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Startup Imperialism: Venture Capital and the Age of Exploration

A re-examination of the Age of Exploration may have more than a little to teach us about modern venture capitalists.

The English naval captains of the so-called Age of Exploration were the startup CEOs of the 16th century. As we witness a popular disenchantment with today’s high profile “innovators”—grifters—in finance and tech, we can reinterpret some well-worn history by imagining privateer-explorer-colonizers like Gilbert, Martin Frobisher, Richard Grenville, Walter Raleigh, and Francis Drake as tech bros. With a 21st-century framing, we see that these men were neither heroic swashbucklers nor problematic visionaries but exemplars of an all-too-familiar breed of opportunistic scammer. They styled themselves as daredevil disruptors, but what they were really doing was running speculative schemes and pushing untested strategies for cutting costs. They aspired to bypass business-as-usual trade and commerce by innovating new navigational IP. Instead of finessing algorithms, they obsessed over the Northwest Passage. They raced to pour money, brainpower, and occasionally human lives into the search for a shipping route to China through the perilous deathtrap of the frozen Arctic.

Englishmen had special cause to resort to this rampant risk taking. Powerful commercial empires controlled the Mediterranean, the Baltic, and overland trading routes in Africa and Asia. By the end of the 15th century, that dominance had already driven Iberians to seek out circuitous ocean detours and run aground in the Americas. With no holdings across the Atlantic and none of the resulting colonial riches the Spanish forced local inhabitants and enslaved Africans to extract, England at mid-16th century was a backwater among backwaters. To become competitive players in the global market, English merchants had to contrive dubious financing ploys. They realized they could fund the kind of speculative projects that required huge capital investments but were unlikely to pan out into near-term profits by limiting personal financial liability through the sale of shares in joint stock companies. The first such corporation, chartered in 1555, was the Company of Merchant Adventurers to New Lands—adventurers as in those who venture, or risk the loss of, capital. Venture capitalists invested in joint stock companies proceeded to fund every early English experiment in America. 

Then as now, private for-profit innovators relied on public subsidy. The English Crown extended explorers and their financiers protections that facilitated their long shots, precursors to the taxpayer-funded Titan rescue mission and Silicon Valley Bank bailout of recent headlines. In an incident we might emplot as a prequel to a Theranos or WeWork docuseries, Martin Frobisher’s announcement that he found gold on a 1576 voyage to Meta Incognita (Inuit homelands, current day Baffin Island, Canada) led to an early overvaluation of his Cathay Company. This triggered arguably the first known economic bubble, predating Tulip Mania, the infamous Dutch speculation frenzy, by 60 years. When the bubble began to burst, investors were barred from pulling out because the queen was personally invested. Frobisher did a short stint in prison when it all went sideways, but he was soon out, sailing off on the royal payroll to suppress the Irish and raid the Spanish.