Spring Comes Early To Silicon Valley

In Silicon Valley the cycle of enthusiasm and disappointment has been compressed as the years have gone by and the pace of innovation has increased. The 1960s spawned the rise of the semiconductor business. The 1970s brought personal computers. The 1980s gave us computer-networking companies and biotech firms. And the 1990s produced a rush of Internet companies. Each of these waves was followed by disappointments as hundreds of weak companies collapsed or were gobbled up by their larger competitors. But all these periods gave rise to the formation of a handful of venture capital-backed firms that have come to occupy major roles in the U.S. and the global economy, such as Intel, Compaq, Amgen, Microsoft, Sun Microsystems, Dell, AOL, Oracle and Cisco Systems.

If the savagery of a young industry leads to casualties, so does the chaos surrounding rapid corporate growth. There is barely an important technology company that has not had a close encounter of the worst kind. Over the past 20 years, business writers have penned plenty of premature obituaries for all the companies I just mentioned. These companies seem to go through similar phases: a period of obscure labor followed--in rapid order--by glowing notoriety, loosely controlled growth, chest-pounding arrogance, a rude comeuppance and public humiliation. The fortunate recover and become stronger. The weak surrender to economic necessities.

Although stock-market indexes are dropping to ankle level, there is still little reason for gloom about the long-term prospects for U.S. technology companies. Progress will not stop. Invention will not cease. Ambition will not evaporate. Many years ago, during a similar period of bleakness, we encountered a little company with a dozen employees attacking a market that few people understood. Eight weeks after the crash of 1987, when the only sound in the air was of checkbooks slamming shut, Sequoia Capital became the first investor in this unknown company. Its name was Cisco Systems.

MICHAEL MORITZ is a partner at Sequoia Capital, the California venture-capital firm that has helped to organize and finance some of NASDAQ's leading companies