TLDR:
- The venture capital industry has its roots in the risky and high-reward world of whaling ventures in the 18th and 19th centuries.
- Charles W. Morgan, a Quaker born in 1796, is considered the prototype of a venture capitalist in the United States.
Charles W. Morgan, a Quaker born in 1796, is considered one of the first well-documented venture capitalists in the United States. He was a partner at a risk-hungry Philadelphia mercantile firm and played a significant role in shaping the venture capital industry as we know it today.
The venture capital industry as we know it today has its origins in the risky and high-reward world of whaling ventures in the 18th and 19th centuries. Whaling expeditions were expensive and dangerous, but when successful, they yielded significant returns that could offset the losses from failed expeditions.
New Englanders, in particular, became known for their innovative ship designs, talent networks, and willingness to take on remarkable risks in the whaling industry. By the mid-19th century, almost 75% of the nine hundred whaling ships worldwide were American registered.
Tom Nicholas makes the case in his book VC: An American History that the venture capital industry we know today has its deepest origins in the world of whaling. Whaling voyages were long-haul, risky endeavors that required due diligence and pattern recognition, much like modern-day venture capital investments.
Charles W. Morgan, known for his meticulous record-keeping and secrecy, financed and organized long-term whaling ventures in a manner that mirrors the work of venture capitalists today. He kept detailed logbooks to track successful expeditions and best hunting grounds, similar to the due diligence process in modern venture capital.
In comparing historic whaling industry returns to the net IRR of VC funds, Nicholas found similarities in the risk and returns of both industries. While the challenges faced by whalers in the 19th century were different from those faced by modern-day founders, the underlying principles of risk-taking and potential for high rewards remain constant.
Despite the brutal and unpredictable nature of whaling, the industry provided a model for risk-taking and innovation that has influenced the development of venture capital as a vital part of the American economy. Charles W. Morgan stands as a historical figure who played a crucial role in shaping the early foundations of the venture capital industry.
