Principles and Practices of Gap-Closing Investing

Abstract

This thesis examines the principles and practices of gap-closing investing, a distinctive model of early-stage venture capital investing that seeks to close gaps in access, opportunity, and outcomes for low-income communities and communities of color. Developed by Dr. Freada Kapor Klein and Mitchell Kapor through Kapor Capital, gap-closing investing integrates social impact objectives with a performance-driven investment strategy. The thesis combines historical analysis of socially responsible investing and impact investing with case studies of venturebacked startups to situate gap-closing investing within a broader tradition of values-based finance. It traces the ethical roots of impact investing to religious traditions, the emergence of socially responsible investing funds in the 1970s, and the formalization of impact investing terminology in the late 2000s. Gap-closing investing is distinguished by a developmental approach to startup growth, a redefinition of founder selection criteria emphasizing “distance traveled” over pedigree, and a focus on mitigating structural barriers through capital allocation. The thesis critically compares gap-closing investing to Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) frameworks, arguing that gap-closing uniquely centers systemic impact as a core investment goal rather than a secondary consideration. The findings challenge the perception that impact investing is inherently concessionary, using performance data from Kapor Capital’s portfolio to demonstrate that intentional, equity-focused investing can produce both superior financial returns and measurable social outcomes. Gap-closing investing is presented as both a pragmatic investment strategy and a model for using venture capital to drive systemic change toward a more inclusive economy.