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Updated February 11, 2023Contrary to popular belief, the earliest forms of venture capital can be found long before the whaling industry took off. Other popular maritime money spinners, more commonly known as the transoceanic spice, tea, and slave trades, were instrumental in the creation of several innovations that shaped both modern venture capital and the systems it is inherently reliant upon, such as insurance, productization, leveraging equity and debt, economies of scale, high-risk, high-reward financing, and many more.
Venture capital has been widely accepted as existing in one form or another since the earliest forms of commercialization. Scholars, such as Harvard historian Tom Nicholas in his VC: An American History, have accredited the first venture capital style investments to whaling, the transatlantic voyage of Christopher Columbus, and Georges Frédéric Doriot, who is seen as being the first venture capitalist to raise money from non-family sources—believing there was a strong business case for investing in entrepreneurs with the vision and acumen to create a future not yet imagined. Among each slightly varying narrative about how venture capital has evolved through the ages, from the financing of whaling ships that were to set sail on perilous waters, carrying precious cargo from one port to another and emblematic of Moby Dick; to the underwriting of risky expeditions leading to the discovery of new territories; and the founding of Doriot’s American Research and Development Corporation (ARD) in 1946, the belief in an entrepreneur to execute the completion of tasks in which there is a high probability of failure and the promise of outsized returns if successful is the golden thread running through a complex and intricate tapestry of events.
Most fascinating is that the invention of venture capital is often ascribed to Americans—despite Doriot being French—with much of the activity being focused on post-World War II exploits. The “VC is an all-American invention” narrative essentially negates the part that the Europeans, mainly the British, played in the formation of venture capital and sweepingly omits the transatlantic slave trade, which was the predecessor of the whaling industry and the foundation for the insurance and banking industries to which venture capital has been intrinsically linked and remains heavily reliant upon today.
Given the legacy of these financial industries, it is no wonder that the ethnic wealth gaps persist to the extent they do across the globe. The inequities that persist in society and the economy today can be redressed through the fairer distribution and allocation of venture capital and the potential for higher returns for the investors who choose to pursue the dividends that diversity offers.
This volume does not focus on the apportion of blame or reparations; that is a matter for a different forum. It seeks the commitment of those currently holding the purse strings, who have invariably profited off the backs of Black and Brown bodies, to make access to venture capital fair and inclusive going forward.
If and when, for instance, Black and Latinx people enter the venture capital market, and they are unable to progress beyond positions in which they have no decision making power or access to carry, are we recreating patterns where these groups work for the system without being able to profit from it? Black and Brown funds across the globe recount stories of being unable to close their funds. At the same time, their white male and, in more and more instances now, female counterparts regale in the successes of well-funded and well-supported ventures that provide returns.