Watt had no personal knowledge of woolen mills but there were in Oregon, at the time, two millwrights who understood the subject and were anxious to be employed in such an enterprise. As the subject was canvassed the interest grew. In 1855, therefore, articles of incorporation were drawn up for the erection of a woolen mill to be located somewhere in the Willamette Valley. Subscriptions to stock were sought and offers of bonuses solicited. The articles provided that the capital stock should be $25,000, and that when $9,000 was paid in a meeting should be held to decide upon the location of the mill. A committee of five was appointed to take charge of the matter. The meeting to decide upon location was held at Dallas when the requisite amount of stock was paid in. It was a meeting of considerable importance, as much rivalry had arisen regarding the location. One party wished it to be placed on the Luckiamute, west of the Polk County hills, and the other desired it to be located at Salem on the east side of the hills. Lively work had been done; the party favorable to the Salem location had secured a bonus worth about $7,000 and had control of the voting stock. Considerable scheming, preliminary to the vote occurred, and when it was taken "you could hear a pin drop," says Watt. The result was favorable to the Salem site, and plans were begun for the construction. Within a few weeks all the stock was paid in and the company had possession of a piece of land for the mill. A board of five directors was elected and orders were given to begin the work. The water power was to be brought from the Santiam River by means of a ditch. The task was not great as the bed of Mill Creek could be used and the water power was soon secured. An agent was sent East to purchase the machinery and by the time it arrived the building was ready for its occupation. Before the machinery was placed the introduction of this new industry was the occasion of a splendid ball in the spacious building. It was one of the most brilliant social affairs ever held in Oregon up to this time. Among the list of those present from all over the territory were dignitaries of state, including the Governor; dignitaries from the army, including Lieut. Phil Sheridan, and as Watt himself says, "even dignitaries from the church were present." Watt was an inveterate lover of song and dance, and would go many miles at any time to engage in such festivities. He was therefore in the height of his glory, which was not even destroyed by the fact that his chosen lady, Miss Lyons, beautifully adorned in a gown of blue velvet, with golden stars, was led to the dance by the Governor. Indeed, he had no reason to be uneasy, for the understanding between them was good, and a few years later, 1860, he was married to her, dressed for the occasion in a suit of wool made in the mill which he had done so much to establish.