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Book Review: Creative Capital: George Doriot and the Birth of Venture Capital

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Creative CapitalI received an advance reader’s edition of Creative Capital back in early March and have been dying to read it. The book, as I was told, was the story of the birth of the Venture Capital industry putting it right in my sweet spot. History and VC - what could be better? I knew I didn’t know the whole story but I figured there was going to be a lot about the early days in the Valley. Firms like Kleiner and Sequoia would be spoken about a lot and Hewlett Packard would be hailed as one of the early wins.

What I was surprised and delighted to find when I opened the cover and dove into the book was that the birth of venture capital happened right in my own backyard in Massachusetts with a firm called American Research and Development (ARD) and a Harvard Professor/Businessman/WWII General named Georges Doriot (oh, and Digital Equipment Corp founded right in Massachusetts was the first big hit for institutional VCs and for ARD).

While the book does give all of the requisite history of venture capital from Doriot’s founding of ARD after WWII, to the spinouts of ARD which included Greylock, to the rise of the valley with Kleiner Perkins and Sequoia what really kept me engaged was the biological information on Doriot and specifically his business philosophies and sayings.

Here are a handful of Doriot’s famous sayings:

A team made up of the younger generation, with courage and inventiveness, together with older men of wisdom and experience, should bring success.

One should not only be able to criticize but should always have a suggestion to make.

Don’t challenge others’ statements, have them repeat them over again.

Conditions which are best for workers will give best production!

Ask about prospects who didn’t buy product.

Always challenge the statement that nothing can be done about a certain condition.

Those are some great quotes from a very wise man and there are many more (in fact, Fred Wilson is posting one per day on his blog until he runs out).

I have to say that I subscribe to most if not all of Doriot’s philosophies and it is interesting to me that there are a lot of folks uttering the same philosophies today as if they were new even though they were developed by a man over 50 years ago (and there was someone who probably figured them out before him as well).

One particular section of the book hit me hard since it touched on the relationship between entrepreneurs and VCs (something I have thought a lot about and also have written a lot about over the years). I will quote the paragraph from the book in full here:

ARD’s biggest hurdle was usually convincing these small, yet proud companies that they needed outside help. But Doriot didn’t hold that against them. He knew that if entrepreneurs weren’t self-driven and a bit egotistical they’d be punching the clock for IBM or General Electric. [Doriot] then closed his lecture by stressing the importance of management assistance in the venture business. “There is always a critical job to be done,” said Doriot. “There is a sales door to be opened, a credit line to be established, a new employee to be found, or a business technique to be learned. The venture investor must always be on call to advise, to persuade, to dissuade, to encourage, but always help to build. Then venture capital becomes true creative capital - creating growth for the company and financial success for the investing organizations.”

That’s a mouthful and a half but what Doriot says in that small amount of words is very important. It seems as if there will always be a struggle between entrepreneurs and VCs in that entrepreneurs by nature will never think they need a VC or that VCs will add value to their company. In reality entrepreneurs need VCs and VCs need entrepreneurs in order to change the world which is what we’re all in it for in the first place. (Of course that statement doesn’t apply to all businesses as some can be bootstrapped and/or don’t take a lot of up front capital.)

I can’t do this book justice in a short blog post so I will stop here and say that I highly recommend this book to any VCs or aspiring VCs out there. Doriot’s words of wisdom can’t be beat when it comes to venture and to business. I would also recommend this book to entrepreneurs who are interested in the history of VC. History always provides context and this book certainly gives that much needed context to the entrepreneurial climate in the U.S. and abroad. Lastly, I recommend this book to any person interested in or currently practicing the art of business. This book will show you how America’s entrepreneurial scene came into being and why we still look to entrepreneurs and VCs to drive the next wave of technological innovation that will propel us even further into the future.

Written by Eric Olson

May 26th, 2008 at 9:54 pm

Posted in Books, VC

One Response to 'Book Review: Creative Capital: George Doriot and the Birth of Venture Capital'

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  1. Great, great book. I just finished it earlier this week while on vacation to Boston and France (perfect read for the situation!)

    It’s one of those books that you simply can’t put down. The author did a wonderful job. General Doriot’s passion and dedication to his students made me want to apply to HBS.

    Nice review.

    Scott Scheper
    Newport Venture Group

    Scott Scheper

    27 May 08 at 1:35 pm

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