From Samuel Morse’s humble beginnings to today’s booming tech finance landscape, Hugh Larratt-Smith tracks how innovation reshaped not just communication but the flow of capital itself.
As a young man, Samuel Morse did not set out to revolutionize communications technology nor launch an unprecedented wave of innovation in finance and industry. Indeed, his early years were not auspicious. He had been an unsteady student at Philips Academy and Yale. Although he was an indifferent scholar, his interest was piqued by lectures on the then little-understood subject of electricity. To the distress of his austere parents, he also enjoyed painting miniature portraits.
After graduating from Yale in 1810, Morse became a clerk for a Boston book publisher. But painting continued to be his main interest. In 1824, he won the commission to paint a portrait of The Marquis de Lafayette during his tour of America, which launched him into the upper echelon of New York artists and today, hangs in New York City Hall. In 1832, after his return to the United States from Europe, Morse was appointed professor of painting and sculpture at the University of the City of New York, now NYU. This was the first such professorship in the United States.
On the heels of this, Morse had hoped to paint four large panels in the Rotunda of the Capitol in Washington, which would be the fulfillment of his aspirations as a serious artist. The commission also paid the unheard of $10,000 fee — a princely sum at the time. He sought this honor in an avalanche of letters to members of Congress, including Daniel Webster and John Quincy Adams. In 1834, in remarks on the floor of the House which he later regretted, Adams had questioned whether American artists were equal to the task. A devoted friend of Morse and fellow expatriate in Paris during the early 1830s, James Fenimore Cooper responded to Adams in a letter to the New York Evening Post, insisting that the new Capitol was destined to be a “historical edifice” and must therefore be a showplace for American art. Morse’s career as a painter effectively ended in 1837 when he failed to win the commission, leaving him dejected and embarrassed.
That same year, Morse’s interest in technology and invention set him on a new path. Although the idea of an electric telegraph had surfaced in 1753 and electric telegraphs had been used to send messages over short distances as early as 1774, Morse believed that his was the first workable transmitter model. A colleague at The University of the City of New York, chemist Leonard Gale introduced Morse to inventor Joseph Henry’s work on electromagnetism. The powerful electromagnets that Henry had devised allowed Morse to send messages over 10 miles of wire. A friend, Alfred Vail, offered to provide materials and labor to build transmitter models in his family’s ironworks in Morristown, NJ. Gale and Vail became partners in Morse’s telegraph company.
In December 1837, Morse submitted a proposal to Secretary of the Treasury, Levi Woodbury, who had been tasked by the House of Representatives with soliciting proposals for the construction of a telegraph system in the United States. All but one of the respondents presented plans for an optical telegraph — a series of towers with humans sending signals in semaphore to one another, a version of which had already been established in France. Morse was the lone respondent to propose an “electromagnetic telegraph,” with electrical signals sent over long distances by wire. Morse informed Woodbury that his device had sent a signal over 40 miles of spooled wire and that he “had no doubt of its effecting a similar result at any distance.”
In addition to developing the transmitter, by 1838, Morse and Alfred Vail had developed the system of dots and dashes that became known throughout the world as the Morse Code. In 1838, while unsuccessfully attempting to interest Congress in building a telegraph line, he added Maine Congressman F.O.J. Smith as an additional partner and influencer. After failing to organize the construction of a Morse line in Europe, Morse persevered in promoting the telegraph, and in 1843 he was finally able to obtain financial support from Congress for the first telegraph line in the United States from Baltimore to Washington. In 1844, the line was completed, and on May 24, he sent the first message, “What hath God wrought.”
His invention would revolutionize communications in the United States and throughout the world. Following the routes of the quickly spreading railroads, telegraph wires were strung across the nation and eventually across the Atlantic, providing a nearly-instant means of communication. For the first time, economic and financial developments such as California Gold Rush in 1849 and Comstock Silver Lode discoveries in 1859 became closer to real-time. Newspapers joined forces as The Associated Press to pool payments for telegraphed news from foreign locales. Railroads used the telegraph to coordinate train schedules and safety signaling. President Lincoln received battle reports at the White House via telegraph during the Civil War.
“The Massachusetts Miracle”
Massachusetts’s industrial economy began to decline during the early 20th century with the exodus of shoe, garment and precision machine manufacturing companies. This industrial decline would continue throughout the century — between 1950 and 1979, the number of textile manufacturing jobs declined from 264,000 to 63,000. The 1969 closure of the Springfield Armory spurred an exodus of high-paying jobs from Western Massachusetts.
In the early part of the 1980s, the computer market was changing dramatically. Large main frame computers that typically ran custom-developed software for a small range of tasks were being replaced by minicomputers. Up to that point, companies like IBM sold mainframes whose only purpose, for example, was to generate accounting data for a single company, running software tailored for that company alone.
By the early 1980s, new software and the rapid acceptance of SQL languages launched minicomputers into a marketplace previously dominated by the mainframes sold by IBM. Now, developers typically linked together several pieces of existing software, as opposed to developing everything from scratch.
The minicomputers were attractive to a broad cross section of the business community because of their low cost, relative to mainframes, and how they could readily be programmed to perform specific tasks for relatively small companies. Their development was made possible by the advancement of semiconductor technology to the point where computer circuits were reduced to the size of a fingernail.
In the late 20th century, the leading light of “The Massachusetts Miracle,” Digital Equipment Corporation (DEC) played a pivotal role in shaping the landscape of computing. Founded in 1957 by Ken Olsen and Harlan Anderson, DEC started as a small startup in a nondescript mill building in Maynard, MA. However, it quickly became a powerhouse in the world of minicomputers. As the years went by, DEC’s headquarters in Maynard buzzed with innovative activities. The company had a unique culture — a mix of innovation, camaraderie and a commitment to excellence. Engineers and developers at DEC were passionate about their work, often pushing the boundaries of what was thought possible in the realm of computing. DEC was known for its strong focus on research and development and software standards, which made its systems widely used in businesses, universities and government institutions. DEC’s in-house computing brainpower was augmented by nearby MIT and Harvard.
The distinctive humming sound of DEC’s computers became synonymous with progress, computation and the digital age.
But soon it all came crashing down.
Microcomputers were a curiosity leading up to the 1980s. After Apple’s successful introduction of the Apple II, IBM unveiled the IBM PC personal microcomputer in 1981. After Microsoft’s software operating system became broadly accessible, the market for PC clones exploded.
DEC was slow to transition to smaller, more affordable systems, and this failure to adapt to new market demands contributed to its decline. The company continued to focus on the declining minicomputer market as opposed to the microcomputer marketplace that was quickly dominated by IBM, Apple and Dell. DEC, as well as visionary Ken Olsen, failed to understand the significance and impact of microcomputers until it was far too late. DEC could have moved more quickly into the personal computer market, recognizing the rising demand for smaller, more affordable computing solutions. The company was already known for proprietary architectures. Embracing open systems and industry standards could have helped the company stay relevant in a rapidly evolving market. Instead, it became of symbol of the rapid pace of technological innovation and the disruptive forces that seemingly came out of nowhere.
Another poster child of The Massachusetts Miracle was Wang Computer. Its founder, An Wang felt a personal sense of rivalry with IBM, partly due to heavy-handed treatment by IBM in 1955 over the rights to his magnetic-core patents. Wang virtually dominated the word processing marketplace as the 1980s started but made the strategic error of not allowing third party software developers to augment or upgrade the Wang system. Wang attempted to build a technology moat around its “closed” system, but this ultimately stifled innovation.
As part of this “moat,” Wang took steps to ensure that the Wang family would retain control of the company after going public. He created a second class of stock — Class B, with higher dividends — but only one-tenth the voting power of Class C. The public mostly bought Class B shares and the Wang family retained most of the Class C shares. The letters B and C were used to ensure that brokerages would fill any Wang stock orders with Class B shares unless Class C was specifically requested. Wang stock had been listed on the New York Stock Exchange, but this capital structure was not acceptable under NYSE’s rules, and Wang was forced to delist with NYSE and relist on the more liberal American Stock Exchange.
Wang was one of the first computer companies to advertise on television and the first to run an ad during the Super Bowl in 1978. Their first ad cast Wang as David and IBM as Goliath, several years before the famous 1984 Apple Computer ad. A later ad at the Super Bowl depicted Wang as a helicopter gunship taking aim at IBM.
The market for standalone word processing systems collapsed with the introduction of the personal computer. The IBM PC and Apple replicated the keyboard and screen interface and functions of the Wang word processor and was actively marketed to Wang corporate users. WordPerfect and Lotus 1-2-3 quickly became state -of-the-art systems which proceeded to decimate Wang’s stranglehold on the corporate office automation marketplace.
Wang filed for bankruptcy protection in August 1992. During Wang’s 1992 bankruptcy, holders of Class B and C common stock were treated equally.
Prime Computer was one of the stars of The Massachusetts Miracle. In 1980, Prime Computer was the number one moving stock on the NYSE, up a stunning 272%. At the end of 1988, Prime had 12,386 employees, and annual revenues of $1.6 billion.
In 1988, financier Benne LeBow attempted a hostile takeover of Prime. To stave off LeBow, Prime management organized a $1.3 billion “white knight” leveraged buyout by J.H. Whitney & Co.
The Prime buyout seemed to be star-crossed almost from the beginning. First, bank lenders balked at the terms of the LBO, forcing a cut in the price paid for Prime. The LBO avoided becoming a “hung deal” only because Shearson Lehman Brothers, the company’s investment banker made a bridge loan of $500 million. Shearson Lehman planned to sell junk bonds to refinance the bridge loan, but could not do so, and so it was converted into a term loan. One year later, Shearson Lehman was forced to convert this loan from a cash-pay to a hybrid of today’s PIK loans in which Prime simply issued additional bonds. As it failed to meet financial goals, Prime ran into the classic problem that recently enthusiastic investors and lenders were starting to realize in more spicy LBOs — there was little room for error without default on obligations.
By the late 1980s, the company was having problems retaining customers who were moving to lower-cost systems, as minicomputers commenced their rapid decline to obsolescence. Additionally, Prime failed to keep up with customers’ increasing need for raw computing power. Over the next two years, the decline of the market for minicomputers accelerated. By 1991, sales plummeted to $170 million. Prime went dark in 1992.
During this early part of the 1980s, banks were reluctant to provide financing other than one-year revolvers to companies like DEC, Prime and Wang, since the technology was fast — moving with short life cycles. Moreover, winners were difficult to predict. As the 1980s progressed, New England banks increasingly provided term loans up to five years to keep New York City lenders at bay. Credit committees were challenged to understand how to match the tenor of term loans with the life cycle of the products of a company like DEC and Prime. The personalities of many leaders of these companies ranged from charismatic to messianic, and the traditional push-and-pull between credit departments and the banks’ sales teams could be intense. Credit committees struggled with new terms like “germanium transistors,” “flip-chip modules,” “Amphenol connectors” and “banana plug patch cords.”
Numerous other technology companies in The Massachusetts Miracle followed the paths of DEC, Wang and Prime. The rapid and often unpredictable obsolescence of the technology devasted many of the New England banks and was a key factor in triggering the ultimate disappearance of banks such as Bank of Boston, Fleet Bank, Connecticut Bank and Trust, Bay Bank and Shawmut. On the West Coast, the demise of once-hot companies like Silicon Graphics mauled some lenders.
As technology evolved in the 1990s, venture debt became commonplace, with innovative lenders such as Silicon Valley Bank and MM Venture Partners providing secured tranches of mezzanine debt that included warrants to increase yield.
These lenders would pay close attention to the cash burn of technology companies, typically allowing no more than 12 months of cash burn. The term loan tenor would be three years with interest only for the first six months, then 100% amortization until maturity. Venture debt always had the potential backstop of a venture capital fund below them in the capital stack, with one dollar of venture debt to two dollars of equity. Venture debt agreements usually had no covenants, had the right to accelerate and was accompanied by intercreditor agreements which gave the senior secured lender the right to refinance the venture debt with no interest penalty. However, the warrants usually had a 10-year tail which were priced to yield an IRR of 40% when combined with the cash pay interest rate ranging from LIBOR +5% to 8%. Early venture debt funds returned 4.5X to 6X to the original investors. By the 2000s, an influx of competitors drove down yields.
In the late 1990s, Well Fargo pioneered the concept of lending against recurring revenue streams with mission-critical software. The balancing act was acute — between software that was mission critical and the creditworthiness of the borrowers.
Fast Forward to 2025
Technology finance is a rapidly expanding marketplace for lenders.
Michael Haddad, president, Southstar Capital provides some market color: “Tech financing is booming! It’s funny — when something is booming in ABL — everyone wants in. And borrowers are flocking to ABL to unlock liquidity from financing intangible assets. They can access non-dilutive growth capital without giving up equity, which is ideal for tech founders who want to retain control while scaling operations. Lenders can tailor the deal to match the cash flow cycles of SaaS or subscription-based businesses, offering revolving credit lines based on monthly or annual recurring revenue. While traditional ABL relies on tangible assets, tech companies are increasingly able to leverage intellectual property, software licenses and recurring revenue contracts as collateral. Lastly, ABL can serve as a bridge financing tool for tech firms approaching profitability or preparing for acquisition or an IPO.”
Richelle Kalnit, chief commercial officer, SVP, Hilco Streambank offers some insights: “Monetizing disruptive technology can be a very complex undertaking. Let’s assume that the reason for the monetization effort is that the company faces an inflection point, whether it is pivoting to turn its business in another direction (as early-stage companies often do) or is experiencing stress or distress.
“First, a company and its advisors need to identify what exactly will be offered for sale, and how it will be offered — namely, through an asset or a stock sale,” Kalnit says. “Disruptive technology can take the form of data sets, source code, patents and know how. All of these will need to be identified and harnessed. Where are they stored? Are third parties necessary to make them operate? Who maintains the know-how? Are the assets being maintained? How are the company’s systems integrated (or not)? The capital structure of the company will also need to be examined, as will whether a buyer will feel compelled to assume certain liabilities.
“Second, advisors and the company need to work together to determine the objectives,” Kalnit notes. “If the company is continuing on but pivoting in strategy, it probably wants a transaction to include an earn out or a license. If the company is winding down, cash is typically king, as is speed. Technology assets often require the expertise of those who developed and supported them. In a wind-down scenario, as those people depart, the company risks losing value. It is often imperative to harness that know how in anticipation of a sale of the technology.”
“Finally, taking a step back from the specific assets and what a deal will look like, it is important to consider the market in which the assets have historically been deployed and the market the company was hoping to break into,” Kalnit says. “When it comes to disruptive technology, one cannot truly rely on history, because history and precedent are exactly what the technology is designed to disrupt. The job of the company and its advisors will be to convince potential partners, licensees and buyers that not only is the technology transformative, but that in the future, it will be the solution to a problem that we might not even know existed today.”
“Now that you see the opportunities, some of the challenges in tech financing for ABL can be daunting or hard to overcome,” Haddad says. “The first and most obvious is that many tech companies have limited borrowing capacity making it harder to maximize liquidity through traditional ABL unless lenders are comfortable with bespoke or unique collateral like IP or software. Another challenge is valuation complexity or assigning value to intangible assets (e.g., names, codebase, patents, user data) is difficult and often subjective, which can limit borrowing capacity. Most lenders may view tech — especially early-stage — as riskier due to volatile cash flows, customer concentration or short operating history. As a result, many loan agreements include restrictive covenants that limit operational flexibility, such as minimum liquidity thresholds or revenue targets. Also, ABL often requires frequent reporting of asset values and performance metrics, which can be resource-intensive for lean tech financing teams. Lastly, especially in fintech or healthtech, regulatory compliance (e.g., data privacy laws) can affect asset valuation and lender appetite.”
Paul Shur, partner at Becker looks at technology finance through a legal lens: “As the scope of technology evolves and financing businesses within the technological sphere follows suit, it becomes important for the parties to know and be able to apply legal principles in this landscape. One such set of principles is the Uniform Commercial Code, which applies through its various Articles to a large set of commercial relationships which impact technology. In fact, through the efforts of the Uniform Law Commission and segments of the business and legal communities, amendments to the Uniform Commercial Code emerged in 2022 (widely known as the “2022 Amendments”), which extend and apply commercial concepts to a wide segment of digital assets including cryptocurrency as well as digital assets documented by blockchain and distributed ledger. Included in the 2022 Amendments is a new Article 12 governing ‘Controllable Electronic Records’ as a subset of digital assets generally. These records are those which permit the Uniform Commercial Code’s perfection principles in Article 9 to be extended to them via principles of ‘control’ already applicable to other types of commercial property.
“The extension of these perfection principles to these emerging digital assets permits and encourages the financing of tech businesses and assets, as lenders are attracted to such financing opportunities because they can obtain security interests in those Controllable Electronic Records which arise in these transactions to secure their loans and financing,” Shur continues. “Thus, the 2022 Amendments extend a whole host of commercial principles, including secured transactions included in Article 9, to tech financing. It is another way that the law endeavors to keep pace with technology, digital assets, electronic records, electronic signatures and other tech concepts. Adoption of the 2022 Amendments is in full throttle. A check of the Uniform Law Commission website on September 5, 2025, reveals that 32 states have already adopted them. Of the three states where I practice, Florida has adopted them, New York has a bill introduced to adopt them and New Jersey is one of only 10 states to do nothing. Ultimately, financing of technology and businesses which focus on it depends on a uniform set of legal rules and concepts which can be applied to these transactions and meet the closing expectations of the parties.”
George Psomas, Senior managing director at Brooks Houghton sums up: “Even companies that are considered ‘old economy’ with products such as manufactured industrial components, traditional energy and building materials may have a much greater technology element than ever before. That intangible value is usually missed with traditional accounting metrics and only becomes clear during an equity raise or outright sale of the company.”
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Over the next few years, private companies used Morse’s patent to set up telegraph lines around the Northeast. In 1851, the New York and Mississippi Valley Printing Telegraph Company was founded in Rochester, NY. It would later change its name to Western Union and fall into the hands of robber baron Jay Gould (coincidently, an oil painting by Morse hangs on the walls of Gould’s baronial home, Lyndhurst overlooking The Hudson River). By 1861, Western Union finished the first transcontinental line across the United States. Five years later, the first successful permanent line across the Atlantic Ocean was constructed and by the end of the century, telegraph systems were in place in Africa, Asia and Australia.
Because telegraph companies typically charged by the word, telegrams became known for their succinct prose, whether they contained happy or sad news. The word ‘stop,’ which was free, was used in place of a period, for which there was a charge. In 1933, Western Union introduced singing telegrams. During World War Two, Americans came to dread the sight of Western Union couriers because the military used telegrams to inform families about soldiers’ deaths.
Hugh Larratt-Smith is a Managing Director at Trimingham Inc. and is a regular contributing author with The ABF Journal.