VC: An American History (Book Review) by Ian Hathaway

Title - Section: Early Risk Capital Investing (early-1800s to 1940s)

TL;DR - Risk capital has roots in the whaling textile industries of the mid-late 1800s/early 1900s.

Helpfulness - 5

Tags - risk capital, long-tail returns, private capital, two and twenty, venture capital

Questions answered:

  • Where/how did early risk capital originate?


  • The whaling industry had similar characteristics to the modern VC industry (organization, long-tail returns, and incentive structures)
  • Two and twenty model may have emerged from whaling expedition incentives.
  • In the mid/late 19th century, wealthy elites invested in textiles and heavy industry.
  • At the turn of the century, private capital-pooling entities started financing high-risk ventures (VC-like).
  • Lack of significant capital and outsized returns differentiated this landscape from modern VC.

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