Creative Capital

Back in 1992, at age 22, I started my first company. Before cellphones. Before the Web. Before broadband. Before everyone had an email address. Before the Lean Startup.

But what I (and others) took for granted was a system of Angel investors and venture capitalists. I didn’t think twice back then where that system came from. I didn’t consider whether the same system funded Edison, Carnegie, and Ford back when they were young entrepreneurs.

The answer is no. Venture capital as we know it today started in the 1950’s. It started with an immigrant from France looking to America after the destruction of Europe during WWII.

George Doriot (dor-ee-oh) was the key to modern venture capital.

Assistant Dean at Harvard, he helped create Harvard Business School and their case study teaching method. Professor at HBS, for decades with the most sought after class. Founder of INSEAD, the premier business school in France. General in the U.S. Army during WWII. President of a dozens companies (often many at the same time) all while teaching.

Creative Capital is one of Doriot’s biographies, focusing on American Research & Development, the first venture capital company, which he ran as President for most of its existence.

I picked up this book searching for an answer to one simple question: Who came up with the idea of putting aside 20% of a startup’s equity as a pool of stock options for employees.

Woody Howse, Seattle’s first venture capitalists didn’t know the answer, but he said it probably dated back to Doriot, as the professor not only ran the first VC company, but also taught many of the first generation of venture capitalists.

This book didn’t answer that question, but it answered a lot of others. It was an excellent read for anyone interested in the history of venture capital. For those who want a primer and for those topics not covered by this particular book, I created a new category on this blog and will be rolling out a series of posts on the history of venture capital and the assumptions we all take for granted that were in reality inventions by the early VCs.

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