Today’s venture capitalists are spoilt for start-ups in which to invest and reap the rewards. Two contrasting travesties from either end of the European age of adventure show the very different character of early venture capitalists and the extremes they went to – both in success and failure.
As a modern enterprise, Hernán Cortés’ bid to open trade with hitherto ‘undiscovered’ Mexico in 1519 would be counted as high-risk. Its founding ‘document’ was a verbal agreement between Cortés and two Cuba-based backers to an equal division of profits. Cortés would rewrite this as needed, promising all proceeds both to the King and his own crew, as the expedition wore on and their magnitude became apparent.
Since Columbus a generation before, adventurers had secured funding with promises of rich returns. This started out in a geographical ‘404 error’ over the location of India, but contemporary discoveries showed that the ancient civilisations of the Americas may have been wealthier still. Cortés’ modus operandi was to follow trade networks to a motherload of treasure – and steal it! However, charged with previous administrative irregularities, the Crown ordered him to return to Spain to stand trial. But he ignored them, setting sail west on 18 February 1519.
The riverless Yucatan coast where they landed would have finished off the party had locals not rescued them with potable water from cenotes in the plateau’s limestone. Belatedly, Cortés recognised local market knowledge as critical. More than this, there were synergies: each new trade partner also brought grievances against the existing regional empire. Deploying his ever-ready ‘promises,’ Cortés gained their help to reach the imperial capital and treasury, Tenochtitlan, now with 200,000 expectant ‘allies’ behind him. If he turned back, he would be for the chop.
But his captains now petitioned Cortés to do exactly that – leave. Previous insubordinations had been handled with European 16th Century brutality, but, under the circumstances, Cortés acquiesced. Quietly, he stirred up the crew against the would-be mutineers, forcing himself to arrest them. After some wrangling he ‘graciously’ allowed them to stay on the team.
In our modern-day context, a consortium of auditors and employment tribunals would be stalking rough-shod through the jungle after the battered remains of Cortés’ expedition. He achieved his aims, looting the motherload of treasure when he destroyed the Aztec civilisation in 1520 - 21. For all our revulsion today, he sufficiently remunerated all backers such that his adventure was deemed a ‘success.’
By the 1800s, the tide had turned on Spanish and Portuguese dominance in South and Central America. Between 1809 and 1825 all countries there gained their independence. Now, they needed investment.
Enter Gregor MacGregor, a Scottish adventurer with a track record of fighting the Spanish in wars of independence. In 1821, he began telling anyone who would listen that the king of the Mosquito Coast had appointed him ‘Cazique’ of a land called ‘Poyais.’ MacGregor explained that Poyais was a sophisticated, vibrant settlement looking for new settler-investors.
This pitch chimed with other propositions at the time. It convinced many to swap their life savings for Poyaisian money and investment bonds, which, once the owners moved to Poyais, would offer riches beyond their wildest dreams. This, as you’ve hopefully registered by now, was a huge scam. The bonds
were worthless.
Taking money and running would be okay for most con artists, but so conniving was MacGregor that he actually sent 250 ‘investors’ on a ship to Poyais. When they arrived, they found nothing but undeveloped jungle. Half of them died soon after arriving, but 50 managed to return to Europe to sound the alarm. By this point MacGregor had also tried the Poyais trick in France. He actually went to court in 1826, but got off on a technicality. Unbelievably, he was able to continue versions of the scam until 1838, when he returned to South America to live out his days.
Cortés and MacGregor partook of the same ‘bonanza’ – the exploitation of the Americas by Europeans. MacGregor was an out-and-out charlatan, while Cortés was more ambiguous. He struck out based on an educated guess, which delivered on a scale that would only be surpassed by Francisco Pizarro’s reduction of the Inca Empire in the 1530s. By MacGregor’s day, treasure speculation had moved from the world of venture capitalism into fantasy novels. For investors, he invoked a passing age, packaged in a persuasive fiction, which is no less interesting for being so.
Some lessons remain transferable to the more honest adventures of start-ups today. Instinct, investment in expertise, adaptability and good investor relations keep a venture going, as they did 200 and 500 years ago. And don’t forget the secret ingredient without which they wouldn’t be start-ups: risk.
Further information
Bernal Díaz del Castillo, The Conquest of New Spain.
David Sinclair, The Land that Never Was: Sir Gregor MacGregor and the Most Audacious Fraud in History.
