Editor's note: Most people think the biggest fortunes in technology are made after a company goes public...
But according to Luke Lango – senior analyst at our corporate affiliate InvestorPlace – that assumption is becoming increasingly outdated. And it's revealed by the playbook that has been running Silicon Valley for almost 70 years.
In today's Masters Series, Luke shows that AI's biggest players are increasingly deciding that it's faster to buy breakthrough technology than build it themselves...
The Playbook That Built Silicon Valley Could Build the Next AI Fortune
Back in 1957, William Shockley should have owned the future.
He had co-invented the transistor, won the Nobel Prize, and had eight of the brightest young engineers in America working under him in his Mountain View, California laboratory.
Instead, all eight engineers quit because they found Shockley impossible to work for.
With no product and no revenue, the eight quickly realized that no institution or company would support them. Back then, the suburbs and farmland south of San Francisco and north of San Jose weren't exactly "Silicon Valley" yet. The budding tech firms in the region weren't quite ready to invest in unproven ideas.
So they made one phone call.
A young financier named Arthur Rock listened to their story and took a risk.
Although Rock did not have the capital himself, he was willing to bet on people he deemed impressive.
He found a camera company willing to gamble $1.5 million on eight founders and an idea.
Thus, Fairchild Semiconductor was born. Fairchild eventually became one of the most influential technology companies in history, spawning Intel (INTC) and dozens of other semiconductor firms collectively worth trillions of dollars today.
And the men Shockley lost became known affectionately as the "Traitorous Eight." They were the accidental architects of a model Silicon Valley still runs on to this day.
The Traitorous Eight: That's Gordon Moore – of "Moore's law" fame – on the far left.
Credit: Intel
That same instinct resurfaced in 1998 when Andy Bechtolsheim sat down with two Stanford University grad students. Right on the spot, before their company had a business model or recognizable brand, the Sun Microsystems co-founder wrote a $100,000 check to Larry Page and Sergey Brin.
Anyone who has ever Googled... well... anything knows how that story ended. But for the record: That $100,000 check reportedly bought roughly a 1% stake in Google, a position that eventually became worth tens of billions of dollars.
More recently, in 2023, Spark Capital invested $75 million in Anthropic while it was still an obscure AI startup with little revenue. Today, millions of people are familiar with Claude, and that stake is estimated to be worth roughly $7 billion.
Across nearly 70 years, the technologies and the players keep changing. The playbook doesn't.
Rock backed eight unknown engineers. Bechtolsheim backed two graduate students. Spark Capital backed an AI startup few people had heard of.
In each case, the biggest opportunity wasn't buying a great business after everyone recognized it. It was recognizing exceptional founders and businesses before everyone else did.
I think that same playbook matters more today than it has in decades.
First, because AI has created an unprecedented race to develop new technologies. Second, because the companies leading that race increasingly have more money than time. And finally, because that combination is changing where some of the biggest fortunes in technology are being created.
Let me explain...
There's a reason this playbook has endured for nearly 70 years, and it isn't just today's excitement over AI.
When the prize is building the next great computing platform, speed becomes everything. If a startup has already solved a problem that would take your own engineers two years to crack, buying that company is often far cheaper than losing those two years.
That's exactly what's happening in today's AI race.
Alphabet (GOOGL) made that decision early, back in 2014, when it acquired the British AI startup DeepMind. Rather than spending years assembling a comparable research lab from scratch, Google bought one of the world's best AI teams outright. More than a decade later, DeepMind sits at the heart of Google's AI strategy.
Meta Platforms (META) reached a similar conclusion last year when it invested $14.3 billion in Scale AI. The deal wasn't just about software. Scale AI had become one of the industry's leading providers of the high-quality training data and infrastructure needed to build advanced AI models. Instead of trying to recreate that expertise internally, Meta bought a seat at the table.
Microsoft (MSFT) made perhaps the biggest AI-boom bet of all. Its $13 billion worth of investments in OpenAI, made between 2019 and 2023, gave the company immediate access to one of the world's leading AI developers years before it could have built a comparable capability on its own.
And this isn't unique to AI. Cisco Systems (CSCO) spent much of the 1990s building its networking empire by buying promising startups rather than reinventing technologies itself.
Long story short, this isn't a new playbook. It's an old one that's becoming even more valuable.
Every one of those deals happened because the real value had already been created inside a startup, long before Wall Street started paying attention.
That's why I think one of the most important shifts in investing today is this: The buyout, not the IPO, is increasingly becoming the finish line many early investors are aiming for.
Even the best startup investors get it wrong sometimes. And nobody understands that better than the funders themselves.
Bessemer Venture Partners keeps what it calls its "Anti-Portfolio" – a public list of companies it had the opportunity to back but passed on. Google is on it. So are Apple, eBay, Airbnb, FedEx, and many other companies that went on to become enormous successes.
Being early offers no guarantee, but it does give you the opportunity to make a decision before the rest of the market has reached the same conclusion.
That's the common thread running through Fairchild Semiconductor, Google, Anthropic, and countless other success stories. The biggest fortunes come from someone recognizing extraordinary people and extraordinary businesses before the consensus is formed.
That's the playbook. And I believe it's becoming more relevant again as AI reshapes the technology landscape.
The challenge, of course, is knowing what characteristics to look for when opportunities do appear...
Sincerely,
Luke Lango
Editor's note: The same pattern that has played out repeatedly in Silicon Valley is about to occur again in the AI sector. And you'll want to make a move before the rest of Wall Street catches on.
That's why, on July 30, Luke is hosting his 2026 AI Megadeal Event, where you'll have the opportunity to learn the same strategy that made Elon Musk and Peter Thiel rich. Luke has spent the past year building a framework to uncover the companies today's AI giants can't afford to ignore. And if you follow along, you could find some of the biggest winners in AI's next chapter. Click here to learn more.