skilled craftsmen, as well as a bustling atmosphere that encouraged innovation and manufacturing.

In today's high-technology industries, proximity to raw materials or water transportation is not as important as it was for the auto industry. The entrepreneurial spirit now seems to flourish best near universities. There companies just getting started can find research help for their projects. In addition, discoveries made in laboratories frequently have a commercial application in new products.

One such place is Minneapolis. Engineering Research Associates, a pioneering computer company, was founded there in 1946. After the firm was absorbed by Sperry Rand, William Norris, one of its founders, left to start Control Data Corp. in 1957, which he financed by selling 615,000 shares of stock for $1 apiece. Today a share of the original stock is worth $324. Another alumnus of Engineering Research was Seymour Cray, who built the world's fastest computers at his company, Cray Research. Both firms thrived in the Minneapolis area, and many other high-technology companies have sprung up near by, where they have benefited from a steady supply of new engineers from the University of Minnesota and an established system of local financing.