The History of Venture Capital

ivelina.biz

4 min readFeb 9, 2024

It’s partly thanks to venture capital that the tech world has seen such rapid innovation over the past few decades.

Since 1974, 42% of companies that went public have had venture backing.

But how did venture capital become a “thing” and when did it start?

I really wanted to know, so I recently looked into the origins of venture capital.

I wrote a whole article about it, but here’s a quick overview:

⚫ 1492

It goes WAY back — as far back as when Christopher Columbus got sponsored by Queen Isabella of Spain to voyage to the Americas (after many other monarchs turned him down).

In return for funding his high-risk venture, she got 90% of the profits after he accidentally discovered the West Indies and propelled Spain into a Golden Era of exploration.

⚫ 1800s — Investing in Whaling

American whaling agents had figured out how to finance and make money from these risky ventures.

⚫ 1893 — J.P. Morgan & Electricity

J.P. Morgan was a huge believer in Edison’s lighting tech and placed heavy financial bets on him.

His investment turned out to be extremely lucrative as General Electric went on to become one of the original 12 publicly-traded companies on the Dow Jones.

⚫ 1946 — ARDC

ARDC is formed and starts sourcing funds from institutions like universities, insurance companies, mutual funds, and investment trusts.

It’s no longer only wealthy families such as the Vanderbilts and Rockefellers providing risk capital.

⚫ 1957 — Silicon Valley

Sand Hill Road in Palo Alto rose to fame as some of the most prestigious VC firms started to pop up: Sequoia Capital, Kleiner Perkins, and New Enterprise Associates, etc.

⚫ 1990s — The Internet

Hello Google, Amazon, Yahoo, Netflix, PayPal, eBay, etc.

It was a glorious time to be a tech entrepreneur and a VC investing in tech.

⚫ 2000s — Dot Com Bubble and a New Era of Celebrity Entrepreneurs

The dot com bubble explodes.

VCs shifted the way they invest, and focused their portfolios and funds on stages and industries.

This era gave birth to companies like Airbnb, Uber, Facebook, Reddit, and Dropbox.

Accelerators were popping up everywhere. Y Combinator, the most popular accelerator for startups (which backed companies like Airbnb and Dropbox) is formed in 2005.

For the first time ever, entrepreneurs such as Mark Zuckerberg and Jack Dorsey held the same celebrity status as movie stars.