Instructions
Squirtle
Go to Vermilion City.
Find the Pokémon gym, and defeat gym leader Surge in a Pokémon battle. Surge uses electric Pokémon, so counter with ground-type Pokémon such as Cubone and Nidoking that are invulnerable to electric-type attacks.
Show the newly earned Thunder Badge to the police officer in the middle of the city and you will be given a Squirtle.
Bulbasaur
Level up the Pikachu you were given at the beginning of the game. Keep it in your party, let it fight in plenty of battles, prevent it from fainting and use many items on it. All of this will increase Pikachu's happiness.
Go to Cerulean City.
Talk to the girl standing next to the Bulbasaur East of the Pokémon Center. If you have made Pikachu happy enough, she will give you her Bulbasaur for taking such great care of Pikachu.