Personal Reflections on David Morgenthaler ’41
July 11, 2016
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David Morgenthaler and MIT Entrepreneurship: Memories of Ed Roberts

David Morgenthaler was the earliest and most enduring of my relationships with anyone from the venture capital industry. We met in Cleveland in 1971 when we both participated in the MIT Alumni Association Entrepreneurship Seminar on “How to Start Your Own Business”.  A team of us initiated that weekend program in Cambridge in 1969 and carried its format across the U.S. over the next four years, hosting more than 3,000 MIT alumni. The original template was used throughout, with me kicking off with a report on my first studies of MIT spinoff companies, and local alums leading each of the following sessions. David ran the session on “Raising Capital,” just three years after starting Morgenthaler Capital.

After that beginning, David came up to Cambridge frequently over many years to chat on how things were going re: entrepreneurship at MIT and in the Boston area. I would tell him about new companies I had heard of, and of MIT faculty who seemed to be generating multiple startups from their labs. I introduced David to various VCs in the Boston area, although he quickly developed a strong network of his own.

We were very good friends by 1990 when I started the MIT Entrepreneurship Center (now renamed the Martin Trust Center for MIT Entrepreneurship). Almost immediately after the announcement of the E-Center, a few students approached me with their unique idea of organizing and running the “$10K Business Plan Competition;” the $10K representing what they hoped they could raise as a first prize. We agreed to divide responsibilities — they would focus on building the organization and recruiting student teams to compete, I would find the money for their prizes.

My job turned out to be the easiest. I called dear Dave and told him of the students’ idea. He loved it and responded, “Ed, I guess you’re calling me to give them the prize money.”  I supported Dave’s premise but asked for three years’ worth of that prize. Dave immediately agreed and committed $30,000 for the first three years of the $10K. When the final winner was announced annually in Kresge Auditorium, the student leaders would bring out a very large facsimile check, made payable to the winning team for $10,000, and clearly signed “David Morgenthaler.”  Dave continued that funding for many years after those first three, building the base of what is now the MIT $100K, the “granddaddy” of all university business plan competitions. By the way, before our initial phone conversation ended, Dave also agreed to send me $55,000 as the initial research funds to use in our new Center.

David continued his active interest and involvement in all we were doing in building the education, research, and student activities programs of the MIT Entrepreneurship Center. In response to a Dean’s 1997 Challenge that we raise a significant endowment to support the Center’s growth, David gave us one of our very first million dollar endowments to support our activities, and still kept sending in annual checks to help us out.

For several months we have been preparing for a November 12 “Celebration of a Half Century of MIT Entrepreneurship.” In addition to a grand “Tribute to MIT Entrepreneurs” planned for that date, we are working hard on a “coffee table book” of stories and photos and interviews covering the past 50 years. How fortunate we were to capture David in a lengthy interview just one month before his sad demise. Up to the end he was very proud of his MIT background, modest about his own achievements in leadership of the venture capital industry and of his significant contributions to nationwide entrepreneurship, and loyal in urging us on to greater achievements in stimulating young would-be entrepreneurs.

David Morgenthaler gave so much to so many of his wisdom, his resources, and his friendship. I shall miss him deeply.

Personal Reflections from Bill Aulet

On June 17th, David Morgenthaler died at age 96. He was an important figure in MIT entrepreneurship. I wanted to provide some reflections as someone who got to know him over the past few years.

David graduated from MIT in 1941 with a bachelor’s in mechanical engineering. He was president of his senior class as well as the Sigma Nu fraternity and was captain of the MIT swim team to name but a few of his activities here. Upon graduation, he fought in World War II in North Africa and Italy.

Upon leaving the military, David became an entrepreneur well before it was fashionable or really even socially acceptable for someone of his stature. Of course, through choosing his own route and working incredibly hard, he was very successful and played a huge role in creating and shaping the venture capital industry. He was an early investor in numerous iconic companies such as Apple and even if he hadn’t invested, he had heard their pitch.

I had the great pleasure to have met David a few times in Cambridge and in Palo Alto for wildly entertaining meals or meetings, often with his son Gary. David was one of a kind and never short on opinions and/or direct challenges. I will treasure those words of wisdom and stories, like the one about how he unsuccessfully tried to harness a young Steve Jobs.

With people like David, Ed Roberts, Jack Goss, and Martin Trust, we have this final window of opportunity to see and hear first hand the perspectives from those who helped to create the entrepreneurial world we know today.

I feel beyond privileged to know these types of people, who Tom Brokaw called in his book “the Greatest Generation” and see the continuum from their foundational efforts to today. The common sense and value of these trail blazers reminds us that sometimes we can make things too complicated.

David was a very smart MIT alum who could understand the most intricate situations as well as anyone, but what made him a leader for the ages was his ability to synthesize things down to a small number of actionable steps and then act decisively on them.

RIP David, and thank you Scott Shane for sharing these precious nuggets of wisdom.

What David Morgenthaler Taught Us About Entrepreneurship

by Scott Shane

On June 17, the world lost David Morgenthaler — a great entrepreneur, iconic investor, major philanthropist, and just plain brilliant man.

For me the loss of David Morgenthaler was personal. David taught me more than anyone else — academic or practitioner — about investing in startups. Much of what I teach my students is basically David’s wisdom.

Many beautiful obituaries about David have been written already. I am not going to write another. Instead, I am going to try to summarize a few of the things David taught me by offering 11 of my favorite David Morgenthaler aphorisms.

David Morgenthaler: Insights on Entrepreneurship

1. “Building a successful start-up is like making lightning strike the bottom of a swimming pool on a sunny day.”

This was David’s way of describing how truly rare successful start-ups are and how their development requires an unusual confluence of events that aren’t easily controlled. Anyone who makes it seem otherwise is delusional.

2. “Investing in a company without knowing management, the company and the market is like betting on horses without knowing the jockey, the horse and the race.”

This was David’s way to explain the three things you need to find to invest in a winning start-up: a great entrepreneur (the jockey), an excellent idea (the horse), and a huge market (the race).

Read the rest of David’s insights at Small Business Trends

About the Author:
Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

image: JumpStart, Inc.