Originally published in Business Digest, May 1997

The Blue Sky Brothers

by Craig C. Bailey

Paul Castrucci and Charlie Dickinson have some funny ideas about retirement. While others who have reached similar career[Paul Castrucci & Charlie Dickinson] plateaus might be content with some well-deserved rest, these two are charging ahead with a two-pronged approach to bring more high-technology businesses to the Green Mountains. Their Vermont High-Tech Initiative (VHTI) is an ambitious blend of research, analysis, speculation, financing, and more than a dash of strategic imitation.

Paul Castrucci (left) and Charlie Dickinson think Vermont and high technology could make beautiful music together. The duo have assembled a strong collection of back-up players to help serenade Silicon Valley.

To hear Castrucci tell it, the premise is obvious: Silicon Valley, an area of approximately 250 square miles, situated 45 miles southeast of San Francisco, Calif., is bursting at the seams with high-technology companies that desperately need to expand but can't do it locally due to an overburdened infrastructure. Vermont's a fertile ground for high-tech, thanks in part to the 45-year history of IBM's Essex plant. So why not market the Green Mountains as the next Silicon Valley to attract both satellite companies from established firms, as well as high-tech start-ups?

The advantages to Silicon Valley, a term coined by electronics writer Don Hoeffler in 1972, and to Vermont in such an arrangement are clear. With proper planning, the industry in question can have very little negative impact on our environment. Many high-tech fields, like software development, are exceptionally clean. In addition, Vermont will benefit from an influx of high-paying, professional jobs, which have the leverage to send positive ripples throughout the state's economy. In theory, the money wave would start with lawyers, bankers, insurance firms and the like, carry through to real estate, architecture, the construction industries, and eventually reach down as far as the local cafe and Laundromat.

Castrucci, chairman of VHTI, is no stranger to the high-tech world. A 32-year veteran of IBM, he was one of the four key players in development of the first 16-bit memory chip, which was manufactured at IBM's Essex plant, placing him at the heart of a paradigm shift in the computer field from magnetic core memory to silicon chips in the mid-1960s. "It changed the whole industry," he says. "You got cheaper memory, but you also got all kinds of new applications that were never even possible before.

"People don't really realize just how important this operation is to the whole worldwide IC (integrated circuit) industry," he continues, referring to IBM's Chittenden County facility. "Many of the industry's first technology developments for manufacturing were done here in Burlington."

Castrucci lists production of 8-inch silicon wafers in the late 1980s, moving up from 5-inch wafers five years ahead of the Japanese, and a process called chemical mechanical polish that allowed more dense circuitry on chips, as two other innovations from IBM. "I can give you a whole list of firsts that came out of this organization (IBM). The rest of the world is now piggy-backing off all the work we did," he says, with a near exasperation that frequently flavors his tone. "We drove the whole industry."

In 1988, Castrucci "retired" from IBM to become executive vice president and chief operating officer at Sematech, a consortium of 14 companies and the federal government with an annual budget of $200 million, in Austin, Texas, another hotbed of high-tech. After working a year under the late Bob Noyce, at one time the number two man at computer processor giant Intel, he left Sematech and formed Paul Castrucci & Associates, a consulting firm to the semiconductor industry, with offices in South Burlington and in Cambridge, Mass.

With his primary client pool in California and the greater Boston area, Castrucci has been in a prime position to observe the goings-on in Silicon Valley. "Every time I go there," he says, "there's two or three new companies. They spring up like dandelions out there. Now the people aren't smarter there than they are here. I know that for a fact. So what's different? What's the magic ingredient?" He hopes VHTI will be able to provide the answer and determine how Vermont can obtain any key ingredients that are missing in the state to make it more hospitable to high-tech business.

Relying on a base of contacts built through a career in the semiconductor industry, Castrucci pulled together a collection of heavy hitters in the Burlington area to join the initiative. (See sidebar.) Most were persuaded to sign on with little more than a phone call. "I didn't even know them that well, some of them," Castrucci admits. But "by having these people with different backgrounds work together for a common goal -- we'll get some things done." For his co-chair, Castrucci chose Charlie Dickinson, an associate of four or five years whom Castrucci met through his son, David Castrucci, who approached Dickinson for help with his business, PSA/Softcom.

Dickinson had come to Vermont in 1986 to "retire," after a career spent in the electronics and computer industries. A native of northern Minnesota, and a World War II veteran, he spent 20 years working for RCA in Indiana, New Jersey and the Boston area, manufacturing vacuum tubes, before moving into the magnetic core field. His resume includes several years with Control Data Corp., an innovator of large computer systems co-founded by computer legend Seymour Cray in 1957, and a brief stint with Memorex. Dickinson was also CEO of Data Products Corp., CEO of Vermont Microsystems from 1986 to 1990, and has sat on the board of Solectron Corp., a $3.5 billion electronic assembly and test house in California, for 14 years, recently relinquishing the title of board chair.

"I go to Silicon Valley a lot," he says. "I'm on a couple of company boards out there, so I see the misery the guys are going through to try to get professional people, and then worrying about the housing and the traffic kind of problems." Dickinson believes some of the pressure in the valley could be relieved by convincing 10 to 20 companies to establish small modules in Vermont.

"Charlie is pushing for satellites. I'm pushing for new start-ups. We'll see who wins first," laughs Castrucci, who's so intent on emphasizing that the two aren't in competition with each other that he almost gives the opposite impression.

Shuffling across his kitchen floor in stocking feet, Castrucci doesn't immediately give the impression of the high-tech mogul. But his sunroom office on the back side of his South Burlington home reveals some of his accomplishments: Framed silicon wafers, plaques and a magazine cover bearing his likeness line the walls.

His office, equipped with phone, fax and computer -- not to mention spa and wet bar -- stands as an example of a basic premise inherent in the VHTI: In the '90s, geography is rarely a hindrance. "Look at this," he says, gesturing to his back yard. "I'm 10 minutes from the airport and look at the view I've got. Live locally, work globally. There's no reason I can't do that."

Dickinson spent the majority of five years' time setting up a $600 million European branch for Solectron, "from my place on a damned old gravel road on a hill in Williamstown. My fax, my email, my phone worked on all kinds of hours. And I never had a bit of a problem getting on a plane and getting over to Europe at a moment's notice. ... That isn't hard to do, once you break through that imaginary barrier."

Nor is there any reason any number of high-tech firms couldn't operate smoothly from the relative isolation and serenity of Vermont. Thumbing through a pile of photocopies and overhead transparencies, Castrucci points to a bar graph of a Bank of Boston survey. "They evaluated the factors that people consider when they build a new tech plant," he says. "The most important one is quality of life."

Indeed, the chart shows quality of life and skilled professionals, two elements Vermont has in abundance, according to Castrucci, at the top of the list. Regulatory climate and taxes, surprisingly, are at the bottom.

"I think the success of Silicon Valley is actually replicable," says Thomas Kosnik, consulting associate professor at the Stanford School of Engineering, the educational seed of Silicon Valley in the 1930s. Kosnik, who'll conclude his three-year stint as visiting associate professor at Harvard Business School in June, points to North Carolina's Research Triangle Park; the Route 128 area of Boston; Austin, Texas; as well as a half-dozen other international sites that have also tried to mimic Silicon Valley.

He warns that in measuring the success of economic development initiatives like VHTI, states should be careful to look beyond economics. "If you look only at those indictators, and don't look at things that have to do with quality of life and the environment and those sorts of things," Kosnik says, "you'll wind up with some of the problems we've got now in the valley: urban sprawl, pollution, ridiculously high land prices and so on."

"Silicon Valley has been in development for 50, 60 years," says Dickinson. "It didn't start yesterday. And so this is not an overnight process." Certainly one advantage Vermont has over the valley is the benefit of hindsight, and the case example of California to improve upon.

Castrucci sees a bigger challenge. "There is one black hole. We're going to go to work on it," he says. "Silicon Valley depended on Stanford for quite a bit: source of engineers, support. UVM doesn't have that same drive. ... UVM has to be at the center, and there has to be a champion at UVM."

Castrucci's fix to beef up the engineering and computer science programs in Vermont is the same as suggested by Kosnik: Incorporate Vermont schools with distance learning presences from MIT, Stanford and the like.

"Companies are going to be more comfortable about locating major facilities here if they feel comfortable with the educational resources, the training resources," adds David Huwiler, vice president of academic affairs at Champlain College, and chair of VHTI's education and training committee.

"The toughest thing might be capital now," according to Dickinson.

The irony is, according to Kosnik, "The venture capital industry is currently in severe oversupply. That is, there are more VCs (venture capitalists) with money to invest in companies than there are good companies to invest in," thanks to an aging population investing money in pension funds, a portion of which eventually makes its way to venture capitalists. "As more and more people demographically are hitting the point that they're starting to invest for retirement," he adds, "there's this huge flood of money flowing into mutual funds. That increases demand for initial public offerings, which increases the velocity of investing by VCs."

The problem is that most of those venture capitalists aren't in Vermont.

Many venture capitalists, says Kosnik, "are very provincial, very regional, even very local. ... A lot of people in Silicon Valley really don't like leaving the valley to invest in anything." The solution? Bring more venture capitalists into the Green Mountains, where they will invest locally. Kosnik suggests appealing to "sons and daughters of Vermont," who are either native to the state or completed undergraduate work here -- individuals who have left Vermont to enter the field of venture capital, but are frustrated by working for more conservative superiors. A campaign to lure expatriates working in venture capital in other places back to Vermont could appeal to their desire to "establish a dominant presence in an emerging market."

Getting the ball rolling might be the trick. While there are already plenty of high-tech activities going on in Vermont, Castrucci thinks the PR that VHTI would receive by snagging a significant satellite or landing a start-up would make his efforts easier. Dickinson adds that attracting the first small satellites will help determine what Vermont needs to support high-tech businesses. Satellites are "great debug modules," he says. "They're an easy way to find out what you don't know about the high-tech scene."

"It would be nice if we could start between five and 10 new companies in the next two years," says Castrucci.

"It isn't my thought to try to change the population of the state of Vermont by leaps and bounds," adds Dickinson. "I'm trying to help with the learning curve by seeing if I can't encourage a half-dozen (satellite) modules, or a dozen."

Put a beat behind it, and that sounds like high-tech harmony.

Cover Band

[original, untouched photo] In the computer age, the term "photographic evidence" has all but lost its meaning. Case and point: the photo gracing this month's cover. What appears to be a simple picture is, in fact, the result of more than a little computer wizardry befitting an article on a high-tech subject.

We began with a group photo, shot Wednesday afternoon, April 9, by Jeff Clarke at Advance Music in Burlington. Charlie Dickinson couldn't be present for the session, so Advance owner Michael Trombley (tambourine) stood in. Furthermore, neither Paul Castrucci (bandleader), nor Trombley, standing in for Dickinson, was wearing a hat and sunglasses.

[Jeff Clarke (right) and Dickinson] One week later, Dickinson, wearing hat and glasses, was photographed by Clarke in his Pine Street, Burlington, studio. Using a seamless, white background, the lighting and pose were chosen to simulate Trombley's position from the previous week.

The resulting color transparencies were then digitized by H. Horsman & Co. in Williston. With the images now on computer disc, Business Digest art director Rebecca Awodey went to work.

The first matter of business was to get Trombley out of the scene. Using Adobe Photoshop on her Power Mac, Awodey removed Trombley's head -- and pesky hair! -- from the group shot.

She then fabricated a background, "cloning" textures, colors and shapes from the surrounding background, to fill the resulting hole, and appended a right shoulder to David Huwiler (guitar), whose right side had been partly obscured by Trombley's head and hair.

[computer workparts] To cover the turtleneck Trombley was wearing when he stood in, Awodey copied the shirt and tie from John Darcy (keyboards), and tucked it into Trombley's jacket, a loaner from BD publisher Jack Tenney. To cover her tracks, she narrowed the tie and changed its color.

She then appended Dickinson's head where Trombley's was, after rotating and color-correcting it to match the scene, and added a little shadowing along the shirt collar. Finally, she copied the hat and glasses from an alternate shot of Dickinson, and placed them on Castrucci, being careful to reconstruct his baton in front of the hat.

Strike up the band!

Vermont Hi-Tech Initiative Committee Chairs

[cover photo]

(Photo: Jeff Clarke. Effects: Rebecca Awodey) 1 Paul Castrucci, president
Paul Castrucci & Associates Inc.
Silicon Valley benchmark analysis 2 John Darcy
Darcy & Associates PC
Accounting, taxes and business planning 3 Charlie Dickinson
Satellite companies 4 David Hallam, president
Hallam Associates
High-tech start-up 5 Joe Hameline, vice president, investments
Dean Whitter
Investment 6 David Huwiler, vice president, academic affairs
Champlain College
Education and training 7 Susan Lewis
VHTI administrative services 8 Greg Morgan, manager of economic development
Green Mountain Power Corp.
Government 9 Chuck Ross, state director
Office of Sen. Patrick Leahy
Vermont high-tech statistics 10 David Usher, director of regulatory affairs, Vermont
Nynex
Software/communications/Internet Rob Everett
Everett Studios
Public relations Tim Kenney
Nybor Corp.
Software Scott & Pat Sainsbury
Marketing

Vermont High-Tech Initiative Board of Directors

Robert Arns
Education, UVM David Castrucci
Internet commerce Paul Castrucci
High-tech industry Robert Clark
Education, VTC John Darcy
Taxes Dudley Davis
Venture capital Charlie Dickinson
High-tech start-up strategy John Ditoro
High-tech industry J.P. Doud
Federal government liaison Audrey Englesberg
High-tech start-up Fred Hackett
Vermont Technology Council David Hallam
Engineering services Joe Hameline
Investments Peter Heinz
Vermont high-tech start-up Bob Hoehl
Software industry/Vermont high-tech start-up David Huwiler
Education, Champlain College Rudy Lia
Government liaison, state and federal Stewart McConaughy
Legal Ken Merritt
Legal Greg Morgan
New business development Robert Miller
State economic development William Parker
Holographic memory/Vermont high-tech start-up Angelo Pizzagalli
Construction Chuck Ross
Federal government liaison William Ryan
Security technology/Vermont high-tech start-up Michael Sweatman
Venture capital Dave Usher
Communications Marc van der Heyden
Education, St. Michael's College Mary Wilson
Learning systems/Vermont high-tech start-up Paul Whalen
Communications/Vermont high-tech start-up Roger Perry
Education, Champlain College