the modern venture capital industry in the usa most likely began in 1958, marked by the first venture-backed startup being funded.
the modern venture capital industry in the usa most likely began in 1958, marked by the first venture-backed startup being funded.
when did the modern venture capital industry in the usa most likely begin, marked by the first venture-backed startup being funded?
1958
the seeds of the us private equity industry were planted in 1946 with the founding of two venture capital firms: american research and development corporation (ardc) and j.h. whitney & company. before world war ii, venture capital investments (originally known as "development capital") were primarily the domain of wealthy individuals and families. in 1901 j.p. morgan arguably managed the first leveraged buyout of the carnegie steel company using private equity. modern era private equity, however, is credited to georges doriot, the "father of venture capitalism" with the founding of ardc and founder of insead, with capital raised from institutional investors, to encourage private sector investments in businesses run by soldiers who were returning from world war ii. ardc is credited with the first major venture capital success story when its 1957 investment of $70,000 in digital equipment corporation (dec) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 5,000 times on its investment and an annualized rate of return of 101%). it is commonly noted that the first venture-backed startup is fairchild semiconductor (which produced the first commercially practicable integrated circuit), funded in 1959 by what would later become venrock associates.
private equity
the growth of the venture capital industry was fueled by the emergence of the independent investment firms on sand hill road, beginning with kleiner, perkins, caufield & byers and sequoia capital in 1972. located in menlo park, ca, kleiner perkins, sequoia and later venture capital firms would have access to the burgeoning technology industries in the area. by the early 1970s, there were many semiconductor companies based in the santa clara valley as well as early computer firms using their devices and programming and service companies. throughout the 1970s, a group of private equity firms, focused primarily on venture capital investments, would be founded that would become the model for later leveraged buyout and venture capital investment firms. in 1973, with the number of new venture capital firms increasing, leading venture capitalists formed the national venture capital association (nvca). the nvca was to serve as the industry trade group for the venture capital industry. venture capital firms suffered a temporary downturn in 1974, when the stock market crashed and investors were naturally wary of this new kind of investment fund. it was not until 1978 that venture capital experienced its first major fundraising year, as the industry raised approximately $750 million. during this period, the number of venture firms also increased. among the firms founded in this period, in addition to kleiner perkins and sequoia, that continue to invest actively are aea investors, ta associates, mayfield fund, apax partners, new enterprise associates, oak investment partners and sevin rosen funds.
history of private equity and venture capital