Although public education sorely needs innovation, the funding that accompanies it – whether through public agencies, philanthropic sources or private investors – rarely encourages such innovation to flourish. In this paper, education entrepreneur Kim Smith and innovation writer Julie Petersen explore the ways in which the public, private, and nonprofit sectors might steer their capital toward products, services, and approaches that improve educators’ productivity and students’ learning outcomes. By analyzing the way capital markets operate and drawing inspiration from social change efforts in other fields and countries, Smith and Petersen illustrate what a more “innovation-friendly” capital market would feature, such as agreed-upon goals and metrics for success, effective use of research and development (R&D), an emphasis on evidence-based decision making, and diverse sources of investment capital.