Why you should care
Because what once seemed a natural partnership is fraying in the heat of the 2018 midterms.
On a blistering Baltimore County day when temperatures would reach the mid-90s, former NAACP president Ben Jealous should have been in friendly territory as seven Democrats endorsed him during the outdoor press conference. But just a few blocks away, his opponent, Republican Gov. Larry Hogan, was announcing an endorsement from one of Jealous’ own party members, Democrat state Sen. James Brochin, who accused Jealous of pulling the party too far to the left. The intraparty betrayal came after recent Republican ads and Hogan himself had accused Jealous of being a socialist.
So Jealous swung to the other extreme. “What I am is a venture capitalist, and what I do is invest in growing businesses,” responded Jealous, who has been a Maryland-based partner at Oakland, California, firm Kapor Capital since 2014. When a reporter pressed him again on whether he identified as a socialist, he snapped back: “Are you fucking kidding me? Is that a fine enough point?”
Jealous later apologized. But lost in the sanctimony over his expletive was a more surprising reaction: criticism from his own party. Not for his choice of words, but for describing himself as a venture capitalist. “This is about the worst answer you possibly could have given,” tweeted Alex Staherski, a Baltimore-area audio engineer and self-described “card-carrying socialist.” Others on social media chimed in, one calling Jealous a “vulture” capitalist and another saying he bought into “right-wing framing” of the term and “alienated a whole base of natural allies.” Others expressed their feelings of betrayal in that oh-so-devastating method of modern communication: GIFs.
— alex kliner (@akliner) August 8, 2018
The episode highlighted a new tension forming within the Democratic Party, between venture capitalists and tech entrepreneurs and the progressive left wing they typically have associated with. That conversation is happening across the country as venture capitalists show renewed interest in expanding past private enterprise and entering politics — typically as Democrats.
In May last year, Y Combinator president Sam Altman publicly considered running for California governor before pulling out to recruit Democratic candidates around a VC-focused policy platform, addressing issues like automation and housing costs. Josh Harder, a former Boston Consulting Group employee and Bessemer Venture Partners vice president, is running for Congress in California’s 10th Congressional District — taking on incumbent Jeff Denham, one of seven California Republicans defending districts Hillary Clinton won in 2016. And in Kansas, Brian McClendon, a former Google executive and Kansas City venture capitalist, is now the Democratic nominee for secretary of state.
Venture capitalism is … predicated on a bunch of people failing and a couple of people making a shit-ton of money.
Cayden Mak, executive director, 18 Million Rising
For sure, venture capitalists align themselves with Democrats politically. Three-quarters of tech entrepreneurs voted for Hillary Clinton in 2016, while almost all support same-sex marriage and roughly four-fifths support abortion rights and gun control, according to a study by Stanford political scientists released last fall.
But with surging skepticism across political lines of Big Tech — consider the scrutiny of Facebook and Google for data collection and content curation — venture capitalists are on the way to joining Wall Street bankers and business tycoons in drawing hostility from an energetic left wing of the Democratic Party. At the progressive national conference Netroots Nation in August, an entire panel called “Digital Sanctuary: Engineering Tools and Models for Racial Justice” was organized around activism against what was perceived as tech evangelists enforcing a neo-capitalism, predicated on abusing personal privacy, that doesn’t help common workers.
Many of these candidates are pitching their VC background as a crucial part of what makes them business-savvy. “I know how to make more small companies be successful, and that’s a message that resonates with both Republicans and Democrats,” says McClendon. In California, Harder touts immigration reform, a move that unites his experience in Silicon Valley (where high-skill immigrants are courted by tech companies) and the dusty Central Valley (where the Hispanic population is large, and agriculture companies complain about not having enough foreign workers). Venture capitalists know how to back out of bad deals, how to stay true to their word because trust is their currency and how to make decisions based on facts over ideology, argues John Aristotle Phillips, founder of Aristotle Inc., a large bipartisan campaign technology firm in Washington. “Venture capitalists are able to spot something before others. But they are meticulous also,” he says.
On a recent weekend in Maryland, Jealous tells a crowd of seniors: “I’ve spent the last five years building small companies into big companies, investing in startups that do right by working people, creating jobs in Maryland and across this country.” Yet one of Jealous’ favorite stump speech anecdotes is about the time he realized universal, government-funded Medicare-for-all was a necessity for America. After he convinced a Canadian factory to move to Baltimore, the Saskatchewan-based business pulled out at the last minute because of the exorbitant cost of providing employee health care, Jealous says.
That combination, of a capitalist résumé on the one hand and policies like Medicare-for-all and free community college on the other, has opened Jealous up to criticism. Namely? “That [his pro-market résumé] and being a socialist are not mutually exclusive,” says Marta Hummel Mossburg, a visiting fellow at the right-leaning Maryland Public Policy Institute. Jealous argues that the outrage he faced over his capitalist-socialist remarks was overstated. “I won an eight-way Democratic primary by 10 points, having started in fourth,” he responds.
But this election season, critics of venture capitalists are accusing them of being carpetbaggers. That was the charge Democrat and labor activist Valerie Ervin, who briefly ran for governor of Maryland herself, leveled against Jealous for receiving more small donations from Californians than Marylanders. Both Harder and McClendon have spent most of their careers in Silicon Valley and outside their districts, going to where the wealth and opportunity of startup investing lies. Republicans, in turn, have run ads criticizing them for not representing local values.
McClendon argues he is “well-inoculated” from that attack. “I’ve been promoting Kansas and my hometown [Lawrence] throughout that time” away, he says. But traditional arguments that made venture capitalists easily acceptable to Democratic voters are wearing thin. “Venture capitalism is a very specific way of funding businesses to get started that’s predicated on a bunch of people failing and a couple of people making a shit-ton of money,” Cayden Mak, executive director of Asian-American activist group 18 Million Rising, told Netroots attendees. “The rest of us will fail.”