Investing in a Recession: An Origins Story

The Roots of Investment and Venture Capital Funding

Imagine the perfect storm of a pandemic (sweating sickness), a new king (Edward VI), rising inflation, the loss of European trading routes (trade moved from Antwerp with the new Central/Southern American trade routes going to Portugal), a Silk Road too dangerous to tread and an ever-increasing gap between rich and poor.

Wool, the only English export was piling up in warehouses and merchants desperately needed new markets or routes to the middle and far east to function and trade. Which is why The Company of Merchant Adventurers to New Lands was established and incorporated in 1551. An organisation with a function seen as so pivotal to commerce at the time that 240 adventuring investors pledged £25 to buy a share, a sum over double the average annual salary.

READ: A Comprehensive Guide to Venture Capital

The company’s vital purpose was to find and open a new trade route by sea to China and the Spice Islands, unlocking desperately needed commerce. John Cabot, under Henry VIII decree had already sailed across the ocean and discovered Newfoundland. Despite mistaking it for Asia, Cabot had reassured investors that it was possible to find new routes and trading partners. Even though discovering new trade routes certainly wasn’t plain sailing, with three ships failing to reach their destination. The company did prove effective in reaching northern Russia and negotiating a much-needed trade deal with Moscow.

This was a catalyst to motivating merchants, the wealthy and establishing investment in multiple voyages, this time to find the northwest passage across Canada and into the Pacific Ocean. Typical to form, these voyages failed to find the trade route, but they did reach Canada, Greenland, and the USA, eventually leading to trade across the ocean. Even though trade took time to develop momentum, taking some 70 years to establish the routes and for investors to start to see some returns.

Lessons from Early Investment Journeys

In hindsight, the origins of the funding and investment process were hampered by poor planning and understanding of the journey, with little guidance, or learned experience, but how can this relate to your modern-day investment ambitions?

There are simple lessons to be learnt from these early investment journeys. The desire to venture and find new markets, business models and trading terms drive investment, even in uncertain financial times or when the return is not guaranteed. Strategic planning, preparation and a clear route to market are all vital, especially when the market challenges are tough. And, identifying a clear goal is a must, especially as the journey may take a surprising turn. Thankfully, an inspired team can not only help founders chart their way around challenges, but also use them to their advantage. As evident hundreds of years ago, the ability to identify opportunity when your business follows a different course is crucial.

The spirit of adventure wins out. It’s a tried and tested business format; tough market challenges and inspired people do develop new markets. They may struggle at first, but history tells us perseverance pays and investors ultimately benefit.

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