How to Use Venture Capital for Good | Freada Kapor Klein | TED

Summary

The speaker, a venture capitalist and activist, emphasizes the unfairness of circumstances determined by birth and advocates for closing gaps in opportunities. She shares her journey from activism to founding Kapor Capital, which invests in startups addressing access and outcome disparities for underprivileged communities. The firm prioritizes diversity, inclusivity, and gap-closing business models, achieving top-quartile financial returns. Success stories like Promise, a utility bill assistance service, demonstrate the potential for both social impact and profitability. The speaker also highlights the importance of succession planning with new leaders committed to the firm's values.

Takeaways

• 🌐 The circumstances of our birth, including family, neighborhood, and financial resources, significantly influence our lives and opportunities.
• 🚧 The 'birth lottery' is unfair, leading to vast disparities between those with advantages and those facing barriers.
• 🔄 There's a need to close these gaps, which requires philanthropy, structural change, and the support of private-sector-backed startups.
• 💼 The speaker, a venture capitalist, emphasizes the importance of reassessing how talent is evaluated and what makes a good business.
• 🎓 The speaker's background includes activism and a commitment to diversity, inclusion, and corporate culture, which led to her venture into venture capital.
• 💡 Kapor Capital, cofounded by the speaker and her husband, focuses on investing in companies that close access, opportunity, or outcome gaps for underprivileged communities.
• 🤝 Kapor Capital introduced a 'founders commitment' in 2016, ensuring that funded companies are committed to building diverse teams and inclusive cultures.
• 🚀 The firm challenges traditional VC practices by being open to all entrepreneurs who meet their investment criteria, not just those with connections.
• 🌟 Success stories like Book Nook and Promise highlight the potential of gap-closing businesses to achieve both social impact and financial success.
• 📈 Despite skepticism, Kapor Capital's portfolio, with a significant representation from underrepresented founders, has delivered top-quartile financial returns.
• 🔄 The firm is committed to progressive succession planning, ensuring that the next generation of leaders continues the mission of supporting gap-closing entrepreneurs.

Q & A

What is the main issue the speaker addresses in the script?

The speaker addresses the unfairness of the circumstances of birth that lead to wide gaps in opportunities and resources, and the role of private-sector-backed startups in closing these gaps.

What role does philanthropy play according to the speaker?

Philanthropy is mentioned as one of the roles that can help close the gaps created by the circumstances of birth, alongside structural change.

What is the speaker's background before becoming a venture capitalist?

Before becoming a venture capitalist, the speaker was an activist, working with Cesar Chavez's farm workers, at a rape crisis center, and co-founding the first group focusing on sexual harassment in the United States.

Why did the speaker transition to venture capital from corporate America?

The speaker transitioned to venture capital to get closer to building fairness into the core of tech businesses.

What is the main hypothesis behind the founding of Kapor Capital?

The main hypothesis behind Kapor Capital is to see if it's possible to make venture-scale financial returns with a portfolio of companies that close gaps of access, opportunity, or outcome for low-income communities and/or communities of color.

What is the Founders Commitment mentioned in the script?

The Founders Commitment is a requirement implemented by Kapor Capital in 2016, where they do not invest in a founder who doesn't commit to building a diverse team and inclusive culture.

How does Kapor Capital ensure they find entrepreneurs with gap-closing businesses?

Kapor Capital ensures they find entrepreneurs with gap-closing businesses by having an open submission process through their website, which allows them to see about 3,000 deals a year.

What is the distance-traveled story the speaker refers to when evaluating entrepreneurs?

The distance-traveled story refers to the personal background and journey of an entrepreneur, starting from where they began in life and how far they have come on their own, which is considered when evaluating their potential for success.

Can you provide an example of a company that Kapor Capital has invested in?

An example of a company Kapor Capital has invested in is Book Nook, a high-impact tutoring company focusing on reading skills for grades K-through-eight, which is now in over 7,000 schools and educational institutions.

How does the speaker describe the financial performance of Kapor Capital's portfolio?

The speaker describes the financial performance of Kapor Capital's portfolio as top quartile, beating 75 percent of other venture capital firms of their size and vintage, including those with a diversity or impact lens and those focused solely on making money.

What is the significance of Ulili Onovakpuri and Brian Dixon in the context of Kapor Capital?

Ulili Onovakpuri and Brian Dixon are the new co-managing partners of Kapor Capital, representing a new generation of leadership that will maintain the firm's core rigor while taking it to new places, with a focus on diversity and inclusion.