Posts Tagged ‘Doriot’

Doriot Quote of the Day

August 27, 2009

“A real courageous man is a man who does something courageous when no one is watching him.”

Doriot Quote of the Day

August 17, 2009

Over the next week or so, I am reviving a great idea that venture capitalist Fred Wilson came up with last year: The Doriot Quote of the Day.

One of the fun and surprising things I discovered while researching my book is that Georges Doriot had a knack for coming up with pithy, humorous and Nietzschian aphorisms.

Here’s one of my favorites:

“You will get nowhere if you do not inspire people.”

Another Doriot Legacy: Building an Institutional Investor Community for Private Equity

December 10, 2008

I’m always amazed and pleasantly surprised to hear stories from today’s leaders in the venture capital and private equity business testifying to the continuing legacy of Georges Doriot.

Case in point: This week I spoke to the co-founder and senior managing director of HarbourVest Partners, D. Brooks Zug. HarbourVest is one of the world’s largest fund of funds investors, with more than $30 billion of capital invested in various partnerships over the years. The Boston-based company began as an affiliate of John Hancock Mutual Life Insurance Co. in the late 1970s. In 1982, the firm created its first fund with $148 million of capital to invest in U.S. private equity partnerships and operating companies.

Zug, who told me had dinner with Doriot soon before he died in 1987, said the General and the venture firm he ran for 25 years, American Research and Development, played a key role in convincing John Hancock to support the creation of HarbourVest–thereby helping to spawn the fund of funds world.

The reason? John Hancock was one of the founding investors in ARD–the first venture capital firm to raise money from non-family sources such as pension funds, endowments and insurance companies. In fact, ARD worked out of the old John Hancock building for most of its existence.

Although most investors thought John Hancock and the handful of firms that backed ARD’s first $3.5 million venture fund were nuts, Doriot and ARD proved them wrong. John Hancock earned a 10,000% return on its investment in ARD, said Zug. “The firm’s support of ARD helped management be receptive to the idea” of backing HarbourVest, said Zug.

Today, institutional investors contribute the majority of capital to the private equity business, and the fund of funds world has become a major player in global capital markets. And for that, we can thank Georges Doriot.

Creative Capital Gets Ink in MIT Technology Review

June 25, 2008

MIT Technology Review published a long and nice review of Creative Capital in its July/August issue, along with a cool black & white photo of Doriot from 1931 standing on the deck of the luxury liner Ile de France. The review was written by contributing editor Mark Williams. I am stoked since MIT played such a crucial role in the founding of Doriot’s VC firm, American Research & Development. Enjoy!

Are VC Returns Unfairly Judged? Why Fred Wilson is a Great Host & Thoughts on Doriot Quote du Jour

June 3, 2008

For the last six days, Fred Wilson has been posting a Doriot Quote of the Day. It’s a new addiction of mine to see what quote Fred comes up with each day. He’s picked some of my favorites and surprised me some other times.

Like today, Fred quoted me! Here’s the snippet from Fred’s blog A VC:

“Thanks to Digital Equipment’s blockbuster IPO, ARD met Doriot’s goal of generating superior performance by producing a 17 percent rate of return during its twenty-one year history, a significantly better return than the 13 percent average of the Dow Jones index during the same period.”

This is not a Doriot quote either. In fact, it’s not a quote at all. Spencer Ante wrote this. The reason I posted this is that I think the expectations for venture capital have been skewed by several periods of strong returns (the late 90s in particular). Over the long haul, I think VC should produce high teens/low 20s returns after fees and carry. The 17 percent number that ARD delivered seems about right. You have to remember that 17 percent over twenty-one years is 23x the initial capital invested.

So far, the post has generated 13 comments.

One reader Mats Myrberg asked:
17% over 21 years is really an incredible record. If you take out the DEC IPO what does the record look like? Also is there historical data on VC funds (and managers) and their return rate to give this more context? This would be interesting data.

Good question, Mats. As Fred says, VC is a business based on the long ball. If you strip out DEC, ARD’s 25-year rate of return was 7.4%, according to a report by Patrick Liles that I sourced in the book. It’s 25-year rate of return was 14.7%.

Here are the rest of the return figures for ARD. As you can see, ARD reached its peak return as an independent firm in 1969 when it hit 17.9%. I bet if you held onto your portion of DEC shares, that return would have gone even higher, above 20%, because DEC continued its spectacular run for another 10 years.

1966 9.5%
1967 16.7% (this is the figure that Fred referenced in his original post, one year after the DEC IPO super-charged ARD’s portfolio)
1968 15.5%
1969 17.9%
1970 14.9%
1971 14.7%

One final thought: As the NYT review pointed out, Doriot’s “genius was to coax investors to wait through years of uncertainty.” Consider this: ARD did not generate a positive return on its original $3.5 million investment fund UNTIL ITS EIGHTH YEAR!!! And even then the return was a paltry 1.5%. It was not until 1959 that ARD started to generate returns in excess of 5%. And it never reached a double-digit return until 1967. So you gotta hit that home run to outperform the market.

Doriot Quote Of The Day

May 30, 2008

This just in from Fred Wilson’s Blog A VC.

“At early board meetings, I would try to give an accurate accounting of the profit and loss. He would look through me and ask what I really thought about when I was shaving.”

High Voltage Engineering CEO Denis Robinson, about General Georges Doriot

Says Fred: I really loved this one. Its rarely about the numbers at the early stage. Its about the challenges and opportunities. Speaking of “loving this one” I’ve noticed few if any comments on these Doriot quotes. Am I the only one enjoying them?

So far, 32 people have left comments after Fred’s question–and most folks said they liked the quotes, which makes me feel good. A few people have even gone out and bought the book as a result of reading the Doriot quotes.

What do you think about when you are shaving?