The Mismatch

VC and PE are Failing Democracy

The current systemic troubles of private equity (PE) and venture capital (VC) aren’t just an economic problem—they represent a critical opportunity for impact investors to redefine how we fund technology and other organizations essential to our democracy.

As Rodney Foxworth and Franklin Mora of the Worthmore team argue, current private equity and venture capital metrics suggest those industries are experiencing a “structural reckoning.” “The financial machinations that defined the last two decades of PE and VC—juiced valuations, blitz-scaling, and debt fueled buyouts—feel increasingly disconnected from the real economy, and the lives of everyday people.”

They call for a fairer investment ecosystem that prioritizes “stewardship over speculation, dignity over disruption, and ownership over extraction.”

I agree completely and would add this crucial point: These investment strategies are not only failing our economy, they’re also failing our democracy. The political industry urgently needs new investment vehicles that value profit and growing our democracy equally.

The Problem: Mismatching Capital with Public Good

I also work at the intersection of capital innovation, impact investing, and company building. Specifically I focus on the often-overlooked political consulting and technology sectors. My work with the Movement Politics Accelerator (MPA) provides patient capital and technical assistance support to a new generation of political firms founded by experienced community organizers. These organizers are democracy experts and natural entrepreneurs, ready to transition from reliance on charitable dollars to sustainable social enterprise models.

Like many founders, these political entrepreneurs want more than the typical VC/PE deal. They are committed to ending extractive economics in their communities. At MPA, we view capital as a key accountability mechanism in a larger partnership rather than as a lever that forces firms to deviate from their missions.

Politics has always attracted profiteers, and it always will. The problem is a fundamental mismatch:

• Movements need political firms and technology platforms to operate as essential utilities as much as our homes need water and electricity services, to get people out to vote, manage client membership relations, and support advocacy and campaigns.

• VC and PE firms need something else: rapid value extraction—often driven by data mining, 10x returns, and “unicorns.”

• There are only so many elections over the course of four years. Democracy simply doesn’t produce the explosive profit growth demanded by the traditional PE model.

Civic tech company founders start out with bold missions. They come online to solve democracy problems. But they’re still tech companies with tech company capital requirements. Political firms also have capital-intense growth stages.

When the only growth capital available comes from VC and PE, civic tech companies and political firms—despite their bold missions—are forced to prioritize the extractive model over their democratic purpose. In other words, they start solving a different problem: providing unreasonable financial returns. The mission quickly shifts from essential service to a quest for a profitable exit, turning essential political utilities into little more than low-quality, data-mining apps.

The Opportunity and the Threat

The need for change is urgent, as evidenced by major shifts within the political industry:

The Threat: PE Control of Core Infrastructure

Bonterra’s Struggles: Apax Partners-controlled Bonterra, which offers mission-critical tools that progressives rely on, is struggling. Since 2023, it has cut budgets and staff. Earlier this year, it faced scrutiny from a right wing lawmaker in a powerful leadership position; this could happen again at any time.

The Extraction Model: At a time when civic tech needs more stability and muscle, we must ask: Can we trust private equity entities like Apax to safeguard the political utility that platforms like Bonterra provide to the civic organizations? Will PE continue to extract value from our elections until the industry is a hollowed-out husk?

The Opportunity: A Call for a New Vision

The turmoil has opened a massive opportunity. For example, following the 2024 election, the Democratic National Committee (DNC) published an unprecedented Request for Proposal for a broad range of potential new tools, suggesting a willingness to overhaul its core technology infrastructure at a level not seen in decades. More recently, and this hasn’t been reported widely yet, it seems the DNC accepted incumbent NGP-VAN’s proposal, so it’s unclear how much of an overhaul we can expect.

Either way, the first generation of democracy tech firms are vulnerable, and the sharks are circling. They will likely be replaced by 2026 or 2028. The critical question is whether new firms will repeat the mistake of relying on VC/PE or if impact investors will offer a better path.

A Solution: Movement Utility Companies

We need to create democracy-first investment vehicles to capitalize democracy-first tools and avoid VC/PE capture.

Impact investors can disrupt this market by requiring impact covenants and democratic standards instead of maximizing short-term profits. We need massive, patient capital that ensures movement governance of tech and keeps ownership in the hands of movement leaders, relying on the insight, wisdom, and guidance of the political talent on the ground: community organizers. We must turn movement tech into movement utility companies, not data mining operations for larger private corporations.

Imagine the Future

Imagine if an investment group, or several, with patient, non-dilutive capital bought a firm like Bonterra and steered it toward building voter engagement between elections, treating votes and voters as an asset to be nurtured, not just a commodity to be exploited.

Over a generation, this kind of infrastructure would empower a new, active electorate, supported by political firms rising from the grassroots and powered by movement utility technology. It could be free to invest in making democracy a lived experience for so many alienated by the media gestures and shallow transactions of our current political life. Investors would receive a reliable—if not explosive—return on their capital while enjoying life in a stable democracy that strives to include everyone in the covenant of “life, liberty, and the pursuit of happiness.”

As Foxworth and Mora write, this moment is not cause for despair—it’s a call to reimagine. The time to act is now.

Photo by AbsolutVision on Unsplash