Readers are recommended not to judge books by their covers, and that sage advice is especially relevant for VC. The two cryptic letters are emblazoned in large gold font on the black-tinted front panel, with no further clues to elucidate whether the content addresses Victoria Crosses, Vinyl Chloride or Voice Chat. The first sentence of the book ends the suspense, with the aptly risky and venturesome assertion that “Venture capital (VC) is largely an American invention.”

This exceptionally well-written book effectively marshals the secondary literature into a readable exposition regarding the financing of risky ventures in the United States, which will appeal to non-specialists and general readers. Nicholas correctly points out that the essential VC model was prevalent from early industrialization (as an aside, the term “venture capital” itself emerged towards the end of the nineteenth century, and not in the twentieth century, as is frequently claimed). The subsequent discussion in the book somewhat undermines this continuity thesis by characterizing the era before WWII as a long gestation period, in which venture capital remained “still at an embryonic stage of development” (p. 107). This first stage is accordingly given rather cursory treatment—J. P. Morgan would have been justly incensed to find that far more pages are devoted to whales than to his outsized influence on the world of venture funding.

An entire chapter addresses whaling as an investment model that embodied all the features of modern venture capital, involving high risk/high return innovative ventures that exhibited a skewed “long tail” distribution of payoffs. Whaling voyages were typically profitable but, like modern-day VC funds, less than 3 percent of these ventures earned net internal rates of return in excess of 100 percent. In both industries intermediaries served to reduce transactions and agency costs. Investors delegated decisions to specialized whaling agents, the precursors of today’s partners in VC firms, and these intermediaries distributed staged financing, and coordinated and monitored outcomes, while also taking an ownership stake in the company that attenuated principal-agent problems. Whaling and VC developed similar organizational and incentive structures, such as closely-held partnerships. The interaction of these elements largely accounted for the dominance of Americans in the whaling industry and the world of global finance alike.

The book follows the literary device of pointing to particular successful case studies as uniquely important. The management of risk capital by the Slater textile mill is deemed to have been “monumental for American capitalism” (p. 53). Similarly, the twelve “angel investors” of the Boston Manufacturing Company founded a joint-stock company whose “novel” organizational structure is extolled as extraordinarily significant for the development of manufacturing enterprise. The entrepreneurs who benefited from the long-tail distribution accumulated vast wealth, which was initially vested in family holding companies, and then increasingly in private capital institutions. The spotlight here is on Laurance Rockefeller, who funneled his share of the family fortune in high-tech start-ups, most notably in the emerging airline industry. After 1940, venture capitalists tapped into nonfamilial sources of financing, which facilitated the growth of the modern VC industry. The author retells captivating cases of innovative start-ups including Fairchild Semiconductor, Intel, Apple, Genentech, PayPal, Google, and the star-crossed Pets.com; and similarly traces the origins of such legendary venture capital companies as American Research and Development Corporation, Hummer Winblad, Kleiner Perkins Caufield & Byers, and Sequoia Capital.

Private enterprise in the United States exhibited adaptability and innovation, but market imperfections required the enlightened intervention of the government, which “has played a defining role” (p. 315) in the new(er) economy. Hazardous gaps in the free market were minded by forward-thinking federal agencies such as the Office of Scientific Research and Development, government requisitions and defense procurement on the demand side, and enlightened support for Small Business Investment Companies, and Small Business Innovation Research. Despite numerous caveats—such as the high incidence of failure in the loan operations of the Reconstruction Finance Corporation, and the idiosyncratic self-interested nature of much federal activity—Nicholas concludes that government-business-university linkages and entrepreneurial efforts by the State were essential to the success of U.S. industry and innovation.

In sum, this is an absorbing synopsis of the evolution of U.S. venture capitalism, spanning whaling ventures, the organizational structure of firms, investment styles in Silicon Valley, the “ecosystem” of the high-tech world, the role of markets and government, and ending with the dot-com bubble. As with all successful scholarly ventures, it will induce readers to seek out further insights from the extensive primary literature on these and related issues. Students will be encouraged to explore the millennium of VC activities prior to the American experiment, including that most astonishing example of successful ventures, the VOC (Vereenigde Oostindische Compagnie). Some will likely be curious about the extent to which the long-tail distribution is a common characteristic of all risky undertakings, provoking them to overlay Grammy nominations with returns to movies and payoffs to (investment) unicorns. Nicholas’s accounting of historical continuity can be bolstered by additional evidence: my own research shows that institutional and corporate investments in risky new startups were not introduced in the 1980s, but have been present from the advent of industrialization.

Another intriguing topic for investigation relates to the way in which technological innovation has itself disrupted the nature and structure of VC funding; for instance, the legal and managerial autonomy of agents at sea was much reduced with the introduction of the telegraph. As such, if personalized financing minimizes transactions costs through trust, signaling, and specialized knowledge, perhaps the adoption of blockchain technology may exert an even more dramatic influence on the future of VC. A final issue deserving of more inquiry is the extent to which the nature of modern American VC institutions comprised a response to the capital market fragmentation and inefficiencies created by federal government policies, and to the resulting absence of such foreign institutions as zaibatsu, universal banking, and interlocking directorships. Part of the answer to this last question is revealed on the website of Kleiner Perkins, which celebrates its key strategy of fostering close relationships among the self-proclaimed “keiretsu” of companies in its investment portfolio.