The earliest instances of the initial financing of groundbreaking enterprises were primarily found in America. The first major modern communications technology, the telegraph, was financed by a small group of wealthy investors. In 1845, Samuel Morse hired Andrew Jackson’s former postmaster general, Amos Kendall, as his agent for locating potential buyers of the telegraph. Kendall had little trouble convincing others of its potential for profit. By the spring of 1845, he had found a small group of investors who committed $15,000 to form the Magnetic Telegraph Company.
One of the most famous inventors of all time also got his big financial break from two wealthy individuals. In the early 1870s, Alexander Graham Bell, a Scottish immigrant who developed an early fascination with the science of acoustics, became a professor of Vocal Physiology and Elocution at the Boston University School of Oratory, a school for mute children. In addition to teaching, Bell was driven by a desire to cure his mother’s deafness and thus continued his research in an attempt to find a way to transmit musical notes and speech.
During the fall of 1874, Gardiner Hubbard and Thomas Sanders, parents of two of Bell’s students, found out that Bell was working on a method of sending multiple tones on a telegraph wire using a multi-reed device. Sanders, a successful leather merchant, began to underwrite some of Bell’s expenses. After hearing about Bell’s experiments, Hubbard, a wealthy patent lawyer always looking for opportunities to improve things and make a dollar in the process, saw the opportunity in developing an “acoustic telegraph”— in other words, a telephone. He drafted a partnership agreement between Bell, Sanders, and himself and began to financially support the inventor’s experiments.
On March 7, 1876, the U.S. Patent Office issued a patent to Bell covering the “method of, apparatus for, transmitting vocal or other sounds telegraphically … by causing undulations, similar in form to the vibrations of the air accompanying the said vocal or other sound.” Bell and his backers Hubbard and Sanders offered to sell the patent to Western Union for $100,000.William Orton, Western Union’s cigar-chomping robber baron president, balked, countering that the telephone was nothing more than a toy. But after Hubbard organized the Bell Telephone Company in June of 1877 and hundreds of businesses began leasing the phones, the unscrupulous Orton ignored Bell’s patents and began to manufacture a telephone that incorporated the inventions of Thomas Edison and other inventors. Western Union had the considerable advantage of piggybacking on the company’s already existing telegraph network, easily stringing telephone wires to the telegraph poles.
By this point, Thomas Sanders had poured $110,000 into Bell’s work and had not seen a cent in return. And Bell Telephone was facing a serious cash crunch and a vicious illegal competitor. So Hubbard did the only thing he could to save the company: he launched a lawsuit against Western Union, accusing the company of patent infringement. It was a classic David and Goliath battle, the first major lawsuit of the age of modern communications. “The position of an inventor is a hard and thankless one,” wrote Bell to his wife during the middle of the trial. “The more fame a man gets for invention, the more does he become a target for the world to shoot at—while no one thinks the inventor deserving of pecuniary assistance.”
After company lawyers finally convinced Bell to provide his expert testimony, Western Union lawyers knew they stood no chance of winning the case. On November 10, 1879, Western Union signed an out-of-court settlement transferring at cost all telephones, lines, switchboards, patent rights in telephony, and any pending claims to Bell Telephone. In return, Bell Telephone agreed to stay out of telegraphy and to pay Western Union 20 percent of all telephone receipts until Bell’s patents expired. Now that Bell Telephone owned a monopoly on telephone service, its stock zoomed from $65 per share before the suit to more than $1,000 following the settlement. The humiliating defeat led Orton to admit that if he could snare the Bell patent for $25 million it would be a bargain.
In late-nineteenth-century Europe, another innovative new technology was poised to explode—the horseless carriage. With the backing of the family fortune, a young member of the Peugeot clan seized on the opportunity—a move that would ultimately catapult the family’s company into the ranks of the world’s leading conglomerates. Born in 1848, Armand Peugeot exhibited an interest in machines from an early age and went on to study engineering at the prestigious École Centrale Paris. After graduating from the École, Armand visited Leeds, then the heart of manufacturing in Britain, and came back convinced that the future of horses as a means of transport was not very bright.
In the early 1880s, Armand first pushed the family into bicycle manufacturing. Later in the decade, he teamed up with Leon Serpollet, a young engineer who had built a reputation as an expert in steam engines. In 1887, Serpollet had caught Armand’s attention when he built a single-cylinder steam engine almost entirely out of scrap parts and fitted it to a pedal tricycle. Armand subsequently provided financing to Serpollet to create the world’s first steam-powered tricycle. In 1889, at the World’s Fair in Paris, Serpollet introduced his invention, making Peugeot one of the pioneers of the proto-automobile.
At the same World’s Fair, Armand noticed the debut of another new machine that he thought showed even greater promise than the bicycle. The German engineer Karl Benz had introduced his Motorwagen Model 3—a carriage with wooden wheels and a gasoline-powered engine. Today, thanks to the 1886 Motorwagen patent, Benz’s machine is officially recognized as the world’s first automobile.
This was the hothouse of innovation that Auguste Doriot stumbled back into in 1889 when he returned to civilian life and the Peugeot factory. Every successful man can usually point to a mentor that helped guide his career. For Auguste Doriot, that man was Armand Peugeot. Armand recognized Auguste’s mutual fascination with machines and with the future, and, shortly after his return to the factory, sent Auguste on a series of apprenticeships in order to learn the latest techniques in automobile design and engineering and gas-powered “explosion” engines, as they were called at the time.
In 1891, Auguste finished his apprenticeships and returned to a new Peugeot factory in Beaulieu. He immediately set about working with the top engineer of the company, a gentleman named Louis Rigoulot, and began installing Daimler engines into the first Peugeot cars. “The beginnings were rather arduous,” said Auguste. “We had no machines except for those which served the manufacture of bicycles.” But despite numerous obstacles, the two men built several successful prototypes of a four-wheeled “quadricycle.” Armand rewarded Auguste’s hard work and ingenuity by promoting him to foreman of the factory. But Armand had another important assignment for Auguste, one that would elevate his stature and name to an even more formidable plane.
In September of 1891, Pierre Giffard, editor-in-chief of Le Petit Journal, a well-known French newspaper, staged the first Paris-Brest et Retour—a grueling 750-mile bicycle race that took riders from Paris all the way to Brest, at the tip of Brittany, and back. The race was a media coup for Le Petit Journal, generating a significant circulation increase.
Inspired by the success of this event, Armand Peugeot struck upon a brilliant idea. To create a successful business, car makers had to first prove that these strange machines were a reliable, safe, and effective means of transportation. The best way to prove such matters, Armand realized, was through a car race. So Armand asked Giffard if he could enter his quadricycle into the next retour. Giffard agreed and instructed the race agents to record the trip of the quadricycle as well as those of the bicycle racers. This ensured Peugeot would have independent proof of his car’s passage—and reliability.
Charged with the success of this mission were Rigoulot, the engineer, and Doriot, the foreman who doubled as the driver of the quadricycle. In these days of global jet travel, the difficulty of such a journey is hard to imagine. A trip of this length in a car had never before been attempted. The previous distance record was set