Business

What’s Past Is Prologue: Gilded Age Fortunes In VC And PE

Gilded Age fortunes that have contributed to modern-day venture capital financing.


Rockefeller. Carnegie. Morgan. Vanderbilt. All were among the families that accumulated massive fortunes in the second half of the 19th century, led by patriarchs who organized gargantuan trusts in budding technologies like oil, steel and rail. In the process of acquiring more capital than any humans before ever had, they established themselves as the faces of the so-called Gilded Age and earned a reputation, deserved or not, for wielding outsized power in the world of business—for being Oz behind the curtain, the beshadowed kingmakers pulling the strings.

venture capital

Venture Capital

But not anymore. Right? Well…kind of. The financial might of such families may be diminished, but it’s certainly far from gone. Gilded Age fortunes still grease the wheels of many a deal.

The link is particularly clear on Wall Street, where many of the largest and most powerful institutions have direct roots in some of the late 19th century’s most prestigious families. J.P. Morgan, of course, owes its name to John Pierpont Morgan, who became a partner at the financial colossus that now bears his name in 1871. Morgan Stanley was started by Morgan’s grandson. Moses Taylor, the first president of the bank now called Citigroup, was closely intertwined with the Astor family of New York, and the bank has had various close ties to the Rockefellers. The progenitor of BNY Mellon was founded by Alexander Hamilton in 1784, but the bank also has roots with Mellon Financial, founded by the influential Pittsburgh family in 1869.

[drizzle]And the connections are there in private equity and venture capital, too. Here are three firms whose war chests can trace a direct lineage to some of America’s legendary family fortunes.

Bessemer Venture Partners

Henry Phipps Jr. was born in Philadelphia in 1839, the son of a shoemaker. After an illustrious business career that spanned four decades, he and business partner Andrew Carnegie sold the Carnegie Steel Company to J.P. Morgan’s US Steel for $480 million (equivalent to somewhere around $15 billion today). Phipps pocketed more than $40 million, more than $1 billion in today’s money. He quickly went to work ensuring his fortune wouldn’t go to waste.

In 1907, Phipps formed the Bessemer Trust Company to manage his family’s assets. In 1911, he spun out Bessemer Securities as a separate entity that eventually became the Bessemer Venture Partners we know today. The firm can legitimately trace its roots to more than a century ago, making it (as far as we can tell) the longest-operating VC firm in the US.

Interestingly, though, that illustrious history is minimized on BVP’s website—perhaps because that sort of blue-blooded background doesn’t necessarily jibe with the firm’s present strategy and branding. These days, BVP invests almost exclusive in technology startups, pursuing deals at every stage of a company’s growth. Twilio, Blue Apron, Pinterest and Fuze are some standout recent investments for the New York-based firm.

Venrock

Venrock—a portmanteau of “venture” and “Rockefeller”—traces its roots to Laurance Rockefeller (a grandson of family patriarch John D. Rockefeller), who began making venture investments before the start of World War II. In 1969, the family’s early-stage efforts were officially organized under the Venrock name.

John D. Rockefeller, of course, is regarded by some as the wealthiest human being in history. He founded Standard Oil in 1870 and, over the ensuing decades, built the company into a far-reaching, all-powerful monopoly known to some as the Octopus. Exxon and Mobil (which re-merged in 1999) are both direct descendants of the company, as is Chevron.

In the second half of his life, the elder Rockefeller turned to philanthropy, pumping many of his millions into the University of Chicago and various educational and medical endeavors. In many ways, he was a forebear to many of today’s venture capitalists and startup founders, a hard-driving businessman who used his fortune to foster research he hoped would make the world a better place.

Today, Venrock is one of the industry’s most iconic names. The firm was one of the earliest investors in both Apple and Intel, while more recent successes include Dollar Shave Club and Juno Therapeutics.

Warburg Pincus

The Warburg family actually traces its wealth to 16th century Venice, but the American branch of the family established itself as a force in banking in New York in the late 19th century. (Paul Warburg was a major early proponent of the Federal Reserve). In 1939, Eric Warburg launched an investment company called E.M. Warburg & Co., which was renamed Warburg Pincus after businessman Lionel Pincus took control of the business in 1966. Pincus established the firm as an industry giant, raising billions of dollars for venture capital and private equity investment during more than 35 years at the helm.

The firm is still active in both VC and PE and is still a primary player on the industry scene, averaging more than 50 new investments per year over the past five years, according to the PitchBook Platform. One of its most notable roles so far in 2016 was a lead investor in a new $550 million funding of Go-Jek, an on-demand motorbike delivery services operating in Indonesia. Currently boasting offices on four continents, the firm has invested more than $58 billion in over 760 companies during its half-century of existence, serving as a gatekeeper of capital for businesses located around the world.

Want to see the investment trends, fund performance, executive management bios and much more for these firms (or thousands of their peers)? Contact us today to set up a free trial of the PitchBook Platform.

by Kevin Dowd, PitchBook

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