Although in writing this book I consulted dozens of books, reference volumes, and research papers, I wish to cite a few sources that stood out. Sustaining the Venture Capital Firm by Patrick R. Liles provided an indispensable overview of the history of American Research and Development. The First Venture Capitalist, a collection of interviews, newspaper articles, essays, and lectures by Doriot, and commentaries on Doriot, edited by Udayan Gupta, provided a superb introduction to the ideas and world of Doriot. I especially relied on The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment Corporation by Glenn Rifkin and George Harrar, for a vivid retelling of the rise of Digital. The Manufacturing Class Notes of Georges F. Doriot supplied an important window into Doriot’s legendary class at Harvard Business School.
The academic literature on venture capital was surprisingly sparse, but I found two research papers that were especially insightful: “Organizing Venture Capital: The Rise and Demise of American Research and Development Corporation, 1946–1973,” by David H. Hsu at the Wharton School of the University of Pennsylvania and Martin Kenney at the Department of Human Community Development of the University of California at Davis; and “Creating Modern Venture Capital: Institutional Design and Performance in the Early Years,” by Caroline Fohlin of Johns Hopkins University’s Department of Economics. Another academic source that provided essential background and context was the unpublished dissertation of Martha Louise Reiner of the University of California at Berkeley’s Department of Economics, “The Transformation of Venture Capital: A History of Venture Capital Organizations in the United States.”
On the publishing end of things, I would like to thank my agent Christy Fletcher for her steadfast support of this project. Without her persistence, this book would never have seen the light of day. Christy was willing to take a chance on a first-time author, and I am forever grateful to her for that vote of confidence. I would also like to thank my editor Jacqueline Murphy. Before I started this project, I had been warned by many authors to not expect any editing from my “editor.” Book editors are all about selling and marketing, friends and colleagues told me. Jacque, however, is keeping alive the tradition of book editing, striking the perfect balance between providing helpful feedback while not micromanaging the manuscript. Jacque delivered excellent advice that sustained me through a long and complicated task. I am also grateful to my colleagues at BusinessWeek: Jon Byrne, especially, for approving my book leave; Steve Adler, Frank Comes, and Dan Beucke for backing me all the way; and Steve Hamm, Steve Baker, Heather Green, Peter Elstrom, Peter Burrows, Arik Hesseldahl, and Catherine Holahan who kindly offered their counsel and supported me in so many ways.
My parents, Leslie Schoengold and Dr. Hermenegildo Ante, and my two sisters, Nicole and Allison, were always encouraging and inquisitive. I owe extra thanks to my father, who taught me a love of learning and of books, which goes back to the time when I was around seven years old and he bought me the entire collection of the 15th edition of the Encyclopaedia Britannica. My grandparents expressed enthusiasm throughout the project, which lifted my spirits. I trace my love of words and language in large part to the epic games of Scrabble I played with my grandmother when I was a youngster. Big props also go to my close friends Jamie Bernardin, Marc Ench, Darren Gordon, Alan Siegel, and Steven Taub, for making me laugh and keeping me sane during the inevitable spells of doubt and darkness that accompany the writing of a first book.
I owe the biggest thanks to my lovely wife, Erin, for bringing her sensitivity, thoughtfulness, and intelligence to this story. I constantly bounced ideas off of her and she always offered a constructive and helpful suggestion. And whenever I needed to spend an extra day or two cranking out some copy, she would always help me carve out the time and space to get the job done. Finally, I want to thank my beautiful daughter, Justine, who was nice enough to let me keep my computer and voluminous research notes in her bedroom while I finished the book. I will never forget when I put her on my lap and she started banging away at the keyboard.
INTRODUCTION
Venture capital has existed in one form or another since the earliest days of commercial activity. The Spanish monarchy and Italian investors who financed the transatlantic voyage of Christopher Columbus were, in a sense, venture capitalists. But it wasn’t until the second half of the twentieth century that venture financing became a professional, large-scale industry. And the man who led that transformation was Georges Doriot.
I can’t recall exactly when I first came across the name of General Georges Frederic Doriot (pronounced door-ee-oh) but I do know that in 2002, when I looked into the sparse literature on the history of venture capital, his name kept popping up. I found a bunch of newspaper and magazine profiles, a chapter on him in a book or two, and a short film, but no full-length biography.
“He is the founder of the modern VC industry, but there’s been remarkably little written about him,” says Josh Lerner, a professor at Harvard Business School who specializes in the study of private equity. “He is the first person who basically ran an institutional venture capital fund. And he played a lead role in getting the VC community to see itself as a real industry.”
The venture capital industry began to take shape after World War II on the northeastern seaboard when in 1946 Doriot became president of the first public venture capital firm: Boston-based American Research and Development Corporation (ARD). The famous inventor Charles F. Kettering predicted ARD would go bust in five years. But Doriot proved him wrong over the next twenty-five years, as his firm financed and nurtured more than one hundred start-ups, many of which became huge successes that pushed the frontiers of technology and business. ARD companies led the way in developing computers, atom smashers, medical devices, and new machines that desalinated brackish water. Doriot even backed George H. W. Bush’s first company, Zapata Off-Shore Company. “He was very important because he was the first one to believe there was a future in financing entrepreneurs in an organized way,” says Arnold Kroll, an investment banker at Lehman Brothers who worked with ARD.
Doriot was not a physically imposing fellow but he exuded a magnetic aura. “It was almost like knowing someone like Beethoven or Einstein,” says Charles Dyer, a pilot for Eastern Airlines and Harvard Business School graduate who became close to Doriot in the General’s later years. A wiry man with ramrod posture, Doriot was about 5’10”, with a thin moustache, elegant bearing, and piercing blue eyes. He spoke with a charming French accent that some associates referred to as the “velvet glove.” And he brought a unique style to everything he did—even when smoking his trademark pipe. “As with everything else, he was an artist in selecting tobacco and filling his pipe,” said James F. Morgan, an executive at ARD. “He had a custom-tailored blend of tobacco in the office.” Always impeccably turned out in a suit and tie, Doriot required all of his students in his class at Harvard Business School to dress accordingly. “Sport coats are for newspaper boys and college boys,” he would chide his pupils.
The more I researched Doriot’s life, my fascination with an idea transformed into a fascination with the man behind the idea. Doriot was one of the most charismatic characters I had ever come across. Though I had never met the man, I fell under his spell.
Born on September 24, 1899 in Paris, Doriot was the son of an engineer who helped build one of the first automobiles for the Peugeot Motor Company. When I visited Doriot’s surviving relatives in Paris, I learned that Doriot’s father, Auguste, was also an entrepreneur himself who, in the early twentieth century, launched Doriot, Flandrin, Parant, an innovative car company.
In 1921, Doriot came to America on a steamship. Even though he had no friends or family in the United States, never graduated from college, and dropped out of graduate school, the Frenchman became, arguably, the most influential and popular professor at Harvard University’s Graduate School of Business. Over three generations, Doriot taught thousands of students, many of whom went on to become executives at the world’s top corporations. He called his course