By Mark Higgins

“ You can ’ t really understand what is going on now unless you understand what came before .”

— Steve Jobs , founder of Apple Computer

When people discuss venture capital , the conversation often involves famous venture firms , such as Sequoia Capital , Kleiner Perkins , Venrock and a handful of others . These firms were instrumental in financing many of America ’ s greatest technology companies , including Apple Computer , Intel , Genentech and Google . But investing in early-stage ventures has a much richer history than is often assumed — a history that includes the funding of the perilous but lucrative whaling voyages in the early 1800s .

This article seeks to educate readers on the fundamental dynamics of venture investing by recounting its evolution over the past 200 years . Several insights may prove timely because the US venture capital industry appears to have entered a period in which the proliferation of new market entrants and incessant inflows of institutional capital have placed significant downward pressure on returns . As such , trustees would be wise to consider whether these returns still warrant the risk .

Funding Ventures on the High Seas

In the mid-1800s , Catholic missionaries were busy sowing the seeds of fruit trees that would blossom into bountiful orchards spanning California ’ s Santa Clara Valley . A hundred years later , many of these orchards were uprooted to make room for America ’ s burgeoning tech industry , and the Santa Clara Valley was henceforth referred to as “ Silicon Valley .” A handful of premier venture capitalists provided the seed funding for many of Silicon Valley ’ s greatest ventures , but

“ While some vessels on their voyages have made but poor returns … others have done extraordinarily well and brought in fortunes to those investing in them .”

— Alexander Starbuck ( 1878 )

these firms were non-existent in the 1800s . Instead , the 19th century version of the venture capital industry was situated more than 2,500 miles to the east . The epicenter was New Bedford , Massachusetts , where a tight-knit community of Quakers quietly amassed fortunes from the whaling industry .

14 FINANCIAL HISTORY | Fall 2023 | www . MoAF . org