Risk capitalist

Almost ever since man knew enterprise, there have been financiers. When voyagers of yore set sail to distant lands in search of fabled wealth, there were rich sovereigns and merchants who funded them. But the birth of venture capital as an organised industry did not happen until the mid-1940s. In the six decades since, venture capital has grown to be an industry that pumps in $30 billion (Rs 1.29 lakh crore) in start-ups every year in the US alone. How did the industry come about, who were the pioneers who dreamed up the concept of risk capital, and what odds did they have to battle to be accepted as a legitimate industry?

As it turns out, the answer to those questions boils down—well, almost—to the story of one man, Georges Doriot. Born in Paris, Doriot (pronounced door-ee-oh) comes to the US to study engineering at Massachusetts Institute of Technology (MIT), but is button-holed by Harvard University president Lawrence Lowell, who brainwashes him to join Harvard Business School instead upon learning that the 21-year-old Doriot’s ambition is to run a factory some day. What follows is an incredible story of an immigrant becoming a hero not just at Harvard as a professor, but also in the defence establishment for bringing vital management systems to army procurement. But it is his efforts to make capital available to young entrepreneurs in a postwar America that make the core of the book. Why should a Harvard professor, whose primary interest is in manufacturing, think of turning a VC? The reason, as the author explains, goes back to Auguste Frederic Doriot, his father. Starting his career with Peugeot Company as an apprentice, Auguste goes on to help Peugeot build the first cars—quadricycles, actually. After a successful career at Peugeot, Auguste sets up a car company of his own in 1906. Eight years later, when World War I breaks out, Auguste’s factory is commandeered by the French government to make shells. By the time the war ends, Auguste’s partner, the Bentley brothers, end the deal with him and launch their own car company. It was a blow from which Auguste would never recover.

Keen to help entrepreneurs like his father, Doriot launches American Research and Development in June of 1946 to “aid in the development of new or existing businesses into companies of stature and importance”. Incidentally, to this day, that’s what VCs do, although the way they go about it is very different from how Doriot did it, thanks mainly to massive changes in regulations over the decades. But every man, they say, has his failings, and Doriot had his too. This is where Creative Capital scores. It is not only the first comprehensive biography of Doriot, but also an honest one. Ante, a senior editor at BusinessWeek, does a superb job of portraying Doriot, warts and all.

It’s the perfect time to be reading a book like this one. As economies around the world slow down, pressure is building on managers to protect their bottom lines by cutting cost. They’ll try to do so by attacking a number of expenses and activities, and sometimes cutting into the bone and not just the flab. Despite the book’s happy timing, the author, a consultant with London-based OC&C Consultants, argues that cost cutting should not be merely a one-off exercise. The most competitive and successful companies, he points out, look at cost cutting as an on-going, longterm exercise. As Wileman writes, “…timing does not and should not matter. In three or five years’ time, growth will be back, but cost will still be critical.

Cost management is not just for downturns, but for always.” The book comprises 10 chapters, covering everything from cost leadership to techniques and tactics to cost management as strategy. And because Wileman wants to aim the book at managers across industries, he has kept the theme more general and offers several case studies to illustrate his arguments. Wileman says one of the reasons he wrote this book was that he couldn’t find any “book that sets out a generalised approach to the topic of cost management”. Wileman isn’t too far off the mark.