Chubby Brain_Logo

History of Venture Capital

Venture capital’s origins hark back to the post-World War II effort to rebuild America’s economy in peace time by wealthy individuals to provide established corporations with the financial means to grow substantially. It’s when private equity as a business concept first emerged, and soon gave way to a subset: VC to encourage entrepreneurs. The first VC firm was American Research and Development Corporation (ARDC). ARDC founder Georges Doriot is regarded as the “father of venture capitalism.”

RDC alumni went on to found leading VC firms, such as Greylock Partners and Morgan, Holland Ventures, the predecessor of Flagship Ventures.

Historical Venture Capital Highlights

  • 1957: ARDC invested $70,000 in Digital Equipment Company (DEC)
  • 1958: federal government establishes Small Business Act
    • Ushered in beginnings of a venture capital industry
    • SBA begins licensing private “Small Business Investment Companies” (SBICs)
  • 1968: DEC’s IPO; ARDC’s original investment worth $355 million
    • ROI of greater than 500x & annualized rate of return of 101%
  • 1970s: Silicon Valley becomes hotbed of VC activity
  • Weekly trade newspaper Electronic News makes first reference of term “Silicon Valley” in 1971
    • Kleiner, Perkins, Caufield & Byers, Sequoia Capital, among others focus on funding technology companies
  • 1980s: VC boom period
    • few dozen VC firms at the beginning of decade
    • more than 650 by 1989
    • amount of money managed by these companies only slightly grew from $28 billion to $31 billion
    • Federal Express, Apple Inc., Cisco, Genentech, Microsoft and Avis gain VC backing
    • VC investments don’t not match ROIs of LBOs
  • Mid-1990s: Internet Boom fuelled largely by VC
    • Companies backed with VC include:, America Online, eBay, Intuit, Macromedia, Netscape, Yahoo!, Sun Microsystems