What Is a Joint Stock Colony?
Joint stock colonies were colonies that were organized as a business venture funded by investors from the mother country. They were governed according to charters established by the sponsoring joint-stock venture, such as the London Company. The British monarchy promoted the establishment of joint stock colonies in the New World because they alleviated the nation's population problems without the use of government funds.
Joint stock companies arose out of a need to ameliorate rampant poverty in England. During the 17th century, the development of new farming techniques that required fewer laborers left many peasants without work. The poor flooded the streets of urban centers like London and Bristol. While the monarchy viewed New World colonization as a way of reducing the poor on the streets, the government lacked the kind of money that rivals like Spain and Portugal had used to develop their overseas possessions.
The solution was to entrust the funding and organization of the colonies to investors. Joint stock companies were a precursor to the modern corporation. Groups of shareholders created a charter and funded the colonists' voyage with the expectation of a return on their capital. Jamestown, the first English Settlement in North America, was a joint stock colony created by the Virginia Company of London. Massachusetts was founded under the Massachusetts Bay Company, and New York and Delaware were likewise founded under the Dutch West India Company.