Over the weekend I just got to listen to a talk show that talks about this book written by a Japanese author on an european port, Venice. Venice has existed over 1100 years as a business nation by itself until it was forced to give up its national identity when Napoleon reached its cities. Regarded as a city of commerce and also banking.
I shall write about the points where it deals with funding, it is interesting that many of the practices they engage in are seen in contemporary venture capital. Really for anyone who read history books, you know that anything and everything that we do now has been done before by a smart person / group in our long history.
Few point to note.
1) Older merchants often match with younger sailors in business. Older merchants often are the financiers of their shipping trade deal, and younger sailors contribute by devoting their time and life in the business.
However, upon profit taking. The younger sailor actually would take more than 50% of the profit, while the financiers are fine with taking lesser than 50% of the profit.
This is true in contemporary venture capital as well. Entrepreneurs invest their time and life in a business while venture capitalists may contribute up to tens of millions if not hundreds of millions in a venture. Venture capitalists are totally fine with entrepreneurs reaping and retaining most of the profits while they get lesser even though they may have come out with near to 95% of the capital requirements.
2) Merchants of Venice are very wary of risk. Every action that they take is to limit and control risk.
This is counter intuitive to much contemporary understanding of business, where tonnes of entrepreneurs insist on living a life with passion and taking risk with someone else’s money, and they are fine with it.
However the merchants of venice would take every action necessary to limit risk. If they have to partner and co invest with another person in another field to lower down the risk they would do so.
Most entrepreneurs do not see this part of the machinations by venture capitalists. A lot of deals that they talk behind closed doors is to limit the risk of their investments into startup companies or companies in general.
Merchants of venice do not take pride in taking risk, they take pride in limiting it. This is counter to the understanding of many entrepreneurs that they must take risk because what they do is changing the world.
What we must understand from Venice, is that even considering that venture capitalists with entrepreneurs are changing the world it does not mean that the risk is not to be limited and controlled.
Venice for example, was responsible for the 4th crusade, building ships for 10,000-30,000 soldiers to cross the sea to fight in Egypt. Venice were to be paid an equivalent to 2 years of tax revenue of both the British & French Crowns to do just that. On top of that, Venice negotiated a deal that was similar to the shareholder deal of the present days – they would get half of the lands of what they have conquered. They also ransacked the nearby cities for golds, and also robbed the Byzantine Empire of riches in the name of restoring a prince in asylum to royalty again.
Putting that into context, contemporary men may argue that this is hardly meaningful and world changing, but we must contend with the fact that it was important to the Europeans at that point of history. Venice was in the position to exploit all of that for its own profits.
In conclusion, what I received from the radio talk of that book is that business people are to ensure the largest option they can take in a business environment, because more options allows risk to be controlled. If we misunderstand that business is to take risk, we would not do Venice’s legacy any honour – while risk is present in business, the function of business is to control and limit risk, not to enlarge it and embrace it like some of our present misunderstanding demands.
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