The two men walked on the beach near Kapor’s house on Martha’s Vineyard as Jealous explained he might join several corporate boards and enroll in business school.
But Kapor said he thought sitting in a classroom would be a waste of talent for Jealous, a Rhodes scholar credited with re-energizing the nation’s oldest and largest civil rights organization.
“He said, ‘Why don’t you come work for me and you can teach me about social impact and I can teach you everything you need to know about investment?’” Jealous recalled.
After meeting with Kapor and other tech entrepreneurs at Kapor Capital’s offices in California, Jealous found a new calling as a partner at the firm, helping it find small companies working on social justice issues in need of seed money that wouldn’t otherwise have connections to Silicon Valley.
Republicans have attempted to label Jealous, the Democratic candidate for Maryland governor, as a “socialist” who lacks the financial sense needed to run the state’s $44 billion budget. But in his career, Jealous has quietly spent the past five years as the complete opposite, a venture capitalist seeking to apply novel, market-based solutions to tackle social problems that government efforts have failed to improve.
“We wanted to show the world you don’t have to sacrifice your values to succeed in business,” Jealous said.
He said his business background prepares him for the job of governor far better than Gov. Larry Hogan’s experience as a real estate developer.
“I run the only Baltimore office of a Silicon Valley seed stage investment firm,” Jealous said. “Larry Hogan likes to tell people he’s never met me. My question is, ‘If there’s only one Baltimore office of a Silicon Valley seed stage investment firm, why has he never reached out?’”
At Kapor Capital, Jealous said he learned the value of its investments in socially conscious start-ups such as one that offers an alternative to cash bail and another that improves education for inmates. But one of the firms Jealous backed was accused of violating payday lending regulations and fined millions.
The Democrat’s campaign provided The Baltimore Sun with a list of 21 companies that Kapor Capital invested in at Jealous’ urging during his five years at the firm. Interviews with several of those companies show they were able to create dozens of new jobs thanks to the seed money.
“Ben Jealous has been extremely supportive,” said Sebastian Seiguer, CEO of emocha Mobile Health Inc., a Baltimore-based firm that developed an app to help patients properly take medicine. “I’d say he was extremely businesslike and very focused on creating jobs in Baltimore city. We’ve hired more people onto the team and we’ve doubled our revenue since last June.”
Thanks to Kapor Capital’s investment, Seiguer’s small firm grew from seven employees to 16.
Jealous led Kapor investments into firms that help minority churches and nonprofits reduce energy bills; connect cancer patients to treatment options; and provide jails with tablet computers to improve inmate education. Others work to bolster enrollment in Obamacare; connect caregivers with older adults; and help indebted families rebuild their credit scores.
“Many of the companies Ben has invested in have socially conscious missions” that align with his work as a civil rights leader and with his gubernatorial platform, said Kevin Harris, a senior adviser to Jealous. Those missions include reforming public safety and criminal justice, expanding access to health care for low-income individuals, making college more affordable and improving public education, he said.
Jealous, who remains on Kapor’s payroll, said he will step down from the firm — whether he wins or loses the governor’s race — at the end of the year. He said he already divested from all the companies in which he held a stake.
From 2015 to 2017, Jealous, 45, earned $1.3 million at Kapor with an average annual income of $443,000, according to his tax returns.
By contrast, Hogan, 62, has not divested from real estate holdings that span the state, opting instead to put them into a trust managed by three of his former top aides at his firm, The Hogan Companies.
Hogan has made $2.4 million during his first three years as governor, largely from his corporate holdings that include stakes in commercial real estate deals as well as residential and retail developments around Maryland.
“The Hogan administration doesn’t understand the 21st-century economy,” Jealous says. “What we did in venture capital is take founders creating their first or second business and create a rocket ship for them to grow quicker.
“Larry is a land developer and that’s a type of business,” he added. “Frankly, the rest of us are out here figuring out how to bring new businesses to market and grow them rapidly.”
The Hogan campaign said they welcome a discussion about the two men’s business backgrounds. Prior to becoming governor, Hogan grew the company he founded into a firm that has completed more than $2 billion in real estate deals since 1985. It has about a dozen employees.
“Ben Jealous should not confuse the ability to run a successful business with the ability to write a check and reap the profits of someone else’s work,” said Doug Mayer, a spokesman for the Hogan campaign.
Mayer added that Republicans’ criticism of Jealous has less to do with his day job and is more about his platform, which would rapidly grow the size of Maryland’s government and require new taxes if enacted, particularly his proposal for universal health care.
Among the firms Jealous backed is Allovue, a Baltimore-based school software firm.
The company had been turned down by Kapor in a previous bid for funding, but Jealous helped pave the way for a second opportunity, said Jess Gartner, the company’s CEO.
“He was one of the people who just immediately understood the work we were trying to do, and the importance of it and the social impact of it,” Gartner said of Jealous. “Because Ben has such broad experience both with the NAACP and with business, I think he can uniquely evaluate companies not just for viable business ventures, but from an equity standpoint and from a quality of life standpoint.”
Gartner said her firm has grown from eight employees to 25, thanks in part to Kapor's investment.
One firm Jealous invested in has run into legal trouble.
Jealous describes San Francisco-based LendUp as an anti-payday lending firm that “is a leading voice for eradicating underhanded lending practices.” But federal and California authorities have taken a different view.
Both the U.S. Consumer Financial Protection Bureau and the California Department of Business Oversight fined the company nearly $3 million. The California agency said its $2.68 million fine resolved “allegations that it charged illegal fees and committed other widespread violations of payday and installment lending laws,” according to a statement.
Mayer said Jealous should have known better than to get involved with such a company.
“Ben Jealous’ payday lending company was so seedy that the Consumer Financial Protection Bureau created by President Obama and Elizabeth Warren and the state of California fined this company millions of dollars for its anti-consumer practices,” Mayer said.
In a statement, LendUp officials said the ”enforcement actions focused on issues from the company’s early days, and we deeply regret our missteps.” The firm said it has “fully resolved” the enforcement actions against it and is “a very different company today.”
Even so, Hogan’s campaign on Thursday called on Jealous to return $4,500 in campaign donations from LendUp officers.
After an event in East Baltimore on Thursday, Jealous defended his involvement with the firm, which offers lower rates than traditional payday loans and lets customers build credit.
“There were no consumer complaints. Consumers have universally praised LendUp for years,” he said. “It’s the only company out there providing a pathway out of payday lending for people trapped in the payday lending industry.”
Kapor officials say Jealous also was active in locating businesses started by ex-offenders and that provide help to Baltimore’s schools.
Jealous worked with Damian Drake, a Morgan State graduate who is the founder of Pigeonly, which allows inmates to communicate for less money with relatives outside prison.
Drake had trouble getting access to capital to start his company “because many traditional avenues were not available, given that Damian had spent time in prison,” Harris said.
Jealous also worked with Donnel Baird, founder of BlocPower — a start-up that markets, finances and installs solar and energy efficiency technology — to see if the company could help the Baltimore public schools with their heating issues after students sat in freezing classrooms at dozens of schools last winter.
Baird is “continuing to work with the [school] system on solutions at Ben's urging and guidance,” Harris said.
Freada Kapor Klein, founding partner of Kapor Capital and Mitch Kapor’s wife, called Jealous “the smartest person we’ve ever worked with.”
“He really did learn the fundamentals” of how to grow a strong business, she said. “He’s a venture capitalist. It’s a certain kind of capitalism. It’s capitalism for good. It’s capitalism with a moral backbone.”
She said she’s “very sad to lose him as a partner.”
“But I think the highest use of Ben’s skills is in public service,” she said.
To that end, she and Mitch Kapor have invested heavily in Jealous’ campaign. Together they have contributed $24,000 to the campaign accounts of Jealous and his running mate, Susan Turnbull, the maximum amount permitted by state law. Kapor also contributed $50,000 to Maryland Together We Rise, a political action committee established to elect Jealous and supported by one of the state’s largest unions.
Todd Eberly, an associate professor of political science at St. Mary's College, said Jealous would be wise to emphasize his record in the private sector more. But, he noted, Jealous could risk losing some leftist Democrats who view capitalism as a negative force.
Jealous won the Democratic primary with support from the party’s progressive wing that supports big government fixes such as a single-payer health care system and universal pre-kindergarten, not “small-step private sector fixes to problems,” Eberly said.
Melissa Deckman, chairwoman of the political science department at Washington College, said Jealous is struggling to get his message out about his business experience because he lacks the money to counter ads that paint him as a socialist. Hogan’s campaign has $9.4 million in cash on hand; Jealous has less than $400,000.
“Even if the message comes out how successful he was as a venture capitalist, I’m not sure it’s going to resonate,” Deckman said. “People think of those ads that call him a socialist, and he hasn’t had a compelling message to counter that.”