Colonial ventures were partly motivated by profit in the 17th century. Some, like the English colony at Virginia, were established as profit-seeking companies. They raised money by selling shares to investors with various different interests though. To many, the profit motive was of secondary importance. Some supported the Virginia Company, even buying its shares, on nationalistic, religious, or other grounds. In the end, the colony became geopolitically important and allowed Britain to reduce its dependence on tobacco from competing Spanish colonies. However, it was a failure commercially. Yet, because of its composite objective, not all of its shareholders would have viewed this with disappointment.
Charter
A company was formed in 1606 to establish a colony in North America. It was called the London Company because it was established by Londoners, in contrast to a Plymouth Company formed in Plymouth by investors there and from other English towns. That company would create a settlement in New England. At the time, various trading companies bearing place names were in existence in Britain, including the Muscovy Company, the Hudson Bay Company, and the East India Company. There was even the Mysterie and Compagnie of the Merchant Adventurers for the Discovery of Regions, Dominions, Islands and Places Unknown, formed back in 1563.
The London Company differed from the trading companies in that it sought to make money by establishing a permanent settlement, rather than trading with a particular part of the world. Accordingly, the company established the first long-lasting English settlement in North America. Jamestown was founded in May 1607 along Virginia’s James River and the company was given control over approximately one hundred square miles around it.
The company obtained a new charter in 1609 and was renamed the Treasurer and Company of Adventurers and Planters of London for the First Colony of Virginia, or more simply the Virginia Company. The second charter gave the company control over an enlarged swath of the coast of North America, a region two hundred miles north and south of Point Comfort, Virginia. The Virginia Company was also given the right to import goods into Britain, or export from Britain to the colony, with only nominal customs duties.
The Virginia Company became more autonomous under this new charter; royal authority over it was diminished as a new governing council was to be elected by shareholders. Sir Thomas Smythe became the company’s Treasurer and would serve in the post for most of its history. Smythe was experienced in long distance trade; he had been an investor in or governor of other trading colonies.
Share Promotion
Shares in the Virginia Company were available to investors but there were no investment banks marketing these securities. The stock was promoted instead by men with various different interests, often non-monetary ones. For example, the stock was promoted by the Lord Mayor of London to the City’s livery companies, London’s various guilds of merchants and professionals. The Merchant Tailors’ Company alone invested £200 and its members another £587.
The profit motive was not the driving factor everywhere. The mayor saw in the Virginia project, not first and foremost any particular stimulant to the City’s economy, but rather a way of enticing troublesome London residents to emigrate. In 1619, the city would even send homeless children to Virginia, funding their journey with the company. Preachers also promoted the company for non-monetary reasons, regarding it as an evangelizing mission. Logically, these investors were quite unlike a merchant looking for a pecuniary return.
This was not unusual though; the livery companies and churches were both important promoters of share companies at the time, and not just the Virginia Company. These companies typically had composite aims, to make money and also to advance some national interest. Thus, some shareholders, particularly wealthy gentry not as acquainted with trade, invested on nationalistic grounds more than with any intent to profit.
Of course, others, particularly merchants, expected a profit. In Virginia, they hoped these would come either from mineral finds, fishing and agricultural output, or trading income if a passage to Asia, perhaps through the rivers of North America, could be found. Supposed precious metal finds in Spanish Florida and testimony from one of the members of the earlier expedition to establish a colony at Roanoke were publicized by one promoter of the company, Richard Hakluyt, who was an Anglican priest as it happens.
By the end of 1609, 650 investors had subscribed for shares offered at £12 and 10 shillings apiece. This was a relatively accessible share price; investors included relatively modest yeoman farmers and widows. The shares offered a way for non-merchants to invest in overseas trade or advance their country’s interests without possessing any experience of these things themselves. Still, there were many larger investors in the company too, like the financier Peter Van Lore who invested £112 10s. Overall, investors overlapped with those in other colonial ventures like the Guiana Company and the Newfoundland Company.
There was also an intersection between the settlers in Virginia and the company’s shareholders because shares eventually offered investors the right to one hundred acres of land in Virginia. Another intersection between the settlers and investors came from a share given to each planter willing to relocate to Virginia, compensation that came in addition to the land they were granted.
Money Raised
In 1611, more shares were offered. Some subscribers failed to pay their commitments into the company. This suggests a lack of confidence in it had emerged since shareholders are more likely to abandon their shares if they do not think they’ll make much money. This would prove a persistent problem causing the company to return to the market often. In any case, shares were not the only means of raising money; the company also borrowed money from its investors, sometimes in anticipation of future capital raising. Capital was also raised by lotteries, four in 1612 alone, and a ballad was even written to promote these lotteries.
“You Widowes, and you wedded Wives,
one litle substaunce try:
You may advance both you and yours,
with wealth that comes thereby”
– excerpt from the ballad, Londons lotterie
Many records of the company are lost, so a complete tally of money raised is unavailable. Charles P. Kindleberger, the financial historian, reports a couple of estimates: one that £80,000 had been sunk into the Jamestown colony by 1618 and another that perhaps as much as £200,000 was raised by 1624. In any case, by 1624, nearly 1,700 people had invested in the Virginia Company.
Money Made
It is easy to see why investors may have had reservations about investing in the colonial project. Settlers died in huge proportions in the early winters and even into the 1620s and by 1625, there were still perhaps just 2,600 English settlers living in Virginia. The company aligned the interests of the settlers with its own, essentially splitting the profits (though by no means the misery) of the colonists’ production, but these figures were not impressive for many years and unsurprising considering the sorry state of Jamestown.
Thus, Virginia was not a profitable colony. No gold or silver turned up; the early output of the colony was only some iron ore, wood, and sassafras to be used as medicine. Efforts to grow grapes, produce silk, and forge iron tools led to little. A dividend was paid to investors in 1616 … remarkable, you might think. But it was not paid in cash; rather, investors were given a grant of land in the colony. At the time, some wanted to focus on growing the colony and thought the venture more of an imperial project than a commercial one. They might not have been too disappointed by this ‘payment’.
That said, investors driven by a pecuniary return would not have been impressed and many doubted the value of their investment. There was a sign of promise though. A strain of tobacco was developed that could be grown in Virginia and it was palatable if not necessarily the best. Thereafter, tobacco became important to the colony though subject to many constraints. As for these constraints, for one, tobacco was sold at regulated wholesale prices in Britain, prices disadvantageous to the Virginia Company and intended to benefit a separate tobacco monopoly. Secondly, while saleable, the taste of Virginia tobacco was nonetheless inferior to that from Cuba. Still more, tobacco consumption was considered unhealthy and was personally despised by King James I.
Still, the crop finally made the company some money. From nearly zero in 1616, exports of tobacco reached 50,000 pounds by 1618. Despite this, dissatisfaction among shareholders remained, though curiously enough, not just among those motivated primarily by profit. Seeing slim chances of remaining in his post, Sir Thomas Smythe declined to seek reelection and a new Treasurer took charge in 1619. Investors were upset about the high price paid for supplies and steep commissions paid to a separate firm run by Smythe’s son-in-law, called the ‘Magazine’, which contracted with the Virginia Company to sell its merchandise. Smythe was also no doubt distracted by his roles at other companies.
His replacement, Sir Edwin Sandys, struggled with the task of making the company money too. Even with the growing tobacco crop, profits were not forthcoming. He relied on less informed, smaller shareholders to remain in his post; the voting structure was such that shareholders had an equal vote regardless of the number of shares held. This generally put wealthier profit-seeking merchants at a disadvantage in taking control of the company again.
In fact, Sandys prioritized growing the colony over making money. More settlers were sent to Virginia but mortality rates remained high, wars with Native Americans continued, and the Virginia Company remained unprofitable. A royal investigation of Sandys’s performance led to the revocation of the company’s charter and the colony came under state control, albeit with continued self-government in Virginia, a feature Sandys introduced to colonial life and which had rather great historical significance.
Lesson
The Atlantic world in the 17th century may have been increasingly commercial. In Britain, trading ventures were targeting more numerous and more distant markets. The ventures were often being undertaken by trading firms like the East India Company. However, these were not purely capitalistic projects, the Virginia Company included.
The ‘projectors’, as the entrepreneurs behind them were then called, had both political and economic objectives, and sometimes still others too, a composite aim that made the appeal to investors, the role of the state, and the measure of success all very different than that of a modern firm. Of course, there is a risk to some factions of shareholders if the aim is not consistent among them. In Virginia, the company may have failed but the colony survived. The project may have succeeded in the minds of some even if the shareholders saw little financial return. Meanwhile, what might have been a favorable outcome to some was a wasted effort to others.
More from the Tontine Coffee-House
Read about the use of tobacco as money and the offering of shares by the Dutch East India Company in 1602 and Dutch investments in American colonies. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.
Further Reading
1. Davis, John P. “Colonial Companies.” Corporations, a Study of the Origin and Development of Great Business Combinations and of Their Relation to the Authority of the State, vol. 2, The Knickerbocker Press, 1905, pp. 157–208.
2. Ewen, Misha. “Women Investors and the Virginia Company in the Early Seventeenth Century.” The Historical Journal, vol. 62, no. 4, Dec. 2019, pp. 853–74.
3. Koppell, J., and Thomas Hall, editors. “Shareholder Activism in the Virginia Company of London, 1606–1624.” Origins of Shareholder Advocacy, Palgrave Macmillan, 2011.
4. Markham, Jerry W. “Establishment of Permanent Colonies in America.” A Financial History of the United States: From Christopher Columbus to the Robber Barons (1492-1900), M.E. Sharpe, 2002, pp. 24–29.
5. Neill, Edward Duffield. History of the Virginia Company of London: With Letters to and from the First Colony, Never Before Printed. 1869.
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