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
- 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.
Follow up links:
- Early origins of risk capital, https://www.businessinsider.com/andreessen-horowitz16-definitions-on-the-economics-of-vc-2016-9?r=US&IR=T
- Tom Nicholas book, https://www.hup.harvard.edu/catalog.php?isbn=9780674988002