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Executive Summary

Since 2011, Kapor Capital has invested exclusively in “impact” startups. While the term has become trendy lately in the venture capital world, and often misused, we’ve always had a very specific definition for what we consider impact to be.

Quite simply, we are committed to closing the gaps of access, opportunity, and outcomes for low- income communities and communities of color in the US. It is our view that all companies have some sort of impact in the world—some positive, some negative—and that it is our responsibility as investors to nurture only those innovations that make our world more equitable.

When we made that shift, we took a bit of a gamble. Other VCs cautioned that investing exclusively for impact would necessarily come at the sacrifice of financial returns, and while we had some anecdotal evidence to the contrary, we were not completely certain ourselves if our model would hold.

To be sure, we’ve never believed that financial returns should be the only measure of our firm’s success. It is our goal to disrupt the very way that businesses are evaluated. If companies were required to calculate their impacts—good jobs with living wages and benefits created or lost, pollutants pumped into the local community, air or water, shoring up or tearing down democracy—we’d see a different kind of Silicon Valley, one that lives up to its promise to change the world for the better.

Today, eight years in to our “impact only” experiment, we are making public our financial returns for the first time. We are pleased to say that our hypothesis has, thus far, been proven.

For the purposes of this report, we are using the two best measurements at this stage of our portfolio

  • Internal Rate of Return (IRR)

  • The Total Value to Paid In (TVPI) Multiple

We are proud to show that by both measures, Kapor Capital’s Impact Portfolio ranks in the top quartile of venture funds of comparable size:

Our Impact Portfolio includes only companies where investment was initiated between 2011 and 2017. That means this analysis does not include major investments like Uber and Twilio, whose inclusions would have pushed these numbers dramatically skyward.

Even more importantly, we are proud to show the specific impacts that our companies are making in the world: closing gaps in education inequality, helping families access healthy foods, disrupting predatory lenders, improving the lives of incarcerated individuals, creating technical jobs in “underdog” communities, helping people access quality health care, reducing carbon emissions in inner cities and so much more.

Kapor Capital companies are changing our world for the better in very specific ways, and they are bringing high levels of returns for investors. We hope that our experience may be a model for other VCs who care about creating a more fair, just and equitable world.

To do so, we need to fundamentally change the values that currently underpin the Venture Capital world. Here is what we believe:

1. Every business creates an impact of some sort—
some positive, some neutral and some negative.

2. Many technologies that widen the gaps in society can be transformed into gap-closing companies with the right business model.

3. Genius is evenly distributed throughout society, regardless of race, gender or zip code—but opportunity is not.

4. The lived experiences of underrepresented entrepreneurs provide a competitive edge in identifying problems to be solved and markets to be accessed.

5. Silicon Valley’s pernicious myth of “meritocracy” actively exacerbates the problem of who gets to identify problems and come up with tech-enabled solutions.

6. “Distance traveled,” the measure of how far an entrepreneur has come and the obstacles they overcame on their path to Silicon Valley, is a far better predictor of longterm success than proxies like schools attended or investments raised from friends and family.

7. Financial returns cannot be the only measure of a company’s success.We aim to disrupt the very way that businesses are evaluated. “Impact” investing shouldn’t be the outlier; greed-first investing should be the category getting scrutinized.

A New Model: VC 2.0

Based on this belief system we are proposing a new model, a VC 2.0 that fundamentally understands how old-school investment firms have caused real-world problems—not by merely excluding women and persons of color from their ranks, but by proactively creating terrible outcomes in our world and pretending they are good.

VC 2.0 means a real values alignment between investors and entrepreneurs by inviting new and different people to join the table or sit side-by-side at a new table. We want to encourage varied and diverse entrepreneurs to pitch more gap-closing businesses.

We need to help entrepreneurs:

  • Navigate when it is—and isn’t—in their best interests to raise as much money as possible,

  • Understand why raising at too high a valuation may hurt them long-term, and

  • Help them keep their ownership of their companies as long as possible.

    We need more impact investors to step up, especially at the Series A and B stages. We cannot be afraid to call out the harmful effects on entrepreneurs and society of a greed-only investing approach.

Let’s all be more clear about who we are, and who we aren’t.

The numbers are clear: We no longer need to heed the naysayers who told us it can’t be done.

Measures OF IMPACT

As noted above, we believe that financial returns cannot be the only measure of a company’s success. At Kapor Capital, we define impact through our “gap-narrowing” framework that can take on many forms.

Below are a number of examples demonstrating the quantifiable impact that our companies are having in the world today.