When a venture capitalist met a scholar

Bill Helman and Roland Fryer. (ILLUSTRATION: BARBARA KELLEY)
Bill Helman and Roland Fryer. (ILLUSTRATION: BARBARA KELLEY)


Bill Helman’s and Roland Fryer’s real-world experiment tests whether capitalism can be harnessed to improve income mobility.

When you hear a businessman and a scholar talk about doing well by doing good, you can be forgiven for being cynical. “Environmental, social and governance" investing and corporate management often amount to little more than rent seeking or virtue signaling at shareholders’ expense. But Bill Helman and Roland Fryer have something completely different in mind.

Mr. Helman, 65, is a venture capitalist; Mr. Fryer, 46, a Harvard economist. The two are an odd couple: Mr. Fryer wears dreadlocks; Mr. Helman has a receding hairline. Mr. Fryer talks animatedly; Mr. Helman is staid. In 2019 they launched a firm, Boston-based Equal Opportunity Ventures, that invests in startups with the goal of harnessing capitalism to improve income mobility and solve intractable social problems.

Mr. Helman is adamant that doing well is as important to the mission as doing good: “Some of the family offices that have invested said we don’t really care about the return, and our response was, ‘No, no, we want you to care about the return,’ " he says. “That’s the experiment here. We’re not doing this for charity."

Mr. Helman has spent nearly 40 years at the storied Silicon Valley venture-capital firm Greylock Partners, where he served as a managing partner from 2000 to 2013. Greylock provided early-stage funding to such tech companies as Airbnb, Facebook, Dropbox, Medium and Nextdoor.

Mr. Fryer in 2007 became one of the youngest professors ever tenured at Harvard. His research on the causes and consequences of racial economic disparities won him a MacArthur Fellowship, the so-called genius grant, in 2011, and four years later the American Economic Association’s John Bates Clark Medal, which goes to the best American economist under 40.

The two met more than a decade ago and immediately clicked. As Mr. Helman tells the story, an investment colleague had funded a research project that Mr. Fryer was leading. She thought Mr. Fryer was distracted by myriad other projects, so she asked Mr. Helman to intercede on her behalf. “I’ve been in venture capital, so I’m used to sort of out-of-control, wild-eyed ideas, and people behind those ideas being even crazier than the ideas," he says.

“I lived in Cambridge at the time. His office is at Harvard. We met, and I thought the 12 ideas he told me were fantastic and, actually, we came up with six more together. We did this in like 20 minutes or half an hour. Turns out I was exactly the wrong person to send to see him," Mr. Helman says with a laugh. “We just found ourselves in sync over creative ideas."

Messrs. Helman and Fryer started meeting once a month at a Harvard Square cafe to discuss ideas for exactly 29 minutes. Why 29 minutes? So they wouldn’t waste time.

“Bill’s way of thinking about the world was so foreign to me, because at Harvard, the idea of failing was really scary and people weren’t supposed to fail," Mr. Fryer says. “You were supposed to get things exactly right. And Bill would talk about entrepreneurs wearing failure like a badge of honor."

That wasn’t the only difference between the ivory tower and the business world. “Actually having to listen to customers was another foreign concept," Mr. Fryer says. He recalls that Mr. Helman once told an entrepreneur “something to the effect of, ‘You don’t have to listen to me, but you have to listen to the customers.’ " In academia, “you just have to get the theorems right. What do you have to listen to anybody for?"

One of Mr. Fryer’s perennial frustrations was that while his papers might receive academic acclaim, their findings weren’t translated to the real world: “I get a medal, nothing happens." So the two came up with the idea of launching what Mr. Helman describes as a “for-profit, market-driven set of solutions to big social problems in a venture fund." Mr. Fryer says: “For me, the idea of coupling for-profit ventures with real social science offered scale that I hadn’t seen a lot of academics achieve."

Equal Opportunity Ventures is structured like a typical venture fund. Investors pay the fund’s general partners a fee to manage their investments. As an incentive to earn higher returns, the general partners (which include others besides Messrs. Helman and Fryer) also receive a share of the profits as compensation—known in the industry, and sometimes vilified by politicians, as “carried interest."

Messrs. Helman and Fryer initially aimed to earn a 10% annual net return for investors after fees, but they later increased their target to between 20% and 25%. “Our entrepreneurs are better than we thought," Mr. Helman says. “There’s a whole bunch of younger people who want to really do something great for their world—and they want to make money."

One of them is Stepful, which trains people with little formal education for healthcare jobs. Students can become entry-level phlebotomists—who draw blood at labs—in as little as four weeks. Training to become pharmacy technicians and medical assistants requires four months—significantly less time than programs offered by technical and community colleges.

Stepful co-founder Carl Madi previously worked as a general manager at the website Handy, a marketplace for residential cleaning, installation and other home services. When Covid hit, many Handy workers struggled to find jobs and provide for their families. At the same time, hospitals and other medical employers desperately needed workers.

This got Mr. Madi thinking: What prevented Handy workers from going to work in medicine? “I thought there must be a better way to access healthcare jobs," he says in a phone interview. Stepful now trains 2,000 students a month for healthcare occupations. Some 90% of its trainees come from low-income households.

The cost for Stepful’s medical-assistant program is typically a couple of thousand dollars—roughly as much as a semester at a community college. But unlike community colleges, Stepful promises trainees a full refund if they don’t receive a job offer within six months of obtaining certification. Healthcare employers can also use Stepful to vet and train workers.

Graduates of Stepful’s programs see an average 25% increase in income. This is what Mr. Fryer terms the “social return" on his firm’s investment. “We are dead serious about calculating the expected income increases for every dollar that’s invested in our fund," Mr. Fryer says. “The question is: How many dollars in expected income did we produce back to neighborhoods across America?" He strives for a fivefold social multiplier on investment in job-training and education—every dollar invested increases expected earnings by $5.

“We know from lots of research that every one standard deviation increase in test scores translates into roughly 12% to 14% income increases per year," Mr. Fryer says. Hence, an education program’s impact on income can be extrapolated from its effect on academic achievement.

But quantifying the social return is harder for startups like Forage, which has developed technology that allows retailers to accept food-stamp payments for online purchases.

Co-founder Ofek Lavian says solving this problem has provided lower-income Americans more options for buying groceries. It also helps retailers expand their business. In March 2020, some 35,000 Americans used government benefits to buy food online. By April 2023, 3.7 million did.

How does Forage improve economic mobility and produce a social return on investment? Mr. Fryer says research shows “there is a very, very strong correlation between the power of your food stamps and mobility. Having food stamps where you can use your food stamps anywhere—that increases your purchasing power."

He stresses that EO Ventures isn’t trying to profit by encouraging more welfare spending. Instead, startups like Forage aim to help people make more effective use of government benefits. Another example is KaiPod Learning, a microschool platform.

KaiPod was founded in 2021 by Amar Kumar, who had helped design technology and curriculum at Pearson. As with Forage and Stepful, the idea was born out of the Covid experience. Mr. Fryer says Mr. Kumar “learned during the pandemic that people actually liked having their kids closer, but also that the schools didn’t produce as much value as they might have thought." Interest in home-schooling and learning pods increased as many students were stuck learning in front of screens.

KaiPod seeks to solve three challenges for parents who want to home-school their kids: academic support, child care and socialization. Students from different grades attend small academic centers where they learn at their own pace and socialize with peers. Parents control the curriculum.

Students can attend part- or full-time based on what best suits a family’s schedule. While kids learn individually online, they socialize during music, sports and art activities. “Learning coaches," typically former teachers, help keep kids on task. “This flexibility for families has been a real hit," Mr. Fryer says.

KaiPod started two years ago as a single site in Boston. Strong parent satisfaction and student academic achievement quickly caused demand to soar. The company now has centers in Arizona, Georgia, Florida and New Hampshire.

Also driving demand has been the growth of education savings accounts, which parents can use to pay for KaiPod in states such as Arizona and Florida. Mr. Kumar struggled to expand fast enough to meet demand, so he created an “accelerator" program to train parents and teachers who want to launch their own microschools. This has enabled KaiPod to expand its model to California, Minnesota, South Carolina, Texas and Virginia.

“How do you build much more choice? We just can’t build enough private and charter schools fast enough," Mr. Kumar says. “Microschools are quick to build and can be sustained in rural and urban areas. These become a solution in school-choice deserts. These are independent small businesses. They are a one-room schoolhouse brought to the modern era."

Mr. Kumar looks for an entrepreneurial drive and focus in his microschool “founders," just as Messrs. Helman and Fryer do in their startups. A “founder mentality," Mr. Helman emphasizes, is crucial to success. That means “this laser-like focus on a problem and solving that problem. We want this crazy, ‘I’ll jump over walls or I’ll go through walls to get to where I want to get to.’ "

Ms. Finley is a member of the Journal’s editorial board.

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