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When Venture Capitalists Talk "Equity"

Mon, April 16, 10:35am to 12:05pm, New York Hilton Midtown, Floor: Second Floor, Gibson Suite

Abstract

When venture capitalists talk about "equity," they typically mean the financial stake they take in a company in exchange for their investment. But in recent years, some of those venture capitalists actively funding education technology companies have started to use the word "equity" in a different way, framing their investment portfolios as part of larger school reform efforts, particularly those that purport to address racial and socioeconomic inequality (Saltman, 2010). 

It's possible the change in investors' rhetoric comes in response to the long-standing challenges that education technologies have faced: that these technologies exacerbate inequality due to the unevenness of access and the "digital divide," as well as to the differences in how they are used in the classroom (Reich, 2011; Hansen and Reich, 2015). This new definition of "equity" for investors could have come too as a response to challenges about the lack of diversity among those founding and working for ed-tech companies. But it's also likely a response to charges that education technology investment has been too focused on market outcomes (Ravitch, 2010), and this paper charts how a group of ed-tech investors have sought to identify themselves as committed to social change not merely profits.

This paper traces the changing narratives among education investors who have led the conversations about orienting education investors’ missions towards “equity”—those who position themselves as "venture philanthropists" rather than "venture capitalists," for example, and those who describe themselves as "impact investors." These include Kapor Capital, a venture capital investment firm founded by Mitch Kapor, designer of Lotus 1-2-3; NewSchools Venture Fund, a venture philanthropy firm; and most famously perhaps, the Gates Foundation and the Chan-Zuckerberg Initiative, the investment vehicles of Microsoft founder Bill Gates and Facebook founder Mark Zuckerberg respectively.

This paper addresses several questions: When did this conversation about "equity" emerge among ed-tech investors? Where did it originate and how did it spread? To answer these questions, the paper uses content and discourse analysis (Gee, 2006) drawing on the past eight years' worth of press releases and blog posts published by investors -- those touting their investments and their investment strategies -- as well as articles written in ed-tech industry publications that restate these positions. It will also examine the types of companies that these investors are backing: that is, which tools are described by venture capitalists as addressing equity issues? 

The purpose is less to address the question "does impact investing actually address inequality" but instead to examine the kinds of stories that venture capitalists tell about their investment portfolios and how these stories in turn shape larger conversations about technology's role in education politics and education reform. This research is particularly significant considering the growing role that technology as a product plays – not to mention the role tech investors and entrepreneurs play – in education politics and education reform.

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