“Slouching Through the Depression”
Over the course of his long career, Doriot participated in many committees. And he usually despised them. “A committee is an invitation to do nothing,” was one of his famous maxims. But perhaps no committee was as important as the New Products Committee. It wasn’t so much the work of the Committee that mattered, though they did undertake a series of important studies. More so it was the fact that it assembled the brain trust of individuals who would eventually pioneer the venture capital industry.
On November 8, 1940, the New Products Committee convened its first annual meeting to discuss the results of its research. One subcommittee concluded that although capital existed for new ventures, there was a need for an “organization and technique to appraise opportunities for specific enterprises.” Doriot’s subcommittee concurred that “the great need is for qualified technical analysis of situations, in order that venture capital investors may proceed with a reasonable degree of assurance.”
The outcome of the Committee was the creation of the New England Industrial Foundation. The Foundation’s goal was not to invest in new enterprises but to create a sort of industrial research organization to “appraise opportunities for scientific enterprises in the New England area.” After spotting those opportunities, the Foundation hoped existing New England businesses would then invest in and nurture them.
Around the same time, Doriot joined forces with another group of elite New Englanders working on the same problem: Enterprise Associates. Led by William Coolidge, an American physicist who in 1916 invented the prototype of modern X-ray technology, Enterprise Associates took a more direct approach than the Foundation, raising $300,000 from twenty stockholders to finance the final stages of promising research projects.
[William D. Coolidge examining his hot cathode, high vacuum X-ray tube, 1913.]
Doriot joined the board of Enterprise, along with his Business School assistant William H. McLean, and a few others. Throughout 1938 and early 1939, the stockholders and officers of Enterprise met with various entrepreneurs, looking for ideas to finance. On May 7, 1940, they held a dinner where they learned about a young chemical company called National Research. They liked the idea and backed the firm.
Then history threw a wrench in their plans. On May 10, Germany invaded Luxembourg, Belgium, the Netherlands, and France, ending the so-called Phony War. Right after Germany unleashed its blitzkrieg on the rest of Europe, most of the people who attended the Enterprise dinner called up William Coolidge and told him they wished to withdraw from their participation in the financing of National Research. Coolidge refused to withdraw. Since he had made a commitment, he would follow through with it. Doriot, feeling bad, loaned them an assistant to help, and later joined National Research’s board.
But it made little difference. The United States was facing a far graver risk—global fascism—and she needed to devote all of her energies and resources to fighting this dangerous and growing scourge. Enterprise Associates and pretty much everything else unrelated to the war were put on the back burner.
Still, the experience of Enterprise Associates taught the venture industry’s pioneers an important lesson. “[The Enterprise] experience made Merrill Griswold and Karl Compton realize that it might not be a good idea to have a company with only enough money to find and study projects, then ‘to pass the hat’ for capital to start the new company,” explained Doriot. A company should have its own capital, they concluded. That way, it would be insulated from events outside of its control.
For the time being, though, the war had snuffed out the formation of the nation’s venture capital industry just as it was getting off the ground. Six years later, Compton, Doriot, and other members of the New England brain trust would revive their plans to create a regional venture movement. But first, they all had a war to fight.