This realm of direct commerce could be called Venture World. Since extending its focus to direct-to-consumer retail, venture capital has come to fund delivery services, financial services, car companies, shoe companies, office real estate, leisure real estate, coffee brewers, beer brewers, smoothies, razors, trousers, speakers, scooters, mattresses, toothbrushes, socks, and underwear. Such financing seemed especially suited to proprietary technology, which was expensive, hard to seed into the market, and yet, if things went right, extremely lucrative. Once, venture capital was sought by risky startups needing lots of up-front cash, whether for research and development (Genentech had to fund academic-grade research before it had a product to bring to market) or for essential leaps in scale (Uber is appealing only if it’s big enough to get a car to you quickly).
Yet most of us now have daily contact with the world of venture capital, because its sphere of influence has exploded. Funds typically have at least a million-dollar buy-in, available only to accredited investors, so unless you’re the Monopoly Man you’ll be unable to put your daughter’s college fund into some of that. Much as a private table at the Casino de Monte-Carlo is off limits to those who can’t pony up for chips, venture capital is off limits to most of us as a direct investment. In practice, it has become the distinguishing big-business engine of our time. In principle, venture capital is where the ordinarily conservative, cynical domain of big money touches dreamy, long-shot enterprise. It funded Google, Amazon, and Facebook before any of them turned a profit. Occasionally, though, there is a wild success, and, since the nineteen-seventies, such successes have transformed American business. They, too, make predominantly bad bets: about eighty per cent of venture investments don’t pay off. They take a management fee, drop a bit of their own money into the mix, and, like the whaling agents, promise expertise. Venture capitalists fill these cash pots, or funds, with money from large-scale investors-foundations, pension funds, university endowments, and other passive contributors. In “V.C.: An American History,” the Harvard Business School professor Tom Nicholas sees whaling as the first practice of what we now call venture capital: collecting large pots of money and using it to invest in young companies, while also getting involved in their management, in the hope of guiding growth and generating huge returns. A lucky outing, though, could return with a hundred and fifty thousand dollars in goods, a fortune several times the outlay, and for many investors this was enough to justify the risk. In most cases, their efforts were fruitless: data from a couple of whaling ports in Massachusetts in 1858 suggest that fully two-thirds of returning expeditions were unprofitable another study found that a third of the whale ships in the New Bedford fleet never made it home. Specialized agents in whaling-industry towns invested their own money, pooled cash from rich investors, did due diligence, and worked with captains to develop winning strategies and to plot uncrowded routes. Dispatching a whaling voyage cost between twenty and thirty thousand dollars, a small fortune in the mid-nineteenth century, and an industry emerged to get these expeditions off the dock. The people on the boat, however, weren’t the largest earners. In 1853, the Times described the whaling town of New Bedford, Massachusetts, as “probably the wealthiest place” in the United States.
A captain with some skill could spend a few years leading expeditions and retire rich. A captain’s cut of the takings ranged from five to twelve per cent a first mate’s, three to seven per cent and so on, down the line. But what then?”įor those who made it through the earthly trials, there could be riches in tow. “On the eve of a Nantucket voyage, I regarded those marble tablets, and by the murky light of that darkened, doleful day read the fate of the whalemen who had gone before me,” Ishmael says, in “Moby-Dick.” “Yes, there is death in this business of whaling-a speechlessly quick chaotic bundling of a man into Eternity.
If it succeeded, it had to approach the whales in silence, with a small craft strike with a harpoon stay afloat, intact, engaged, and oriented as the poor creatures thrashed about, sometimes for miles through iceberg-laden water row back to the main ship with the carcasses harvest the baleen and render the oil and survive the journey home. An expedition first needed to find whales in the vastness of the oceans. The odds of success here were, by almost every measure, poor. For a certain sort of nineteenth-century person-the sort with high risk tolerance and little revulsion to brutality-a natural career lay in whaling.
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