When did venture capitalism in America start? You could argue, as Mort Collins does, that it began when Queen Isabel of Spain sponsored Christopher Columbus’s voyage in 1492. “He went the wrong way and discovered something he wasn’t even looking for,” Collins notes. “The queen made out okay, but Christopher didn’t make out in the end.”
But the modern form of venture capitalism, whereby private equity firms invest in high-risk, high-return startups, really began after World War II with the American Research and Development Corporation. And that’s where Collins learned his trade.
ARDC was founded by General Georges Doriot, with the goal of fostering businesses run by returning war veterans. Its most famous success came in 1957, when it gave early funding to Digital Electronic Corporation, seeing that startup become a major corporation, and making a fortune along the way.
In the 1960s VC was part of business culture, though not a dominant one. Many promising companies still had a hard time finding investors willing to bet on their success.
That was the environment that existed when Collins graduated from Princeton University with a doctorate in chemical engineering in 1963 and a position as a junior faculty member. “The people that did the financing in those days were family offices, like Whitney and Rothschild,” he says. “They basically did not finance companies unless the companies were already up and running and had revenues. They would not finance a startup.”
During Collins’s time at Princeton, the university had computerized. One of his projects had been to create a computerized simulation of a chemical refinery that allowed processes to be designed without building an expensive pilot plant. Collins saw that computers were going to be the future of business, and so he wanted to get in on the ground floor. He had a vision, and he had expertise, but he lacked one thing: money.
So Collins went to the one company he knew was funding high-tech startups: ARDC. Collins had a connection there, too, since he was friends with Samuel Bodman, an M.I.T. junior faculty member who worked there part time, evaluating projects. Soon Collins met with Doriot. It was a meeting that would leave a lasting impression on Collins and change the course of his career. “He said, ‘You don’t need any money. If you really can do what you say you can do, you can generate cash faster than you’re going to burn it. You start out with 100 percent of the company, and any stock you give away, you are never going to get back. Think about that before you ever give up stock in your company.’”
Collins says the general was right. His company, Princeton Scientific Research, was a big success, and Collins sold the whole thing after several years. Collins says his experience with ARDC convinced him there was a need for more venture capital firms, so he decided to create one of his own. In 1968 Collins founded his first venture capital partnership, vowing to make investments only in computer firms, which was a technology that Collins was very familiar with. He said ARDC’s one mistake was to invest in too broad a range of companies. “I had the arrogance to say, ‘I’m not going to make the mistakes they made,’” Collins says.
Thus, with the founding of Data Science Ventures I (DSV), began a career in the field of venture capital. Collins, now a founding partner with Battelle Ventures at Princeton South Corporate Center in Ewing, will speak on Thursday, October 3, at 11:30 a.m. at the Princeton Chamber of Commerce’s luncheon at the Princeton Marriott Hotel, 100 College Road East. 609-924-1776. Princetonchamber.org. Tickets: $70 nonmembers.
Collins’s first company invested heavily in the red-hot data processing arena, and only with early stage companies. “We were a totally new breed of cat,” Collins says. “We were raising money from a lot of people who had previously financed companies, raising money from them and putting it under a separate management team.” Why the old money elites entrusted this young upstart with their fortunes is a question Collins has often asked himself, and one to which he does not entirely know the answer. But he suspects it was because Collins, with his advanced degree, understood the technology he was dealing with, whereas old-fashioned investment offices did not.
That expertise was a thread that has carried through Collins’s career to the present day. Collins says he generally works with managers who have at least a bachelor’s of science in the field they are investing in, combined with an MBA. “You have to understand a lot about the technology, otherwise you are walking around blind,” he says. DSV1 and its successor partnerships invested in companies such as Datapoint, General Automation, Datacom, and, most importantly, Tandem Computers, which is now a division of Hewlett-Packard.
Collins’s familiarity with computer science was a major reason he set out vowing to never invest outside of his area of expertise. However, later incarnations of his company (DSV II through IV) also invested in biotech firms like Liposome.
Collins came from a poor family in Linwood, where his father, a German immigrant, worked as a billing clerk for a gas company and moonlighting as a bayman. Collins’s mother died of a streptococcal infection when he was two, and his father died after a boat accident when Collins was 12. He was placed in the care of his aunt, who died of cancer seven months later, and he became a ward of the state and lived in a boarding house.
Fortunately for Collins, a principal at Bellhaven Grammar School recognized a spark in the young boy and encouraged him to go to college. All the while, Collins dreamed of being a doctor, though he also had a passion for mathematics.
“If I hadn’t loved math and been poor, I would have become a doctor,” he says. “If I had become an MD, my personality would have been such that I’d be a surgeon, because I’m a risk-taker. It would not trouble me at all to take a risk with somebody’s life.” Collins says he loved biology since he was a little kid, running around with a butterfly net and a microscope.
When Collins went to the University of Delaware, it was time to choose a major. He picked engineering, and was discouraged from studying biology, which was considered the most difficult secondary course for engineering majors.
But through the years, his passion for biology persisted, and eventually, he decided to branch out into investing in biotech firms, learning the business as he went along. It was very different from investing in computer companies, he says. Technology firms would sometimes take off within three to five years of being founded, but with all the medical research involved in biotech companies, it was often 15 years or more before he could tell if they were going to make it or not.
Collins never held anyone’s life in his hands the way a surgeon would, and he says he never made any single investments that could have sunk his companies, but his fearless nature is evident in his line of work as well as his hobbies. Collins is an avid pilot, and has been known to fly a biplane out of the Princeton Airport for fun.
But risk-taking behaviors is different from egotism. Collins has a self-effacing style and is quick to admit his own mistakes. Although, he says, he wasn’t always that way, particularly after he graduated from Princeton.
“I was a kid who grew up the hard way in a small town where there were no professional people. I went to one of the worst high schools on earth. The only reason I got to go to college was because of a principal in grammar school who took an interest in me and helped me along the way. I went to Princeton and got a PhD. It was hard for me not to be a little arrogant.”
He says one of the things Doriot taught him was to be more humble. “Arrogance gets you nothing and humility gets you everything,” he says.
Although he is a world traveler, Collins never truly left New Jersey. He has not invested in many Garden State companies.
“I’ve lived in New Jersey all my life, and it’s first in everything that’s bad and last in everything that’s good,” he says. “The reason I’m in New Jersey is that I happen to have been born here and because I went to Princeton, which is a pretty good school, and they were begging me to come. I didn’t exercise my option to leave the state when I was going to grad school, and I’ve pretty much lived with the problems with the state.”
Collins says any company that sets up shop in New Jersey is doing its employees a disservice by forcing them to live in the state, where their earnings will be taxed away. “It’s unbelievable here,” he says.
Collins lives in Princeton with his wife, Donna. His wife, Eva, died in 1990. Despite his business successes, Collins says his marriages to those two women are the greatest achievements of his life.