Colonization took place most commonly where Europeans could not obtain income through absorbing or conquering an existing state and its tax structure. This was clearly the case in uninhabited areas, but it was just as problematic when they faced free-association societies that leveled no taxes, but were not militarily strong or united enough to prevent some sort of establishment. It also took place where the weaker sort of states existed, not strong enough to expel the invaders but not producing enough surplus to warrant conquest. Although all the European powers that ventured into the Atlantic colonized one place or another, the Portuguese in Brazil and northern Europeans had colonization as their major form of expansion, and for them the uniform problem was dealing with unconquered free associations.

The first places the Europeans colonized were the uninhabited islands of the Atlantic, beginning with Madeira (1415) and the Azores (1437), followed by the Cape Verde Islands (1461) and culminating with the establishment of a colony on the Island of São Tomé (1485) near the Nigerian coast. The problem was how to exploit these places where there was no local population, but where soil and other resources promised some valuable return, starting with tropical hardwoods, and often going to wheat, sugar, and then to wine in the case of Madeira. The Portuguese crown typically gave these islands to their supporters with generous charters and feudal-style tenure, although they modified these as time and circumstances changed.