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Updated February 11, 2023Before Tesla, Microsoft, Meta, Google, or Oracle, there was the East India Company (EIC), a company formed in 1599 to establish a British presence in the lucrative Indian spice trade. The EIC rose to become a British colonial powerhouse. It traded and taxed, persuaded and extorted, enriched and looted, and was so profitable and powerful that it single-handedly dominated the majority of the Indian continent, owned an army twice the size of the British Army at the time, and monopolized a plethora of transoceanic trades. By the 19th century, the EIC had earned the title of the world’s most powerful business, with control of more than half of Britain’s trade.
However, due to years of misrule, malpractice, and the 1770 famine in Bengal, where the company had installed a military dictatorship in 1757, the company’s territory revenues plummeted, forcing it to apply for a £1.5M emergency loan from the British government in 1772 to avoid bankruptcy.* The EIC was among the earliest in a long line of companies considered “too big to fail.” Thus, it was bailed out by the British government. However, that was inevitably the beginning of the end for the company, as scrutiny following the bailout led the government to seek direct control of the EIC. Following a lengthy decline, the British government finally ended the company’s rule in India in 1858. By 1874, the company had been reduced to a skeleton of its former self and was dissolved.
By that point, the EIC had been involved in everything from cultivating opium in India and illegally exporting it to China in exchange for coveted Chinese goods, to the transatlantic slave trade (it conducted slaving expeditions, transported slaves, and used slave labor throughout the 17th and 18th centuries). Modern capitalism may have since eclipsed the EIC, but its legacy is still felt throughout the world.
The EIC is significant for three reasons.
First, the EIC was formed as a joint-stock company, an antecedent to the modern-day corporation (with the exception of unlimited liability). The company is owned by its investors, with each investor owning shares based on the number of stocks purchased.* Indeed the term investment is first used in the context of investing money as part of a multi-stage process that converts goods or money into an alternate form that can subsequently be used to purchase other goods. As part of its definition of commercial investment (“the investing of money or capital”), the Oxford English Dictionary describes the earliest use of investment as “the employment of money to purchase Indian goods.”
Second, the trade being embarked upon by the EIC was novel and risky, with the potential for exceptionally high rewards. The company intended to command market share in the Indian spice trade, which had, until that point, been monopolized by the Spanish and Portuguese.*
Third, the company’s management was economical, deploying an innovative method of slavery that kept them lean and efficient as they scaled operations. During the first two decades of its existence, the East India Company was run from the home of its governor, Sir Thomas Smythe, with just six permanent staff. In 1700, 35 permanent employees worked in a small London office. In 1785, it ruled a vast empire of millions of people with a permanent staff of 159 in London. By 1800, the company controlled an army of 200,000 officers who enabled the EIC to both rule and economically exploit India while enjoying a monopoly on all trade along the coast of Guinea, including the traffic in slaves.*
The founding of the EIC at a meeting in September 1599 brought together a group of investors whose participation in risky new overseas ventures drove England’s commercial and imperial growth. The establishment of the EIC depended on the investors’ decision to entrust their wealth and reputation to a company with no track record, limited state support, and no presence in the Asian markets in which it would operate. Investing substantial sums in the EIC must have been a frightening and highly risky choice, especially for inexperienced investors.*
Despite the impact that the EIC would have on finance, investment, and empire over the next two centuries, we continue to treat the EIC as a homogeneous, monolithic enterprise rather than as an organization composed of and dependent upon what is today seen as venture capitalist and angel investor networks—a collective of investors who, either as individuals or collective groups, invest their money into high-risk, high-reward potential companies for an equity stake, which, in the case of the EIC, the company’s management team transformed into goods that were vendible or convertible into spices that could be sent back to Europe and sold there.
The EIC’s formulation occurred within an intensely interconnected environment that helped create an investing public before the financial revolution, demonstrating that early variants of venture capital-style investments were being made long before the maritime pursuit of whaling. The 1599 petition, which included “the names of such persons to undertake the voyage to the East Indies,” mentioned 101 contributions ranging from £100 to £3,000, and totaling £30,1336. There was a varied cross section of contributors, comprising both new and inexperienced investors and those with significant investment experience. The most common contribution was £200, with 58 investors (57.4%) pledging this sum. The average contribution size was slightly more than £298. Further analysis of the 101 investments reveals that several commitments were from pairs or small groups. Thirty-six of the total contributions (35.6%) were made in this way. Separating these grouped contributions reveals 136 named investors, although the total number of investors would have been slightly higher because some are not named and are merely listed as investing “in company” with another individual.*