At a Spanish cyber-surveillance meeting, one Spanish VC speaker related to the audience that Queen Isabella of Spain during the 15th Century was the true first venture capitalist in the strictest sense. She did finance Christopher Columbus trip to India. And I wish that some sort of record exists that indicated the level of due diligence she applied to Columbus. Let’s imagine that Queen Isabella did the usual VC thing of analyzing his business proposal to finance 3 ships to cross the Atlantic and reach India under the five “T” test.
Team: Everything revolved around the leadership of Christopher Columbus and his capability to captain several ships across what looked like an infinite ocean at the time. Part of confidence behind this Team is Columbus expertise as a sea captain. There is some historical controversy that his real name was Salvador Fernandes Zarco, a family name well known to Portugal. Joao Goncalves Zarco (pictured), another sea faring explorer, discovered the Madeira Islands and is a well-known Portuguese historical figure. Apparently, middle class families developed expertise and reputations to reflect certain skills. The Zarco name had some history. And, if this fact was well known to the Queen of Spain, she felt that he was the appropriate leader for this enterprise and made charge of very expensive sea faring ships. Then he appointed two brothers, Pinzon, to captain the other two ships.
Financing ships for private enterprise is not new. Hundreds of years later, New England developed small syndicate of owners/investors, who invested in whaling ships. And like today’s startups, the sailors where entitled to “stock options,” in this case the whaler’s pay – his lay, a percentage of the catch. And, as the well known book, Moby Dick, revealed, it can be very risky. So the concept of sea adventures and risk and return have had a long history.
Ten Fold: Christopher Columbus pitch had to have high payback in order to finance 3 ships. Prior to his crossing the Atlantic, the current sailing routes to India and beyond relied on sailing around the tip of Africa, which is a dangerous route. By cutting down the trip’s length and distance, he foresaw a faster return. I gather that Isabella understood the time value of money taught at every first year business school. So, if Columbus made that argument, he would increase her investment ten-fold.
This trip went beyond ten-fold, as Spain and Portugal divided the developing world in half, and build up the Spanish empire. The ships were always ladened with smooth stones that now cover the ancient streets of Puerto Rico and Cuba as ballasts, since they returned back to Europe with equally weighted amounts of silver/gold ores, agricultural goods, and other treasures.
Traction: The only way I could see how he would prove that he had traction would be through his previous experience as a sailor. Sailors were returning from their sailing trips to India and beyond with many goods. All that Columbus proposed was to do it faster. However, he couldn’t have been that good since he mistook the Americas with India. On the other hand, we believe that his family must have been well known for seafaring. That would be enough to show some kind of traction.
Technology: By building his ships within Europe, he must have employed the best up to date technology for ships. If anything that attests to that assumption is that the ships did cover the thousands of miles of ocean without incident. Spain had a considerable maritime industry based on the fact that the population’s substantial sustenance came from fishing. The coastlines cover the Atlantic and Mediterranean oceans.
Terms: In those days, the idea of an IPO was not feasible, but royal titles were. An affiliation with the Spanish government was worth its weight in gold. Christopher Columbus was granted the title as Governor of the Indies and he apparently increased his personal wealth with the many trades with the Americas. Whether that was discussed prior to his voyage to the Americas we don’t know. However, we do know that Spain kept Columbus on retainer during its wars with other principalities prior to financing his cross-Atlantic trip. Then they reverted their attention to Columbus’ proposal.
So, Isabella must have applied the 5 T’s based on Columbus’ pitch. Of course, one wins financing by the quality of a pitch. Apparently, Columbus had prior dealings with members of the royal staff who could lead him to that critical meeting. He had the introduction and assistance from the Spanish treasurer, Luis de Santángel, and of the Franciscan friars of La Rábida. Juan Pérez , La Rábida, had been one of the queen’s confessors who had access the Kingdom of Castille. Just like today’s VC managing directors, it was difficult to get the royal attention for your pitch. I guess whom you knew in 1492 matter as much today when raising capital. Some things just don’t change.