Columbus Day And Finding Financing For Ill-Conceived Adventures

Today is Columbus Day, which means today we commemorate Christopher Columbus’ arrival in the Americas on Oct. 12, 1492.   Entrepreneurs reserve a special sort of awe for this day.  400 years later we’re still amazed how he negotiated backing for what many advisors of the time considered a questionable proposal.

Columbus’s Business Proposal

European monarchs of the 1400s competed for gold through imperialism and trade.  Columbus proposed that by sailing west he would discover a new trade route to the East Indies.  It was a proposal with a pay-off: lucrative spice trade with Asia.

And, naturally, Columbus proposed a personal pay-off for his risk-taking.  In his proposals, Columbus asked for a title (in one proposal “Great Admiral of the Oceans”), some level of dominion over the lands he discovered, and a portion of revenues.  Not too shabby.

Columbus and the Investor “Shark Tank”

It didn’t take TV to start the drama of a hopeful entrepreneur being put to the test before a “Shark Tank” of potential investors.  Columbus’s pitching to the monarchs of Europe lasted years.

Italian-born Columbus first petitioned the monarch of Portugal.  This was the natural choice: John II backed a similar proposal by Bartolomeu Dias who was attempting to round the southern tip of Africa.  John II promptly sent Columbus’s proposal to his experts.  They said he grossly underestimated the distance.  Dias returned successful and John II lost interest.

Italy and England were uninterested.  Columbus even got his brother to attempt to spur interest with Henry VII, but to no avail.

Finally, on May 1, 1486, Columbus presented his plan to Queen Isabella of Spain, who, in turn, referred it to a committee.  Her committee gave the same opinion as Portugal’s experts: Columbus had grossly underestimated the distance.  Yet, Isabel did not want Columbus taking his proposal elsewhere so she gave him an allowance and ordered all cities and towns under her domain to provide him food and lodging at no cost.

Columbus had a cushy set up, but he wasn’t satisfied.  It took two years of lobbying the Spanish court to finally come to an agreement in 1492.  The final agreement came after Spain finished conquering  Granada, the last Muslim stronghold on the Iberian Peninsula.  The royal treasury was depleted, but Columbus finally found support.  The terms required about half of the financing to come from private Italian investors, whom Columbus had already lined up.  The pay-off for Columbus was unusually generous, including 10% of all revenues from all new lands in perpetuity… but the generosity was also a sign that nobody really expected him to return.   There was a shifting of accounts, and Columbus was off!

Columbus and Lady Luck

As you know, Columbus’s business plan did not go at all according to plan.  He never did discover a new trade route to the Orient.  Instead he opened up a new continent to European colonization.  Some are quick to point out that the natives and Vikings were there first and that maybe the era that ensued was not necessarily “a good thing”… Yet, judging Columbus as a businessman alone, he demonstrated many admirable qualities: vision, determination, and perseverance.   Between 1492 and 1503, Columbus completed four round-trip voyages between Spain and the Americas.

(Many of the promises to Columbus, such as 10% revenue in perpetuity, were later reneged.  Arrest, court hearings, progeny… this part of Columbus’s adventures is also fascinating, but beyond today’s article!)

Finding Funding For Your Own Adventure

Just as was true of Columbus’s famous voyage, American discovery requires a mix of risk and luck for payoff to be seen.   We’re excited to share with you this Columbus Day infographic from Credit Donkey, a credit card comparison and financial education website.