Usually when I tell people I’m doing a Masters degree in International Political Economy, they look at me funny and follow-up with a “Huh, I guess that doesn’t really have much to do with tech.” And for a long time, I felt this way too. The IMF, the World Bank, the WTO, sovereign debt, currency crises, oil shocks, etc. didn’t really seem to overlap much with startups and innovation. But then again, startups and innovation are at the heart of economic development and growth. Therefore it’s almost impossible not to draw connections between the two fields. And many of the reasons that we commonly use to explain the differences in startup success across the globe all rest on classic economic, political and social reasoning. So for this post, I’m kind of thrilled to be able to blog about a subject that has to do directly with my Masters dissertation (which is on institutional differences effecting venture capital success in the US and Europe).
Dollar dollar bill, yo.
(Hilarious VC pitch of the iPad)
For anyone who knows me and knows what I like to write about, they’ve probably noticed by now that I’m rather interested in startup funding. After all, access to capital is definitely one of the core elements in just about many model of economic growth, from Adam Smith to Joseph Schumpeter. And while I write a lot about more classical investment rounds on TechCrunch, I have also written on investment-oriented Government initiatives and more innovative funding models that I noticed startups using in France last year. Obviously, the rounds of funding we see in Europe are rarely comparable to rounds raised by US companies; the article I wrote on Wikio’s potential 8-figure investment round was dwarfed by Groupon’s “like, a billion dollars.” Even though many people like to point their finger at European investors and say that they are simply risk averse, there are numerous much more complicated reasons for these differences – which I will avoid going into here for now. I’ve also been critical of local innovation – especially a recent trend in what I felt was unnecessary online dating services in France – but investment differences cannot be strictly attributed to this either.
Yet, while venture capital may have developed later in Europe than across the Atlantic, many people may not be aware that one of the “founding fathers” of modern venture capital was indeed French. Georges Doriot, the founder of American Research and Development Corporation (what is considered to be the first publicly owned VC firm), is a name that strangely enough escapes many people in the industry. He also kind of helped create French business school INSEAD but that’s besides the point. Les Echos pointed out in an article published in 2007 that the man who made the Wall Street Journal’s list of Entrepreneurs of the 20th Century next to Jeff Bezos, Henry Ford and Bill Gates was hardly known in his home country. And while he appears in a lot of academic literature that has to do with the development of venture capital, very few books have actually been written about him. I found no books on him at the FNAC and only several on Amazon. For anyone who is interested in reading more about him, I highly recommend this book (free access via Google Scholar).
A French out of water.
What’s funny is that Georges Doriot does seem to have gotten quite a bit of recognition in the US – not just in the Wall Street Journal but his name is mentioned in many publications dealing with investment and innovation. And perhaps rightfully so as he founded ARD in the US and not in his home country (errr, he was also a naturalized US citizen who faught for the US in World War II and went on to teach at Harvard). Whether or not he would have been able to build the venture capital industry in post-War Europe is an entirely different question that may once again underline the differences in entrepreneurial environment and government initiatives between the 2 continents. But, US venture capital industry, on behalf of the République française I’d just like to say “you’re welcome.” (I’m probably going to get the “special treatment” from passport control next time I fly to the US if I keep this up). And regardless of what continent he was on, his name definitely deserves to be added to my list of French entrepreneur names to know.