George Hatsopoulos decided he'd like to start a company some day while he was still an elementary school student in his native Athens, Greece. As a college student at the Athens Polytechnic, he did library research to determine the best country to start his business; he chose the U.S. because of its entrepreneurial spirit and because it had been the home of inventors like Thomas Edison. In his junior year he was offered a scholarship to study in America. The best known American universities in Greece were Harvard, MIT, and Columbia. He chose MIT because he wanted to be an engineer.
As a candidate for a Ph.D. in mechanical engineering, he had a number of ideas for products to start his company. He selected the one most likely to attract venture capital--a device for the direct conversion of heat to electricity. He then went to his advisor and asked if he could do his thesis by developing this product. The professor agreed; when Hatsopoulos needed funding, the professor approached the MIT administration which gave Hatsopoulos a research grant in return for a half-interest in his product. (The university later gave Hatsopoulos its interest in the patent.) Today, Thermo Electron is a $2 billion company, located in Boston entirely because of MIT.
Because he is in Boston and knows so many people at MIT, Hatsopoulos is able to recruit the very best talent from MIT--something he would not be able to do at a distance. (His San Diego operation has a similar relationship with Cal Tech.)
Thermo Electron was started in 1956 with the help of a $50,000 loan from an "angel." A couple of years later, Hatsopoulos' bank (BankBoston) introduced him to Laurance Rockefeller, who invested a million dollars in the company. Hatsopoulos didn't want heavy bank debt and avoided large bank borrowing. In the early 1960s, he received substantial mezzanine funding (again from BankBoston).
In a later section, we report that few MIT founders relied on banks for startup funding. The Thermo Electron experience suggests that a question focused narrowly on startup funding alone may understate banks' roles in sustaining growth. Because of their familiarity with high-tech companies and the profits they made from successful high-tech companies in the 1960s, the Boston banks are more likely to lend to such ventures--giving Boston a further edge over other cities as a startup location .
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