
How early American inventors funded their ventures - raleighm
https://rootsofprogress.org/how-early-american-inventors-funded-their-ventures
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jedberg
Skip to the summary at the end for the juicy bits (although the rest was
interesting reading too).

In the summary is this:

"What there doesn’t seem to have been, at least in what I’ve seen so far, is
any kind of structure around early-stage financing. I haven’t seen any formal
networks of angel investors, and nothing comparable to venture capital.
Funding seems very ad hoc, dependent on the circumstance and connections. If
so, then the rise of institutional early-stage funding in the mid-20th century
was a real revolution."

And I think that is the crux of it. Most people back in the day had to find
wealthy people they knew, but there was no "industry" around early stage
financing.

Now there is, which has probably been great for funding ideas that would not
have otherwise been funded, but is also a double edged sword for
entrepreneurs, as the institutions get better and better at extracting as much
value as possible.

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gxqoz
The recent book VC: An American History by Tom Nicholas argues that the
whaling industry in the early 19th century shared many characteristics with
modern VC markets. The profits of whaling vessels had distributions similar to
startups (most were not profitable, a few profitable, a very few delivered
excess returns). Whaling captains were incentivized similar to startup
founders (returns heavily tied to how much whale oil they harvested rather
than a fixed salary). Many of the families that invested in whaling ventures
branched out into other industries like textiles.

[https://www.goodreads.com/book/show/42449471-vc](https://www.goodreads.com/book/show/42449471-vc)

~~~
PakG1
Hah, you remind me of the scene at the beginning of _The Perfect Storm_ where
the owner of the boat explains to Mark Wahlberg's character why he gets paid
so little while George Clooney's character gets paid so much. Compare sailors
working the ship to the grunts working the startup.

~~~
gxqoz
Everyone on board the ship was actually paid a share of the profits. But yes,
there were disproportionate rewards to those at the top, just like in a modern
startup.

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gumby
Researched in a book by L Sprague de Camp! That explains some things in his
fiction.

Though strangely the origin of modern project finance seems to have evaded the
author: seems to have evolved in New England where groups would band together
to fund whaling and slaving missions (yes, abolitionist Massachusetts made a
huge part of its wealth on slave missions and slave mortgages).

These bands were themselves evolved from a European model, in particular
England (later Great Britain), Portugal, and Spain.

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redis_mlc
I read the article, which is kind of clueless. Nice pics, though.

Any history book of Silicon Valley details the origin of organized VC. After
reading that, you can understand the overall context of informality before
that.

Also, saying Tesla was funded by Westinghouse is a strange way to look at it -
his patents were used to create the company in the first place.

If you're interested in seeing those "heavy metal" early inventions in person,
I highly recommend the Henry Ford and Greenfield Village in Michigan:

[https://en.wikipedia.org/wiki/The_Henry_Ford](https://en.wikipedia.org/wiki/The_Henry_Ford)

For a more modern example, Frank Robinson founded Robinson Helicopter in
SoCal, which is the world's largest producer of helicopters by shipments. I
think he self-funded his first R22 prototype, then a local businessman who was
intrigued invested after that:

[https://en.wikipedia.org/wiki/Robinson_Helicopter_Company](https://en.wikipedia.org/wiki/Robinson_Helicopter_Company)

Similar to SpaceX, Robinson had to in-source a lot of components to get the
repeatable, aerospace-level reliability needed.

The R22 and R44 are the dominant helicopters used in flight training, LEO and
newsgathering in the USA and are about 25% of the cost of a Bell helicopter,
so a real game-changer.

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ozten
I wish the article noted that $30k was in which year roughly, and value in
today's currency. Interesting research!

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tzs
That plow was patented in 1797. If the $30k was $30k then, it would be about
$450k now.

I doubt, though, that it was $30k then. Blacksmiths in 1800 on average made
under $1/day [1]. It would be very rare for a blacksmith then to be able to
put $30k toward an invention. (For comparison, $25k/year was the salary of the
President of the United States then).

If the $30k is $30k now, it would have been about $2000 back then. That seems
feasible for a blacksmith to save up in around a decade or so.

[1]
[https://babel.hathitrust.org/cgi/pt?id=wu.89071501472&view=1...](https://babel.hathitrust.org/cgi/pt?id=wu.89071501472&view=1up&seq=65)

~~~
gxqoz
Comparing values in the past to values today is tricky and comes down to
judgement.

"It helps if one understands how the comparators are constructed. They have
two components. The first is prices of a range of goods which the ordinary
person might buy, such as bread, meat, beer or clothing and possibly rent or
the cost of fuel; these are gathered from a range of archives or surveys.
These prices have to be added together in a way which reflects the proportions
which these items formed in the spending of an average person. If – as was the
case in the past – bread accounted for 25 per cent of what the average person
spent, then the price of bread has to have an influence of 25 per cent on the
overall set of prices. This is known, in the jargon, as its ‘weight’ and the
weights add up to 100 per cent. A calculation is then done for each year,
multiplying the price of each good by its weight, adding the results together
and finally dividing by the number of items to get an average price of goods
for that year. Then, if the result is a figure of, say, £10 in 1800 but of
£767 in 2017, we say that prices rose between those two dates by about 77
times. Another way of putting it is that £10 in 1800 equates to – or has the
same ‘purchasing power’ as – £767 today."

[https://www.historytoday.com/archive/feature/changing-
value-...](https://www.historytoday.com/archive/feature/changing-value-money)

