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Tech is “flunking” the diversity test, says activist and venture capitalist Freada Kapor Klein

On the latest Recode Decode, Kapor Klein says we need to “take a deep hard look at the BS notion of meritocracy.”

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Venture capitalist and activist Freada Kapor Klein
Venture capitalist and activist Freada Kapor Klein, the co-chair of the Kapor Center and founder of Kapor Capital.
Courtesy of the Kapor Center

In recent years, several venture capital firms in Silicon Valley have made public strides to become more diverse after decades of being predominantly led by white men. But Freada Kapor Klein, a venture capitalist who has advocated for diversity in tech since the 1980s, isn’t impressed by their progress.

“Writ large, flunk,” she said on the latest episode of Recode Decode. “Failing grade.”

Kapor Klein spoke with Recode’s Teddy Schleifer about why well-intentioned initiatives such as All Raise have not yet had an impact. If the tech industry is going to reflect the diversity of the whole country, she explained, hiring more white women isn’t good enough.

“If what we do is count the number of women partners, and if those women partners are white and Asian and went to the same schools and grew up in the same zip codes and now live in the same zip codes as their male partners, that doesn’t get me very far on diversity,” Kapor Klein said. “Every single day I am awestruck, I am inspired by the entrepreneurs that come to pitch us. And they are from every walk of life, from every background possible, every combination of family circumstances, of race, of religion, of age, of gender, of LGBTQ status, disability.”

Along with her husband, Mitch Kapor, Kapor Klein is the co-chair of the Oakland-based Kapor Center, which seeks to diversify tech through a combination of education, community organizing, and impact investing — in other words, only backing startups that “clos[e] gaps of access, of opportunity or outcome for low-income communities and/or communities of color.” Another prominent impact investor, Bill McGlashan, has been implicated in the college admissions scandal, which Kapor Klein cast as “outrageous and not at all surprising.”

“We have to once and for all take a deep hard look at the BS notion of meritocracy,” she said. “This society has moved farther and farther and farther away from being meritocratic for many decades. As one venture capitalist put it recently, that in the last 50 years, there’s been a bull market in inequality. I think we have to look at all of the forces including the ways in which tech has made things worse.”

You can listen to Recode Decode wherever you get your podcasts, including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts, and Overcast.

Below, we’ve shared a lightly edited full transcript of Teddy’s conversation with Freada.

Teddy Schleifer: You’re listening to Recode Decode from the Vox Media Podcast Network, I’m Teddy Schleifer, the finance editor here at Recode. I am not Kara Swisher, but I’m in for her today.

Today in the red chair we have Freada Kapor Klein, who’s the founder of Kapor Capital and a co-chair of the Kapor Center. She’s also a founding team member at Project Include, which advises tech companies on how to be more diverse and inclusive. Freada, welcome to Recode Decode.

Freada Kapor Klein: Thank you. A pleasure to be here.

So, you’ve been working on diversity initiatives here in the Valley longer than I’ve been alive, and are sort of a dean of this movement, which we’re going to get into in some good detail. You have some super interesting, provocative opinions about the ways in which Silicon Valley has succeeded and failed at fostering an inclusive, diverse workforce, especially in the venture capital industry, which is kind of going through this reckoning.

A year and a half now after Harvey Weinstein, we’re still going through a good conversation about how we can get more diverse, but for folks who don’t know ... I think a lot of people know you just by first name, or you and your husband have been stalwarts of the tech industry here and are well known, but how did you end up in Silicon Valley in the first place?

Well, I started in tech, and you’re right, I’m probably older than ... I started in tech before most of your listeners were born. So I started in tech at Lotus Development Corporation in 1984, and I had just finished my PhD, and I had written a dissertation on ....

At Brandeis, right?

Yeah. I had written a dissertation on sexual harassment. I’m trained as a researcher. My degree is social policy with a focus on employment policy. I had 20,000 research subjects in my dissertation, 10,000 men, 10,000 women, and Lotus aggressively recruited me, and the job description was, “Make Lotus the most progressive employer in the US,” and I thought, “Well, that’s interesting.”

This is the ’80s. What was the bar there? Was the bar high?

The really sad thing is that in the mid-1980s, we did things at Lotus that still most tech companies aren’t doing. So the whole industry and technology and everything has moved light years ahead, but the practices around people have moved at a glacial pace, and maybe glacial pace means climate change these days. So maybe that’s quicker than it used to be.

Before you got your PhD, I mean, you’ve been involved in this ... Talk about what you were doing in the ’70s, this was kind of ... You were one of the first people to speak loudly about the issue of sexual harassment in the workplace.

Yes. I co-founded the first group on sexual harassment in the US in 1976 in Cambridge, Massachusetts. I’ve been an activist of some sort or another my whole life. I used to cut junior high school — they can’t take my degree away from me now, right? So I cut junior high school to go picket for the farm workers, it was during the Cesar Chavez boycotts, and I was an activist in high school. I was in a feminist consciousness-raising group with a bunch of college women when I was in high school.

I applied to two colleges — I’m a public school kid, through and through. I applied to two colleges based on the strength of their political movements. Isn’t that how everybody chooses college? So UC Berkeley and Madison, Wisconsin. So I have been focused on issues of social and racial justice forever. That’s what I find most compelling.

What was it like working on sexual harassment issues in the ’70s? I mean, this was a very ... I wonder if we can talk a little later about if you think we’ve made that much progress over the last 40 years now, but you were early at this. Was it a lonely place to be out there, talking about these issues?

It was an incredibly lonely place, and what’s sad is that it’s still a lonely place to be talking about sexual harassment in certain pockets of tech, and in certain pockets of VC, in particular. People didn’t have a clue what it was about, it got all confused with what’s consensual, what’s not consensual.

What’s interesting is back then, we named the group The Alliance Against Sexual Coercion, which I actually think is a more apt descriptor, because harassment, we think about like street harassment. Coercion has the implicit dimension of a power difference. And so I think that it speaks to the workplace dynamic, and distinguishes it from street harassment and other kinds of harassment that obviously still do have power dynamics of gender and many other kinds of power dynamics, but I think coercion is the workplace piece most people don’t understand.

Sure. So you end up at Lotus, and you said in 1984, and then you met your husband there.

I did meet Mitch there. Mitch was the founder. We used to meet on a weekly basis on what he called the “pulse of employee morale.” So there’s all kinds of things that we did. We, for instance in the mid ’80s, we did employee surveys. Everybody does employee surveys now. We had employees rate their immediate manager, and their senior manager who reported to Mitch, on the degree to which they lived the companies values on a day-to-day basis.

We’d roll those up, and that informed part of their variable compensation. You didn’t get your bonus if you didn’t live the values, and you might have gotten something worse than that depending on what the degree was. I tell that story to our founders and to others, and I’ve yet to run across anybody who uses the data from their employee surveys in that way.

You think most folks today just use it to check the box, to feel like they’re doing the right things without ...?

Well, there are certain elements of that that are now part of maybe an upward review of a performance review system, but actually living the values is really different than measuring things like the turnover in your group, or the productivity, or whatever. We had an anonymous and/or confidential employee complaint problem-solving mechanism way back when, and Mitch used to do an annual ... it was called The Grapevine, as in “heard it through the grapevine,” and we used to do an annual State of the Grapes Report on everything in the company that had changed.

State of the Grapes, that’s a good name. Replace the State of the Union with the State of the Grapes.

Exactly. Everything in the company that had changed, because people wrote and said, “Hey, how about this, or we have a problem with that, or we need guidance on this.” So it was sort of the high-growth company of the ’80s, and a really incredibly fun and exciting place to be, and I left to go start my own business.

When was that?

That was 1987, and the company had gone from just shy of 300 to over 2,000 in that time, opening offices all over the place, but I really wanted to be out on my own.

Did you feel like you wanted to be more involved in the activist movement, that you couldn’t necessarily as part of a corporation, or was any part of this, you wanted to be more outside the lines?

Well, some was being outside the line, and being able to work with a lot of different organizations, but it was also the person who followed Mitch in the CEO chair was nowhere near as committed, and that’s a lesson that I think we try to talk to our Kapor Capital founders about, and I think VCs need to be talking to their founders, and founders need to think about values when they’re choosing their investors, if they have a choice, which is that values alignment is critical.

So when did you guys start ...? We were just talking earlier before about how you ended up in Oakland originally, but when did you guys start the center, and then when did you guys start the actual kind of doing ... direct investing in companies, and kind of becoming ... I guess, do you consider yourself a venture capitalist?


Okay. When did those two things start?

So first of all, Mitch and I didn’t get together as a couple until 12 years after we met at Lotus, so we weren’t an office romance. He was married to somebody else, and he’s a smart guy, and he was not going to hit on, as a married man and CEO, he was not going to hit on the woman who started the first group on sexual harassment in the US.

There you go, okay.

There we go. So we re-met when we were both single, that was 1996, and have been together as a couple ever since. We moved to California in ’99, and that’s when we started merging various activities. And we moved to Oakland ... oh goodness, close to 10 years ago now.

Yeah. And did you feel like there was ... I mean, you wanted to be in Silicon Valley because you wanted ...? Obviously you’re part of the tech world, but you wanted to be ... you feel like this was a place where these issues weren’t being talked about in general? Were you that intentional at the beginning about kind of, “I want to make sure that the tech industry has this conversation,” or was it just something you sort of fell into?

No. I’d been working on all these issues, and I continued to work with lots and lots of tech companies, and one thing that was true back at Lotus that’s true to this day, people leave those kind of high-growth successful startups, and they sometimes are lucky enough to have made some money, and they go start their companies. And so, they would contact Mitch for certain kinds of tech advice, they’d contact me for certain kinds of people advice. So each of us had our network that went on continuously with startups. Mitch was an institutional VC for a moment, and did ...

You see, I don’t even know that. There you go.

Yeah. He was a partner in Accel, and hated being an institutional VC, loved ... had already been an angel investor, but really, I think, loves mentoring entrepreneurs, and there is more of a tug about a VC, about who you’re responsible to. When you’re an angel, or as we are, having no LPs, we are responsible to our own values.

Because an angel investor is, just to explain, you’re investing your own money, and if you are an institutional venture capitalist, you’re investing somebody else’s money, and maybe you can’t take the same moral stand for righteousness and for equality as ... Sometimes, it could threaten to lose you money. So there’s a lot of ... I know you’ll disagree from impact, from an impact investing standpoint, but that’s the concern from some ...?

I think yes, it is the concern, and I think it’s also the excuse, because there are these things called LPs, limited partners, the folks that put money into the venture capital funds, and they’re expecting a certain rate of return, but it is also possible to be a venture capitalist who says, “These are the kinds of companies we want to back, and these are the kinds of cultures we want them to build, these are the kinds of hiring practices we want them to have, and by the way, we’re not going to look the other way when somebody tells us that a founder is a harasser.”

So I think VCs have much more power than they pretend to have in these moments, when they say, “Oh, I can’t do it because of my LPs.” Well, if you are at all a desirable fund, you’re oversubscribed, and you can say, “This is what I’m interested in.”

I think the better VCs ... the responsibility is primarily on the best VCs, who have tons of influence, and they could very easily ... I mean, you can argue that they’re being cowardly, but you can sort of understand the incentive structure of some venture capitalist who is begging for dollars, and they are concerned that if they’re too much of an activist on issues that are not directly relevant to their LP returns, because they’d say, “Save that fight for the Benchmarks of the world.” I’m not saying that’s legitimate, that’s just what their argument can be.

That often is their argument, and my argument will be, one, is stay tuned because for the first time ever, Kapor Capital is going to release our returns in May, and I think that people will be ... Anybody who’s been dubious, skeptical about impact investing, or seeing it as a trade-off of financial returns, will have to eat those words, and I think what we’re really hoping is that we open a very wide path for founders and for VCs to be able to say, “We can all choose our spots on a continuum, and we can choose to invest in a way that we think aligns with our values.”

I think there has been too much of an emphasis on hiding behind, “The LPs won’t like it, or won’t let me do it.” But I think if we reframed things as, “Well, we’re impact investors, and if you’re not interested in impact investing, you’re interested in greed only.” And I think if you reframe it that way, it’s like, “Wait, do you want greed-only investors on your cap table?”

Sounds terrible. We’ll talk about impact investing a little bit more later on, but there’s one kind of specific decision you made, I guess now two years ago, which you’ve talked about that I think sort of speaks to the tension you feel between making money and supporting your founders, and kind of some of the more ... the cause you’re active in, which is the situation at Uber, which ... So you guys after Susan Fowler’s letter came out in early 2017, called out your own portfolio company founder about ... You guys were angel investors in Uber, correct?

Yes. Seed stage.

Seed stage, a lot of money to be made. You guys are rooting for Uber to succeed. Talk me through what that was like, to kind of basically, after Susan Fowler’s letter came out, to go public. I can’t imagine that people inside Uber HQ and some of the people who had a ton of shares were thrilled about that. You’re giving me a look ...

Yes. Do you want to hear about some of the hate mail, or the hate phone calls?


So what was interesting is that Mitch and I, separately and together, had been in touch with senior folks at the company, and had been offering help, they’d get themselves in ...

Pre-Susan Fowler letter?

Pre-Susan Fowler. They’d get themselves in some kind of a mess, or just growing pains of a company, and somebody would reach out, and bounce something off of us. So there were a few of these instances where I had spent a lot of time on the phone, and giving suggestions, and giving advice, and, “Here’s what to do, here’s the intervention, but then here’s the prevention, here’s what you want to put in place,” and basically felt that ... As soon as they got out of one scrape that was the end of their attention span.

Crisis to crisis, deal with the issue. No real kind of broad or a cultural realization that there was a problem?

Exactly. And in fact, I think what the Holder report pointed out is that there were in fact some values that the company had that fostered that behavior. So it was always pushing the edge, asking forgiveness instead of permission. Well, those things, without the right guardrails, telling people to ask forgiveness rather than permission gets you right down a sexual harassment line.

Was there a part of you that felt like ...? Obviously you guys are wealthy and are not living paycheck to paycheck, was there a part of you that felt like, “Hey, the founder sort of owes ...”? Because there’s a difference between expressing things privately and going public. Talk to me, why did you guys go public with it?

We went public because we felt like we had tried many times in many ways, again, having been invited in, and that that was just falling on completely unreceptive ears, and that it had reached a crisis point, and that we wanted folks to know what we had been doing and what side of the line we were on. At the end of the day, living our values is more important than making money.

Is there any part of you that sort of regrets investing in the company more broadly when you think back on it? Or at least in Travis specifically?

I don’t think we would have had the impact with Uber, and I’m now on Uber’s diversity advisory council and have regular contact. I think Dara invited us in to talk about how they were doing, and as I’ve often said, I’m still waiting for anybody, any unicorn, any tech company to claim the top spot in how to build a truly welcoming culture, and how to build a diverse workforce. So, is Uber perfect? No. Can we point to any high-growth tech startup that’s perfect? I can’t.

Do you think getting Dara has changed ...? What kind of grade would you give them on changing the culture there internally?

I think he’s done a remarkable job on changing the culture. I think there has been ... I think his apology tour is going to be the stuff of lots of business school cases and organizational culture cases.

I don’t know if they call it an apology tour — but you’re not wrong — but they might dress it up as something different.

Yes, they might. But I think that’s really what it’s been. I think he’s spent an awful lot of time listening and apologizing for things that did not happen on his watch. I think that what we see with Uber and more so with the Googles and the Facebooks of the world, is the bigger and older the company, the harder it is to turn it around.

We were talking before about how lonely you felt in the fighting sexual harassment early in the ’70s, you’re a pretty contrarian voice out there today, and kind of given where the venture capital industry is, on some issues around diversity specifically, maybe not on harassment issues or coercion issues.

But I wrote a story at the end of last year about sort of grading or beginning a conversation about how well the venture capital industry has done at improving diversity. There’s been a few dozen women that were added to venture capital firms over the last year — really, well, the last year and a half since the Weinstein allegations came out, and really a couple months before that.

I think that there’s a lot of different reasons why a lot of these firms have added women partners. Some were good reasons, because they wanted to genuinely improve diversity. Some I think would candidly admit privately that a portion of it was PR motivated. What kind of grade would you give the Valley over the last two years at improving diversity in venture capital?

At improving diversity?


Writ large, flunk.


Failing. Failing grade.

What do you make of the stat that when you can quibble with the numbers about who’s a partner and who’s not, but all these women who have been added to the firms, the firms would say, and the women would say, “We’re doing pretty well. We used to have ... “ If you had a firm with five male partners, now they have five male partners and one female partner. That’s zero to what, 16 percent, 18 percent? I mean, what’s the response to the raw numbers?

Well, I think I’m much more interested in the goals, and the goals for me are not adding raw numbers. The goals for me are about building an investment firm that in turn has a nuanced eye for building a portfolio of companies that close gaps of access or opportunity or outcome, rather than continuing to advance inequality.

And how does the current system advance inequality?

Let me give you an example, and I’ll give you an example that’s all of two days old. A prominent VC in the Valley, caucasian male, nice person, great investor, well-known, reaches out and says, “I have a company I think you might be interested in: Two women founders and it’s a direct-to-consumer product.” And their business model is affluent customers.

That describes a lot of direct-to-consumer brands.

Exactly. And I said, “We would never invest in this because it’s gap-widening.” It doesn’t matter if it’s a product, if it’s an education product, or a fintech product, or a health care product, what we’re doing is backing businesses in that model that says, “We want to widen the gap between haves and have nots. We’re going to make health and quality of life and good food and good education, we’re going to make all of those things available only to the wealthy.” Not only am I not interested, I am worried about where that trend goes.

So you think there are only going to be enough folks in the Valley who feel, “Problem solved. We’ve added enough women to the firms.” You think it’s not just like a distraction, you think it’d actually be a negative because it’s ...

Well, I don’t know that women are any more likely to start those companies than men. But I think if what we do is count the number of women partners, and if those women partners are white and Asian and went to the same schools and grew up in the same zip codes and now live in the same zip codes as their male partners, that doesn’t get me very far on diversity.

And I mostly care what we’ve seen in our experience. And that’s what I mean, people like to paint this as negative. Every single day I am awestruck, I am inspired by the entrepreneurs that come to pitch us. And they are from every walk of life, from every background possible, every combination of family circumstances, of race, of religion, of age, of gender, of LGBTQ status, disability.

And it is their lived experience that generated that “aha” moment: “I have a great idea for a business.” And so to be able to back an entrepreneur like that, and to see a business grow, when what the success of that business means is that we’re solving a real problem. We are not exacerbating income inequality. We are closing that income inequality gap.

We have tons of positive solutions and there is a model that works, and I can’t wait until we release our returns because people who only care about greed are going to say, “Well, I can make a bunch of money and happen to make the world a better place at the same time.”

Right. Isn’t the counterargument, though, that by not focusing on the numbers of women VCs in the business, that it’s harder to track progress? I think a lot of the women of, for instance, All Raise, which is a group that their stated objective is to increase the number of women in firms and the amount of, the proportion of capital that goes to women founders, that’s easily trackable. Right?

You can quibble whether this person’s a partner or not, but they can have a clear sense of success and failure. I guess the counterargument to some of the argument you’re making would be that ... how do you know on kind of these broader cultural points about, are we improving? Are we reducing inequality? It’s a more complicated holistic question.

Well, so first of all, if all you’re doing is counting women and they’re white and Asian, and you’re not including African-American and Latinx women, that’s a huge problem. If all you’re doing is replicating, again, the same zip codes ... It’s a fact that the Valley likes to ignore the majority of white women voted for Trump and everything that goes along with it.

And I have had many a white woman say to my face that the SMaSH program I founded 16 years ago, Summer Math and Science Honors Academy, which is a residential program for underrepresented high school students of color. They live all three years of high school, all three summers, they live on a college campus. It closes the academic preparation gap. It builds social capital.

The outcomes of the program are stunning. We create twice as many African-American, Latinx, underrepresented Asian high school students who go on and graduate college with a STEM degree in five years. We turn out these first-generation kids at twice the rate of all college graduates. Just an absolutely amazing outcome.

When I’m talking to affluent white women about the program, more often than I want to count, a finger gets pointed at my face and says, “Your kids are taking my kid’s spot away.” I don’t want those women investing. That’s not any kind of progress. That gets you the college admission scandal we have right this minute.

Right. We’ll talk about it in a little bit. And what do you make of All Raise here?

Look, I think All Raise is incredibly well-intended, and I think they didn’t dig in and do their homework. They didn’t do due diligence like VCs ought to do due diligence. One of the things is, it matters who’s around your founding table. It matters who’s there, whose voices are there when you design your organization and its purposes. I think had they had a different group of women around the table, they would have a different set of goals and their organization would look different.

You see All Raise, the fundamental problem was the beginning. It was too white, too Asian, too insidery, maybe, to a certain extent?

Well, I think here’s what I would say: I would say that they set their standards too low. That if all they were seeking to do is increase the number of privileged women who become partners at VC firms as VC currently exists, that’s an incredibly low bar. And don’t you want to think about VC 2.0? Don’t you want to think about making the industry better on all dimensions of diversity?

And there are a lot of people who are trying to hold tech and VC accountable now. And look, the industry has brought it on itself. And a different group of people sitting around that table could have tackled a bigger issue about where has VC not done what it could do? How would we help VC live up to its potential?

Do you think the focus should be less so, then on … for instance, All Raise, which I realize I didn’t actually introduce is the movement of ... I would say it’s pretty popular among the senior women in VC. There are not many holdouts. And they were started in early 2018 as part of an effort to improve diversity.

So they have two goals. One of their goals is what we were just talking about, which is to improve the number ... I believe it’s to double the proportion of ... I don’t want to get it wrong. But it’s to improve the number of women, senior partners, at US VC firms. Their second goal, which I want to get your take on, might be more amenable to you, which is to actually improve the proportion of money that’s going to female founders. Do you see that as less misguided, because it’s more relevant to the actual outcome, which is improving the outcomes for women entrepreneurs?

Misguided is your word, not mine. And I think that those goals are too limited. And again, the example I gave of being pitched by a very prominent VC about a startup founded by two women that is going to be gap-widening. I care about the kinds of companies, and who benefits from those companies, more than counting the numbers of women VCs.

Women entrepreneurs are starting companies, some of which are gap-widening and some of which are gap-closing. And so I am interested in helping bring about improving the VC sector, and therefore improving who gets funded to build what kinds of companies.

Is there a metric that you think would be better? The critics would say … What sort of metric is the best way to assess progress here on improving diversity in ...

I think improving diversity in venture capital, that the aspiration shouldn’t just be women. That the aspiration should be intersectional when it talks about women, and it should be men of color, underrepresented men of color, as well. And I think, why would you not want it to be representative of the US?

And so the aspiration ... We talked to our founders about their own teams, and we don’t dictate anything. We don’t prescribe numbers for them. We say, “Here’s your aspiration. Build a team that reflects your customer base.” Now, if you stop and think about it, there’s nothing radical about that at all, and actually it sounds like a pretty good business strategy.

And so why haven’t we adopted that more broadly in VC, towards both their own investment partners and towards the companies they fund?

It’s maybe more of a focus on the people who actually interact with the products, and less on the founders and the VCs, which are sort of means to an end. Right? Those are ...

Well, I think who the VCs are and who the founders are is critically important, because as I mentioned, it is their lived experience that generates ideas. Look, it was somebody’s lived experience to generate Juicero, right?

It was a white male founder.

Okay. And somebody thought there was a big need for that. Well, actually I’m much happier to have invested in women of color who started an ed tech platform that’s serving more than 15 million of the world’s poorest students. You tell me, on what scale do you measure those?

Right. Right. Have you had any interactions with All Raise recently? Or what’s kind of your ...

Yes. Jess Lee and I had a fabulous conversation at the conference where I saw you, Teddy. The UpFront.

UpFront. Yes.

And we’re getting together with a few people from our team and from All Raise. It’s been probably a year ago that I offered, when they were going to start a mentoring program for founders, and I said ... I reached out and actually one of the women who started part of that effort is a founder in our portfolio.

And I reached out and I said, “Hey, let me help you so that you don’t forget to have an intersectional lens,” because the kinds of obstacles in front of African-American women entrepreneurs, Latinx women entrepreneurs, Asian women entrepreneurs, LBGTQ women entrepreneurs, the kinds of obstacles they encounter are very different.

And this is where my research hat comes on. And we went and we did a study, we published our Medium post: African-American women and Latinx women entrepreneurs are recipients of almost 10 times as much inappropriate touching from VCs as are white and Asian women. That’s appalling. And if you’re a white woman entrepreneur mentoring a black or brown woman entrepreneur and you don’t know that, you can’t possibly be a good mentor to her.

Do you feel like you are as much of a contrarian as maybe people think publicly? Do you think there are a lot of people who quietly ... Because we were talking before just about All Raise is very popular. There are a lot of people who, at least among the elites in the industry who are ... That seems to be the mainstream opinion. Do you think there are people who kind of quietly reach out to you and say, “I agree with what you’re saying. I just don’t want to be public about it.”

Oh, it’s not speculation. It’s a steady stream of conversations, email, “Can we talk? Can we meet for coffee? Can we meet for dinner? Can we meet for a drink? I can’t say this publicly. I’m worried about the backlash,” and that thanked us. And look, I mean, I think you’re still trying to paint me as anti-All Raise. I’m not anti-All Raise. They have the best of intentions, and as I’ve been saying for decades, sorry, intent doesn’t matter. Impact does.

That’s the main thing.

So when black and brown women entrepreneurs, black and brown women VCs, investors, walk in to that gathering, do they feel welcomed? Do they see themselves? Do they feel this like group has my back?

Big question before we toss to a break, if you were God here and you were designing ... I think part of the challenge is that we’re trying to change the venture capital system based on how it currently is, and there’s so many things you can do. If you were God and you were starting over and you were designing how venture capital and how companies were funded to make sure that underrepresented groups were represented, what would it look like?

Well, I think it would have many dimensions. It would have much more concern for, who’s sitting at the table? It would have much more concern for, what are the pathways in for entrepreneurs? There are many practices in VC that are inherently biased. So this notion of a “warm intro,” and we’ve seen many a famous VC make public statements about “if you can’t figure out how to get a warm intro to me …”

Screw you, right?

Yeah, “screw you. We don’t want to talk to you.” Well ...

You can see that’s very obvious how that would limit the pool of people?

Completely. Your zip code isn’t close enough to mine. It’s completely biased, and it’s confusing accidents of birth with accomplishment.

You’d get rid of the warm intro.

Get rid of the warm intro. What’s really interesting is we’ve gotten rid of the warm intro. People can send us their pitches directly over the website. We have invested in companies whose pitch decks come in over the website and none of us know anybody who could’ve introduced them to us. And they are businesses that meet our investment criteria.

And our investment criteria are pretty rigorous. And we see, between what comes to us individually and what comes over the website, we see about 3,000 deals a year. It’s the criteria of investing that I would change, and the criteria for those investments, by definition, means you change who the entrepreneurs are and who the investors are.

We’re here with Freada Kapor Klein, the founder of Kapor Capital and a leading advocate for impact investing. Do you want to just define quickly how you define impact investing? What does that mean to you?

Well, I’m so glad you asked because impact means anything to anybody these days. Right?

Right. Impact is the impact on my wallet. Yes. That’s impact investing.

Yes, exactly. Exactly. Kapor Capital has very specific investment criteria. And we are looking at impact that means closing gaps of access, of opportunity or outcome for low-income communities and/or communities of color. From every tech product or service, somebody benefits, and we’re looking at who benefits. Is that going to widen gaps? Is that going to make society in whatever dimension it is more unequal? Is it going to close those gaps? We are completely sector agnostic. We have investments in education, in health care, in fintech, in criminal justice, in people ops.

How do you define impact investing versus just like charity or philanthropy, which you guys do also? Where’s the line between those two things for you guys?

One is money going out and the other is an investment where you expect not only to make your money back, but you expect to make a return.

Right, and so you’re not doing, you know, if there was someone with a great mission who is asking for you guys to buy stock in their company but you felt their business plan was terrible, you wouldn’t, you guys would not do that deal. Maybe you would fund it through your philanthropy or something like that, but you would not consider that. I guess that disqualifies on the second part, which is that it’s investing.

It’s investing.

It’s investing.

It has to be a kick-ass business. It has to be a tech business.


It has to meet all of those criteria. And there is no shortage. One of the things, going back to our earlier conversation about VCs and diversity, one of the most interesting things that has popped up every time we pop up with something, our Uber letter in 2016. Early 2016, we were the first venture capital firm to put in a founder’s commitment. We only write checks for the last three years to founders who sign on to build inclusive cultures and diverse teams. With great regularity, we get approached by VCs who say, “I want to increase the diversity of my deal flow. How do I do that?” We say, “Easy. Increase the diversity of who’s sitting at the table.”


We can track the inbound deal flow by the race and gender and schools and every other kinds of dimensions of the people sitting on our investment team. It’s who entrepreneurs feel comfortable reaching out to.

Sure. So impact investing … We’re recording this in mid March. It’s become in vogue among billionaires and among other people in the wealth world who think that — I don’t know whether it’s PR motivated or if they genuinely believe it. It’s in the news right now because one of the most prominent investors, at least in Silicon Valley who has been an advocate for impact investing is Bill McGlashan, who set up this fund at TPG, the private equity firm called The Rise Fund. He’s been pretty vocal advocate for the idea that even in private equity, you can fund good causes and make money.

McGlashan, a couple of weeks ago now, was implicated and is being arraigned I think next week in this college admissions scandal, which you would think that it’s hard to square kind of the actions that he allegedly took with sort of the entire premise of the impact investing mission — which is, we are supporting, we believe in fair play, we believe in leveling the playing field. I’m just curious what you made of the whole scandal and how you squared some of the impact investors with their involvement allegedly in this pretty heinous scheme.

Well, when the scandal broke, it’s both outrageous and not at all surprising. It is the extreme end of the spectrum of what goes on every single day and it’s completely legal, which is rich people jumping the line. What the Rise Fund guy did is exactly what I was describing earlier when it’s mostly white women and it’s mostly moms who come and tell me that my program, SMaSH, is taking away their kids’ spot. You know what? I really think is your kid got every possible unfair advantage you could buy them. SAT prep courses and coaches and summer college essay-writing camps and on and on and on. If your kid still couldn’t get into college, like, hey, you know, I guess that kid’s not so smart!

Right. That’s pre-buying a building, that’s pre- sort of using anything. I mean, buying a building, that’s legal. I mean, that’s pre- doing anything illegal.

Exactly. Exactly. I think what we have to do — and this is deeply tied up with technology and with the VC world in particular — we have to once and for all take a deep hard look at the BS notion of meritocracy. This society has moved farther and farther and farther away from being meritocratic for many decades. As one venture capitalist put it recently, that the last 50 years, there’s been a bull market in inequality. I think we have to look at all of the forces including the ways in which tech has made things worse.

Yeah, and including college admissions, right?


I think it’s pretty hard to defend the college admission system as meritocratic.

Mitch and I, more than a decade ago, I think it was 2007, Mitch and I wrote an op-ed in the San Francisco Chronicle, right around the time when early decision or early action notices come from colleges, which is right around November 1st, right?

November, yeah. Right.

It turns out only rich kids apply early action, early decision, and the odds are much better of getting in early action or early decision. Right there, it’s rigged towards the privileged. Kids from low-income backgrounds, have to weight and compare their offers and especially compare their financial aid packages.

We wrote an op-ed — talk about contrarian — where we said, how about if college admissions, college applications, ask you to list every SAT prep class, every coach, every thing, every purchased college access thing you as a parent did for your applicant? Same thing if you lie on this application and we find out next week, we find out when your kid is a week away from graduation, your kid is kicked out. Colleges could do whatever they want with it, but they could try to create a level playing field.

At least consider it, right? You know?


Which I’m sure some colleges might sort of try to do that with ...

Yes. Comprehensive review, it’s called.

I mean, you can argue about how effective it is. Maybe someone talks about their upbringing in an essay, right?


I mean, I doubt they’ll talk in their essay about the SAT tutor they had who changed their life, but maybe they’re talking about growing up poor or something like that, and then maybe they would consider, maybe they wouldn’t.

What actually shocked me — you’d think I wouldn’t be shocked by this stuff anymore — but what shocked me is that people write fake essays. You can hire somebody to write that essay to make up a good story about your upbringing that isn’t even true but that is just a good story.


There’s one venture capitalist who heard me talk about distance traveled. I’ve learned about distance traveled from working with our SMaSH scholars and our predecessor program, IDEAL scholars before that and really that there’s something there that we don’t know how to measure. If we did, it would tell us a lot about college admissions. It would also tell us about entrepreneurial talent. A VC has quoted me in print a number of times and says, “let’s start a project.” We convened about a dozen college admissions officers and we are starting to build a distance-traveled metric for college admissions. The colleges can use side by side ....

Do you want to explain what distance-traveled metric would mean?

Well, distance-traveled metric would be to look at, where did you start life at? Were you born on third base or were you born miles from the ballpark? Where did you get to on your own steam? As opposed to, what were the purchased advantages for you? For instance, kids who get unpaid internships because mom or dad or the next-door neighbor works at that place. Yes, you had some experience, we don’t actually know what it was, but it was not a merit-based award. It belongs in a different bucket than competing for an internship.

Right. Do you think colleges have been receptive? I mean, so you’ve seen, I mean, some colleges have scaled back on early admissions at the elite levels over the last five years or so. Obviously, a lot of colleges now have need-blind financial aid — or allegedly need blind financial aid programs. You’ve seen stated emphasis on recruiting a more diverse class with various levels of success. How would you rate the movement within college right now, within kind of the more elite colleges, on actually improving diversity and taking this issue seriously?

Well, I love the book, Winners Take All, Anand’s perspective.

He’s been on this podcast, right?

I think we did a book reading with him over in Oakland in the fall. I think what he points out is reminding us to look at how far have we gone. If college admissions, all the things you described are wonderful steps in the right direction. Now, when are you going to get rid of legacy admissions? If that’s still a third of your class, that’s a really different message than, “We care about diversity.”

Sure. Explain this. I feel like, I mean, legacy admissions, it’s a reflection of interest groups, right? It’s a reflection of alumni who are a powerful interest group, who don’t want to see a change. I think the challenge for people who want to see more diverse classes is that someone like you, they don’t really care what you think, necessarily. They care what the alumni association thinks. Right? The stakeholder is the alumni association and they want legacy admissions. I’m skeptical that actually changes, I guess, is my big picture. Unless there’s overwhelming outside pressure, which maybe you’ll bring that.

Well, we’ll see. We’ll see where that goes. You know, the University of California system, UC Berkeley is usually the top-ranked public university in the world and it doesn’t do legacy admissions. I think sometimes you … pointing to examples where things have been achieved I think is sometimes helpful. We know we can do that in the same way that we know we can make boatloads of money doing only impact investing and having our founders sign a founders commitment.

Right. Going back to the McGlashan news here, I guess to a certain extent, does that jeopardize the impact investing movement more broadly? Is it one bad apple?

I hope it doesn’t. I think what it does is points to a need to get more nuanced and distinguished between different kinds of impact investing. Because that fund, as I understood it, it always reverted back to the standard TPG investment committee. It still had to go through the usual mechanism.

Probably the most impactful things we’re going to get weeded out at that point ... I think a firm that we don’t know anywhere near enough about is Generation Investment Management. They’ve been around for 15 years. They’re London-based. I see you wracking your brain to see if you’ve heard of them.

Yeah, I’m trying.

They do have a small San Francisco office. They were co-founded by David Blood from Goldman Sachs, who’s one of the few partners who voted against the IPO at Goldman, and Al Gore.

I didn’t want to say it before you said it, I was like, isn’t that Al Gore’s thing?

Yeah, it is.

I guess I do not get points from the podcast for remembering it.

I saw that glint of memory!

I want the listeners to know I thought about it. There you go.

I saw that glint. Okay. They’ve been around for 15 years. They waited until a decade before they released their returns. They turned out to be in the top five funds in the world, not top five impact, not top five sustainability. They’ve been in the top five every year ever since. They have well over $20 billion under management. They’re not a little side fringe anything. They’re just not very good at tooting their own horn.

Right. Obviously, I remember it.

I’m happy to give them all the credit that is due. Mitch and I have been involved with Generation Investment Management since basically the beginning.

That was the last thing I want to ask you about is like, what do you feel good about these days? Do you feel like, obviously I know there’s a lot of things happening in our politics right now. There’s a lot of things happening in our systems of inequality. How optimistic are you these days about just the world?

I’m incredibly optimistic, which is why it’s so odd. I keep being painted in this contrarian corner, but I am incredibly optimistic. Every single day I get to hear a pitch at Kapor Capital, I’m just awestruck about the creativity and the enthusiasm and the drive that people who’ve been given the short end of the stick turn into this really positive kick-ass entrepreneur, great business, going to help everybody. We see them over and over in every sector.

I’m incredibly inspired by our Kapor Capital entrepreneurs. I think we’re going to get some attention, as I said, when we release our returns. We’re opening our eighth SMaSH campus this summer. I will visit all of them and I will say to each and every class of SMaSH scholars on eight campuses around the US that A) I’m old; B,) I’ve had a great life; and C) the best day of my life is yet ahead, and that is when I write a Kapor Capital check to a SMaSH alum who is starting a business.

That looks like a full circle there.

Yeah, exactly.

Right. Are you planning on getting involved in the 2020 campaign at all?

Well ...

I assume lots of people want your advice.

No, no, no, no. A lot of people want our money.


Let’s be clear about that. When they ask for “advice,” I know that they’re really asking for a check and they’re just thinking that’s the easier path to getting money. So far, not involved.

Any candidates talking about the issues that you think are most aligned with you? Any early favorites?

Well, again, I mean this is representative of bias, I suppose. The candidate that we’ve had the most interaction with over all the years is Kamala Harris from when she was here in San Francisco and Mitch did some transition team tech advising. We know her to be receptive and she is in — as many are pegging her — she’s more the middle of the pack.

The Elizabeth Warren proposals don’t scare me at all. I know that there’s a lot of my colleagues in Silicon Valley who thinks she’s gone too far, who think all of that is crazy. I think it’s great that we’re having conversations about what to do about taxes and carried interest. I think it’s fabulous that we are having conversations about reparations in this country. Long, long, long overdue.

Right, the conversation was nowhere part of the 2016 Democratic primary but now it’s at the forefront.

Exactly. The other thing I’m really happy — I don’t know, “happy” is a funny word — that I am inspired by is last week I was part of a group of 11 founding foundations who’ve come together, pooling more than $20 million, to support the work of on-the-ground women of color organizers that came out of #MeToo. These are farm workers, these are domestic workers, these are hotel workers.

One of the things that I find really inspiring is that #MeToo in Hollywood has shared the stage with hotel workers, with farm workers. That was one of the things I pointed out. I would love to see women in VC share the stage with those who have been gentrified out of San Francisco and Palo Alto and elsewhere because of tech.

There you go. Freada, it was great talking to you. Thanks for coming on the show.

My pleasure.

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