Most businesspeople in the SMB space have heard of venture capital but are unlikely to ever access it or have had much direct experience with it. The overwhelming majority of businesses were initially financed by founders, friends and families, and bank loans etc. But the businesses that have the greatest impact on our lives in recent decades were made possible by venture capital.
The businesses usually funded by venture capital are the technology companies that created astounding wealth. “All of the six U.S. “hot stocks” of the current decade – Facebook, Apple, Netflix, Microsoft, Amazon, and Google, which form the acronym FANMAG – were venture-backed. Tesla and Uber are also pretty hot stuff, despite struggling to make a profit, and they, too, are funded by venture capitalists.”
VC firms didn’t formally come into existence until the end of World War II, but earlier antecedents can be found in the Industrial Revolution with the invention of the spinning jenny (which revolutionized textile manufacturing) and in an activity you might not associate with high tech venture capital: 18th century whaling. Every whaling voyage was a new venture and finding and killing “Moby Dick” was always risky, not only to capital, but life and limb as well).
If you want a short, but excellent summary of the history and workings of this uniquely American financing miracle, check out this short article from the American Business History Center Venture Capital: A History which summarizes the excellent book Venture Capital: An American History by Tom Nicholas.
