Teradyne Inc., founded in 1960 and currently based in Boston, was one of the pioneers in the development and production of systems devised to test electronic and computer components during the manufacturing process. It was also an early customer of Digital Equipment Corporation’s minicomputers – at one point becoming DEC’s biggest customer for those devices.
According to Spencer Ante, in his book Creative Capital, Teradyne is an example of a company that almost folded before it began, but for the faith of Georges Doriot, the head of American Research and Development Corp., the venture capital firm that financed it.
The company, founded by two Massachusetts Institute of Technology graduates, Nicholas DeWolf and Alexander V. d’Arbeloff, originally was based above “Joe and Nemo’s” hot dog stand in downtown Boston. DeWolf had previously been at “Transitron” – a pioneer semiconductor company. DeWolf’s scheme was born because he believed unless automated testing equipment were developed, there would be a crippling bottleneck in the testing of electronic components.
Through an investment patchwork that included an infusion of their own money from the sale of stock and the financial support of friends and family, the pair were able to raise $140,000. They next went to ARD and Doriot for another $10,000 to hit their $150,000 target. Doriot and ARD’s backers weren’t in the mood to fool around, and so Doriot said not only would the company put in the $10,000, but would be willing to invest another $200,000 down the road if they needed it. Of course, the entrepreneurs took Doriot up on that offer in short order. But within the year, they were running out of money. At the time, the company had fifty employees and hadn’t sold anything.
One day, Doriot met DeWolf for lunch, and DeWolf convinced “the General” that Teradyne was on the verge of a big breakthrough. In Teradyne’s formative period, DeWolf had forged a close bond with Doriot, and this no doubt helped the young MIT grad in convincing ARD to stay with them. Doriot agreed to finance another $100,000, Teradyne came through with its new series of testers, and the company took off. By 1962, companies clamored for Teradyne’s new testers, and Teradyne became profitable. According to DeWolf, “It was an agreement of animal faith … but he (Doriot) could sniff that semiconductors were coming along.”
Today, Teradyne has $550 million in annual sales, and has diversified from its original automated testing equipment (ATE) market, and into computer-aided engineering (CAE) services – including advanced telecommunications testing. Though it faced challenges such as losing considerable market share in the 1970s – resulting in layoffs and wage freezes, the company has shifted with historical currents by gaining lucrative defense contracts and expanding ATE into international markets. It is now facing a record backlog for its equipment, and appears to have a bright future – all made possible by ”an agreement based on animal faith.”
For more information on Digital’s role in minicomputers and in computing in general, please consider the forthcoming book ”Learn, Earn & Return: My Life as a Computer Pioneer” by Harlan E. Anderson, as well as checking into his weblog.
– Christopher Hartman
