RealTime IT News

A General Interest In VC

Old soldiers never die, they just become....VCs?

Some did a double-take when former Secretary of State and retired four-star general Colin Powell became the newest partner at venture capital firm Kleiner, Perkins, Caufield & Byers (KPCB).

But if the transition from military leader to IT investor seems unlikely, consider Brigadier Gen. Georges F. Doriot.

The France-born Doriot served as an artillery officer in World War I. After graduating from the University of Paris, he went to Harvard Business School, first as a teacher, then a professor.

With World War II looming in 1941, Doriot was convinced by a former student, who had went on to become an army general, to accept a commission and help with the daunting task of modernizing the U.S. military.

Doriot, by then an American citizen, was inquisitive and hands-on. He had little use for bureaucracy, sometimes going directly to Gen. George C. Marshall to cut red tape on projects that could help GIs in the field.

Asked to design clothing for tank drivers, Doriot had a tank delivered to the parking lot of his Washington, D.C. office. Doriot's efforts produced new uniforms for every climate, plus field rations, combat boots, assault packs as well as pioneering work with plastic and flame-retardant materials.

He also reviewed outside proposals. In "Shaping the Waves: A History of Entrepreneurship at Harvard Business School," author Jeffrey Cruikshank lists Doriot's duties, which read like a VC job description.

"Every day, proposals ranging from the hare-brained to the visionary landed on his desk," Cruikshank wrote. "The most outlandish of these schemes were rejected out of hand. But Doriot and his staff carefully combed through the rest, searching for innovative ideas that might advance the Allied cause."

After the war, he put those skills to use. In 1946, he founded American Research & Development Corp. (ARD), with financial backing from MIT and John Hancock Mutual Insurance.

ARD funded a number of important companies and developed expertise in technology. Digital Equipment Company was founded in 1957, thanks in part to a $70,000 investment by ARD.

DEC went public in 1966 and by 1972, Doriot's investment was worth $350 million, according to a paper by economics professors Jeremy Greenwood and Boyan Jovanovic.

Although there were firms that invested family fortunes in companies, ARD is considered the first independent venture capital firm in the United States and Doriot is called "the father of the venture capital industry."

He died in 1987, but his influence lives on.

One of those students he inspired was Thomas J. Perkins, who went on to found KPCB -- a firm that recently proved it isn't afraid of taking a chance on a career military man with no VC experience.

At KPCB, the leadership skills Powell honed in the army will be an asset, but perhaps not as valuable as the international connections he made as secretary of state. Powell could be instrumental in helping KPCB companies break into China and India.

"As firms invest more and more in consumer IT, having somebody of Colin Powell's stature, who knows officials in those countries, who knows the nuances there, can give [KPCB] a leg up for portfolio companies," Mark Heeson, president of the National Venture Capital Association, told internetnews.com.

Powell also knows Washington. KPCB has made no secret it wants to make more investments in emerging energy companies, Heeson said. Sometimes the success of these ventures depends on getting regulatory changes, a difficult task given entrenched energy lobby, he said.

"Having people who can fight for these young companies creating new types of energy is very important," Heeson said. "If not, they could easily be crushed."

Who better to lead the fight than an old solider?

Colin Haley is a managing editor of internetnews.com in the Boston bureau