Examples from the Archive (Venture Capital)

Barings only foray into venture capital, and one of its few ventures into British industry, was at Weardale (the cradle of the English iron industry since early 15th century). Iron was in high demand for railway construction when Barings was initially approached by Mr Charles Attwood in 1844. He had purchased leases on mineral deposits in the Wear Valley and was looking for investment in his new process for producing pig iron. The current price for pig iron was £5.10/- and Attwood said he could produce it for 16/- giving annual profits of up to £350,000.

Click on the item to see it in the sources:

Letter from Joshua Bates to Charles Baring Young discussing Weardale Iron Company, 13 April 1847.

 

Outcome:

Joshua Bates wrote in his diary that: “These calculations are so very extraordinary that we cannot believe them to be true...” Although he initially supported the venture his concern turned out to be warranted. By late 1846, Barings had paid out:

  • £12,000 of capital
  • £14,000 to Attwood for half interest in lease of ironstone and coal mines
  • £100,000 advance to Weardale Iron Company

Weardale started off making iron chairs and, in 1855, benefited from a deal with the Western Railroad Company because of the strength and toughness of the iron produced. However, consistent production at the right price and right quality proved elusive and early optimistic expectations were not realised. 

Like many Venture Capital projects, Weardale was not proftable in the early years.  By 1858, Weardale was losing a £10,000 a year. In September 1962, Thomas Baring insisted on a management change or else they would look to terminate the connection. The management was changed and by October 1899, when the Weardale Iron and Coal Company was acquired by The Weardale Steel, Coal and Coke Co Ltd, Capital was returned to the original contributors at £15 per share of £10. Debentures were repaid at par (face) value.   

By this time, the company was "one of the most important producers of coal, coke and steel in the North of England” making a profit of £140,086. The business consisted of 9 collieries, steel and iron works, brickworks, wagon works, engineering shops, carpenters and other shops, 2128 workmen’s dwellings, 100% share capital in Tudhoe and Sunderland Bridge Gas Company, freehold of Tudhoe Markets and warehouse and wharf and river frontage on the Thames, leased from the City of London. This new company eventually dissolved in 1957.