| Although there is some similarity between venture | | | | rich or supportive family that provided venture capital |
| capitalists and some ancient forms of financing, the | | | | for projects that were breaking new technological |
| true narrative of venture capital began in the years | | | | ground. Since traditional lending institutions tended to |
| following World War II. | | | | shy away from such risky investments, Congress |
| There was a form of partnership arrangement | | | | had recognized a need to encourage and enable the |
| practiced in medieval Islamic society that bears a | | | | flow of investment capital into these areas to help |
| striking resemblance to the current system of | | | | keep the economy growing and the country |
| venture capital investment. Most experts, however, | | | | technologically competitive. |
| would tend to begin a discussion of venture capital | | | | The dawn of the Information and Technological |
| with the formation of the American Research and | | | | Revolution of the later part of the last century |
| Development Corporation in 1946. AR&DC was | | | | provided a solid growth medium for venture capital. |
| founded by General Georges Doriot, a French born | | | | The emergence of Silicon Valley in California made |
| and Harvard educated businessman who had recently | | | | San Francisco into a center for venture capital |
| left the United States Army with the rank of General. | | | | investment. The venture capital industry has been |
| Doriot's AR&DC made an investment of $70,000 | | | | extremely sensitive to stock market activity due to |
| in 1957 to provide venture capital for the startup of | | | | the fact that their investments are usually in the |
| Digital Equipment Corporation. This $70,000 | | | | form of stock ownership. The stock market decline |
| investment ultimately grew to have a value of $355 | | | | of 1974 was a big set back for venture capital firms. |
| million dollars. When Digital when public in 1968, it | | | | The dot com boom of the late 1990's followed by |
| provided AR&DC with an annual rate of return | | | | the NASDAQ and technological bust of the early |
| of 101%. This amazing success story provides, in | | | | 2000's was another roller coaster ride for venture |
| some ways, the business model goal of the venture | | | | capitalists. However, today the industry is rebounding |
| capitalist. | | | | and moving back slowly to those early levels of |
| The Small Business Administration became involved | | | | investment activity. As always, venture capital is |
| with the venture capitalist idea when Congress | | | | financing risky, but necessary for important advances |
| passed the Small Business Investment Act of 1958. | | | | at the very cutting edge of business. Today, |
| This Act allowed the licensing of Small Business | | | | alternative fuels and alternative forms of energy |
| Investment Companies, called SBICs. In the years, | | | | seem to be the areas where the next Digital |
| prior to World War II, it was mostly the eccentric | | | | Equipment Corporation might emerge. |