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Social Purpose Capital Markets: Financial Capital for Social Entrepreneurs in Education

Like entrepreneurs in any other sector, education entrepreneurs must rely on a variety of resources in their quest for the money, people, and ideas they need to turn their vision into reality.

This paper – written by Kim Smith and Julie Petersen of NewSchools, for a conference on the supply side of school reform convened by the American Enterprise Institute (AEI) in October 2007 – focuses on the “social purpose capital markets” that provide funding to these entrepreneurs. It includes descriptions of the types of investors that comprise this complicated market and how they operate, the flaws in the market’s structure, and the ways in which these limitations could be remedied so that education entrepreneurs may realize their full potential.

This article will also be included as a chapter in a forthcoming book, The Supply Side of School Reform and the Future of Educational Entrepreneurship, edited by Frederick Hess of AEI and slated for publication by Harvard Education Press in summer 2008. This book follows up on a volume released in 2006, Educational Entrepreneurship: Realities, Challenges, and Possibilities, which contained a chapter written by Smith and Petersen that defines education entrepreneurs.