Unlike decentralized deer hunting, the Rocky Mountain beaver trade was a formalized, top-down industry. Financiers like John Jacob Astor invested capital, ran newspaper ads to hire trappers as day laborers, and built a structured supply chain, mirroring modern venture-backed businesses.
Related Insights
History shows pioneers who fund massive infrastructure shifts, like railroads or the early internet, frequently lose their investment. The real profits are captured later by companies that build services on top of the now-established, de-risked platform.
Before the internet, Greylock partners identified emerging companies by scanning classified ads in newspapers from various cities. Job postings signaled a hiring company, prompting partners to fly out and meet the founders in person, a process that could take months.
The venture capital industry was transformed by two parallel forces post-financial crisis. Crossover funds brought a hedge fund-style intensity and speed, while founder-led firms like a16z brought an entrepreneurial metabolism. This dual injection of urgency permanently changed the pace and nature of venture investing.
Rather than competing in crowded auctions, elite private equity firms pursue a differentiated "executive new build" strategy. They partner with proven operators to build new companies from scratch to address a market need, creating proprietary deals that other firms cannot access.
In the late colonial period, white-tailed deer skins were the second-largest commodity by economic value exported from the colonies, surpassed only by rice. This highlights how integral the wildlife trade was to the early American economy, supplying European markets with buckskin for clothing.
Major technological shifts create new industries in unpredictable ways. The spreadsheet automated manual financial modeling, revealing massive inefficiencies in companies. This enabled private equity firms to acquire businesses, streamline operations using this new tool, and extract value, effectively birthing the modern PE industry.
An investor's career journey from 'cool' industries like film financing to 'boring' ones like construction software reveals a core truth: the fundamental principles of building a business are consistent across all sectors. Passion for innovation and business models, not industry hype, uncovers the best opportunities.
Unlike operating companies that seek consistency, VC firms hunt for outliers. This requires a 'stewardship' model that empowers outlier talent with autonomy. A traditional, top-down CEO model that enforces uniformity would stifle the very contrarian thinking necessary for venture success. The job is to enable, not manage.
The emergence of venture capital as a major asset class was unlocked by the new ability to mathematically measure and price risk. Similarly, the current impact investing movement is being driven by our newfound technological capacity (via big data and computing) to quantify a company's social and environmental effects.
True alpha in venture capital is found at the extremes. It's either in being a "market maker" at the earliest stages by shaping a raw idea, or by writing massive, late-stage checks where few can compete. The competitive, crowded middle-stages offer less opportunity for outsized returns.