Chapter 2: Was Private Equity Actually a French Invention?
We usually think of the USA as the birthplace of modern finance. But when it comes to venture capital, the story has a very French twist.
The “father of modern venture capital” was actually a French General named Georges Doriot. After World War II, in 1946, he started the American Research and Development Corporation (ARD) at Harvard Business School.
Doriot was the first to really separate the “capital provider” from the “investment manager.” Before him, rich families just invested their own money. Doriot created a structure where professional managers could use other people’s money to find and grow startups.
His most famous hit? A company called Digital Equipment Company. He invested $70,000 in it, and it eventually became worth hundreds of millions. That’s the kind of return every VC dreams of today.
But here’s the thing: while Doriot was French, he had to go to the USA to make his vision work. Why? Because culture matters.
In the 1940s and 50s, the US had the right “mix” for venture capital. It wasn’t just about having good laws. It was about a culture that wasn’t afraid of risk. As economic historian David Landes said, “culture makes almost all the difference.”
France tried to do its own version with government-backed funds in the 50s, but they mostly failed because they were too tied to politics. It turns out, you can’t just force an innovation economy with government money if the culture isn’t ready for it.
Today, places like China are rushing into private equity, but they’re still catching up on the “rule of law” and fair business practices. It’s a reminder that a successful investing environment needs more than just cash—it needs the right social and legal foundation.
In the next post, we’ll look at how the private equity ecosystem actually works today.