By the early twentieth century, early-stage venture financing remained stuck in a relatively undeveloped state. Most entrepreneurs still got their start by raising money from friends and family, wealthy associates, or, if they were fortunate like Auguste, they were able to take money out of their own savings. Some large American banks occasionally took a chance on a new and unproven technology, but they only put their capital behind established figures with a proven track record. And they rarely, if ever, took a hands-on role and helped to nurture a company. In his later years, Georges Doriot realized how critical such nurturing was in determining the success of a new venture. “I don’t know anyone on Wall Street who ever built a company,” said Doriot. “They simply furnish money, and that’s the least important part of it.”
In 1878, for example, J. P. Morgan and members of the Vanderbilt family helped finance the creation of the Edison Electric Light Company in New York City. By that time, Thomas Edison was arguably the world’s most famous inventor, having sold the patent rights of his quadruplex telegraph to the Atlantic and Pacific Telegraph Company for the princely sum of $30,000. Edison used the money to expand his research laboratory in Menlo Park, New Jersey, considered the world’s first industrial research lab.
For the most part, though, banks refused to finance innovation. Instead, more often than not they ended up reinforcing existing power structures. Nowhere is that more apparent than in the evolution of the House of Morgan, which in the late nineteenth century took over the title of the world’s most powerful bank from the House of Rothschild. Like the Rothschilds, Morgan made his bones by lending large sums of money to governments.
The ultraconservative strategy of J. P. Morgan started during the Panic of 1873, when European investors lost $600 million in railroad stock investments. Petrified by all of the railroad bankruptcies, Morgan decided to limit his future dealings to only the most established and safest companies. He despised risk, wanting only sure things. “The kind of Bonds which I want to be connected with are those which can be recommended without a shadow of a doubt, and without the least subsequent anxiety, as to payment of interest, as it matures.”
The conservatism of modern banking deepened during the recession of 1893. And it was J. P. Morgan who led that transformation. Overwhelmed by massive debt and overbuilding, more than a third of the nation’s railways fell into bankruptcy. The collapse of the railroads triggered a depression that wiped out fifteen thousand commercial firms, leading to class warfare and a bloody round of strikes. Over six hundred banks failed and capital dried up when people started hoarding their precious dollars. English investors implored J. P. Morgan to save their shirts and bring order to the chaotic industry.
Morgan’s solution was to consolidate the industry under his control. Virtually every bankrupt railroad east of the Mississippi—including the Erie, Chesapeake and Ohio, Reading, New York Central, Southern Railway, and many others—passed through such a reorganization, or morganization, as it was dubbed. One-sixth of the nation’s trackage was morganized, allowing J. P. Morgan to ascend to a plateau higher than any other businessman had ever known. The amount of power accrued by Morgan is hard to overestimate. After all, railroads were the primary blue chips of the stock market, then accounting for 60 percent of all issues on the New York Stock Exchange. Utilities and industrial companies were considered too speculative an investment for insurance companies or savings banks.
As a further protection of his interests, Morgan transferred a majority of the voting stock of the railroads into “voting trusts.” Of course, trusts were merely a camouflage for an unprecedented concentration of power, usually equating to Morgan and a few of his cronies running a railroad for a five-year period.
Bankers across the United States embraced Morgan’s consolidation of the railroad industry as the business model of choice. In the first great wave of American mergers, consolidation was propelled by the shift from a domesticoriented economy toward international expansion. The number of mergers jumped from sixty-nine in 1897, to more than twelve hundred by 1899. By 1901, a new class of corporate giants dominated a long list of industries, including sugar, lead, whiskey, plate glass, and coal.
But the most impressive (or impressively frightening) act of consolidation was the formation of U.S. Steel, led by J. P. Morgan. Fearing a repeat of the railroad debacle, with overcapacity and price wars, Morgan proposed a steel trust that would control more than half of the business. Pulling an allnighter in his library, Morgan convinced some of the industry’s leading players, including Andrew Carnegie and John D. Rockefeller, to agree to the deal. The new corporation was capitalized at a staggering $1.4 billion—the first billion-dollar corporation in history. Morgan’s lesson was clear: competition was a destructive, inefficient force that could be cured through large-scale combinations. Venture financing had no place in this increasingly anticompetitive picture.
On August 11, 1906, in their new home in Neuilly-sur-Seine, Auguste and Camille’s second child, Madeleine Georgette Doriot, was born. A photograph taken in 1908 shows an adorable girl standing on a lawn chair in front of a hedgerow, posed beside her smiling nine-year-old brother Georges, who has his arm wrapped around her waist. Georges and Madeleine, nicknamed Zette by her family, formed a close bond. By age nine, when that photo was taken, Georges had grown up to be a healthy boy, skinny yet tough. “I remember my youth, so to speak, as being very close to my family,” recalled Georges. “I loved my sister and had complete devotion and admiration for Father and Mother.”
In 1908, Doriot and Flandrin brought in the brothers Alexandre and Jules Rene Parant as their new partners. The triumvirate of families was set. The company was officially renamed D.F.P., standing for Doriot, Flandrin, and Parant. For their icon, they chose a greyhound dog galloping in full stride. For their slogan, they selected two simple yet strong words: fidele and vite, which translates to Trust and Speed. By highlighting those words, D.F.P. declared its strategy: D.F.P. cars would be fast and reliable.
The partners moved the factory farther west to a growing industrial town called Courbevoie, on the other side of the Seine River. And they began selling bigger cars, including two cars with 2.4 and 2.8 liter four-cylinder engines from Chapuis-Dornier. On March 20, 1908, D.F.P. held a public offering of stock in their new company. This was likely a significant milestone for such a young company. In those days, most new companies took five to seven years before raising money from the public. With an IPO after just three years of operation, its reputation, finances, and growth prospects must have been solid if not superb.
By 1911, D.F.P. began to manufacture cars with even bigger six-cylinder engines. But 1912 was when everything came together for this young group of entrepreneurs. That year, the company started making their own engines. More importantly, D.F.P. secured a major distribution and marketing deal when Walter Owen Bentley, known as W. O., and his brother, H. M., acquired the rights to sell D.F.P. motor cars in the British Commonwealth. An apprentice railway engineer who would become one of the most well-known racers of his day, W. O. founded Bentley & Bentley with his brother to market the French cars. The Bentley brothers imported the chassis of the cars and farmed them out to coachbuilders in London to gussy up their finish.
The Bentley brothers’ timing was propitious. In 1912, D.F.P. introduced what turned out to be its most popular seller, the D.F.P. 10/12 model. Quickly after that came the 12/15 model. Its pressure lubrication, three-bearing crankshaft and four-speed gearbox produced a car that could zoom up to 55 miles per hour. The Bentley brothers entered this car into competitions, and by the end of 1913 a customized version was timed at nearly ninety miles per hour. But the Bentley brothers were not satisfied.
In 1913, working with their French mechanic, they designed a new engine that contained aluminum alloy pistons, a tuned camshaft, twin-spark ignition, and an efficient V-shaped radiator. In 1914, D.F.P. launched a car with the new engine called the 12/40 “Speed” model, built