Thanksgiving - The venture capital deal that kicked started the USA

Thanksgiving – The venture capital deal that kicked started the USA

God Bless turkey, stuffing, pumpkin pie and canned cranberry sauce. 

We are here thanks to Pilgrims who fled religious persecution from England posted up in Holland and realized life is tough there too and decided to get the hell out of there!

So 102 brave and hardy pilgrims had to get from there to here and start their lives – so where is the money coming from?

Capital Raise Kick-Off

It’s that moment when every looks around the room and shouts “Lets raise capital!”  

So here’s the term sheet – 70 investors put up “Adventure Capital” into a joint-stock company, a single share would be 10 pounds ten shillings. 

Each person willing to go to Virginia received one share at no cost – but they had to work for the company for 7 years in building up the settlement. At the 7th year the assets of the company were to be distributed among the shared holders.

Marketing Deck

Pamphlets were produced to market the venture, the equivalent of today’s pitch deck. Of course, minimize the negative and amplify the TAM - “lusty hills and land” and good conditions – “The natives are very loving and gentle!” 

Under-raising since 1620, Funding Rounds, near death - Zero Cash Day

The small groups of investors supporting the Pilgrims under-estimated the returns and cost to maintain the colony which needed large supplies. So pilgrims went hungry for a while – hat tip to Squanto for the hook-up on helping out.

Fast forward, after starvation, harsh conditions, various company failures - oh yes and more funding rounds - and recapitalizations the colony eventually took hold and flourished. 

Then came the buy-back / Cap Table clean up

Investors unhappy with their return allowed the colonists to buy them out for 1,800 pounds paid in installments of 200 pound a years over 9 years. 

Reorganization

The common stock helped supply the colonists with things like food, tools and clothing. At the end of the seven years, the shareholders would divide the profits and capital (which included houses, land and goods) equally.

Yet, in 1623, the common-stock plan was abandoned and the land and houses were divided so that each colonist could reap the rewards of their own labor.

The colony had been barely producing enough food to survive and the Governor of the colony, William Bradford, felt that the communal aspect of the colony was discouraging many of the colonists from working hard because they felt they were working for others rather than themselves.

Politicians take note of above and below – Communal efforts haven’t worked here!

When the common-stock plan was abandoned and the new plan put into place, the colony suddenly began to flourish and they soon had an abundance of food. Corn production dramatically increased and famine was averted.

Today – 400 years later! Here we are the most successful and wealthiest country in the world.  

Enjoy your thanksgiving, football and pass the cranberry sauce!

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