Chapter 1: From Explorers to Entrepreneurs
We saw how Christopher Columbus was basically a 15th-century startup founder. But for private equity to become a real industry, something big had to change. We needed a shift from “kings and queens” to “partners and contracts.”
Believe it or not, this started as far back as Ancient Babylonia. King Hammurabi created one of the first sets of laws that allowed people to form partnerships. Before that, businesses were mostly just family affairs. These laws paved the way for people to pool their money and share the risk of a new venture.
Back then, if you couldn’t pay back a loan, they didn’t just take your car—they could sell your whole family into slavery. Talk about “high stakes” investing!
Fast forward to the Industrial Revolution, and we see the perfect example of a modern startup duo: James Watt and Matthew Boulton.
Watt was the genius inventor who improved the steam engine. But he almost gave up on the project several times. He needed more than just money; he needed a partner who believed in the vision and could handle the business side. That was Boulton.
Boulton didn’t just give Watt a loan. He took a share of the patent rights and funded the venture for ten years before it even made a profit. This was one of the first times we see a clear split between the “inventor” and the “investor.”
This “fruitful tension” between the person with the idea and the person with the capital is what makes private equity work today. The investor provides the pressure and the resources to turn a cool invention into a massive commercial success.
In the next part, we’ll talk about why you can’t have private equity without a specific kind of person: the entrepreneur.