Melinda Gates’s Art of In­vest­ing


Fast Company - - Contents - BY MELINDA GATES

The global leader ex­plains why she’s bet­ting on women and peo­ple of color with her new fund, Piv­otal Ven­tures.

To change the world, it helps to get cap­i­tal into the hands of peo­ple who have a dif­fer­ent vi­sion for it. A few years ago, I be­gan qui­etly in­vest­ing in “non­tra­di­tional” ven­ture cap­i­tal funds— “non­tra­di­tional,” of course, be­ing in­dus­try par­lance for a fund that isn’t com­pletely overindexed on com­pa­nies led by white men. With th­ese in­vest­ments I joined a grow­ing com­mu­nity of fun­ders who be­lieve that worth­while in­vest­ment ideas are more evenly dis­trib­uted among the pop­u­la­tion than the cur­rent flow of ven­ture cap­i­tal dol­lars would sug­gest.

My jour­ney to Sand Hill Road be­gan, of all places, on a beach in Tan­za­nia. It was 1993, and Bill and I were in East Africa to cel­e­brate our en­gage­ment. That trip was our first en­counter with the daily re­al­i­ties of ex­treme poverty and dis­ease, and we were deeply af­fected by what we saw. Be­fore we went home, we took a long walk and dis­cussed giv­ing most of the wealth that had been cre­ated by Mi­crosoft back to so­ci­ety. Af­ter a few years of learn­ing, lis­ten­ing, and con­sult­ing with ex­perts, we de­cided to start a foun­da­tion ded­i­cated to end­ing in­equal­ity.

As my three kids got older, I took on a more pub­lic role at our foun­da­tion and spent time in de­vel­op­ing coun­tries talking to women and girls about their lives, their goals, and the bar­ri­ers stand­ing in their way. I met so many strong, hard­work­ing women who wanted noth­ing more than the chance to lift their fam­i­lies out of poverty and con­trib­ute to their com­mu­ni­ties—a chance they would never have sim­ply be­cause they were born fe­male.

On my way home from th­ese trips, I thought a lot about the fact that there is no coun­try on earth where women have achieved true equal­ity. The truth is that we’re wast­ing a lot of hu­man po­ten­tial here in the United States, too. Women are still un­der­rep­re­sented in govern­ment, in me­dia, and at the high­est lev­els of al­most every in­dus­try. I de­cided that—with­out tak­ing time or re­sources away from the pri­or­i­ties of our foun­da­tion—i needed to do more to ad­vance eq­uity in my own coun­try. That de­ci­sion led me to start Piv­otal Ven­tures.

Piv­otal Ven­tures works to help dis­man­tle bar­ri­ers to equal­ity for women and peo­ple of color in the United States. In many ways, it feels like a nat­u­ral con­tin­u­a­tion of the work I’ve been do­ing at our foun­da­tion. But it also of­fers me new op­por­tu­ni­ties to en­gage in the fight against in­equal­ity. For ex­am­ple, part of our ap­proach in­volves study­ing the gen­der gaps in in­dus­tries that have an out­size in­flu­ence on so­ci­ety—in­dus­tries like tech—and look­ing for ways to in­vest for cat­alytic im­pact. That, of course, is ex­actly what led us to our in­vest­ments in ven­ture cap­i­tal.

The de­ci­sions ven­ture cap­i­tal­ists make to­day de­ter­mine who will be the tech lead­ers of to­mor­row and who will be left be­hind. Yet the data sug­gests in­vestors have a nar­row idea of what kind of in­no­va­tions—and what kind of in­no­va­tors—de­serve fund­ing. In 2017, women founders re­ceived only 2% of VC dol­lars, and the num­bers are even worse for women of color. Since 2009, only .0006% of ven­ture fund­ing has gone to black fe­male founders.

As I see it, this in­vest­ment gap has more to do with who’s do­ing the fund­ing than who’s do­ing the found­ing. Only about 8% of part­ners at the top 100 ven­ture cap­i­tal firms are women, and more than half of those firms don’t have even a sin­gle fe­male part­ner. The re­sult is a boys’ club that doesn’t give women and peo­ple of color a fair shot.

A study pub­lished in the Har­vard Busi­ness Re­view found that in­vestors tend to de­scribe young male

en­trepreneurs as “promis­ing” but young fe­male en­trepreneurs as “in­ex­pe­ri­enced.” A prom­i­nent VC put an even finer point on it in his in­fa­mous state­ment that he prefers to back en­trepreneurs who also hap­pen to be “white male nerds who’ve dropped out of Stan­ford or Har­vard.” It’s ironic that the very peo­ple who glo­rify dis­rup­tive in­no­va­tion keep ex­pect­ing it to ap­pear from the ex­act same place.

In­vestors have poured bil­lions of dol­lars into dat­ing, photo-shar­ing, and food-de­liv­ery apps, but have made rel­a­tively few in­cur­sions into cat­e­gories like women’s health and child­care. I would like to hear more from the en­trepreneurs and in­vestors who un­der­stand th­ese un­met needs be­cause they’ve en­coun­tered them in their own lives. And I’m bet­ting that con­sumers would too.

That’s why I stepped up as a limited part­ner and be­gan in­vest­ing in firms like As­pect Ven­tures and Fe­male Founders Fund—funds that pri­or­i­tize com­pa­nies led by women and peo­ple of color. Un­like the grants that Bill and I write through our foun­da­tion, this set of in­vest­ments I’m mak­ing through Piv­otal Ven­tures is not phil­an­thropic. I ex­pect strong re­turns. In fact, that’s the point.

By putting my money where my mouth is, I’m hop­ing to high­light the mar­ket op­por­tu­nity that ex­ists in th­ese funds and el­e­vate the pro­file of the in­vestors lead­ing them. As­pect Ven­tures’ co­founder There­sia Gouw is a six-time Mi­das List in­vestor who has a dif­fer­ent def­i­ni­tion of “promis­ing” from the rest of the in­dus­try. She has made her ca­reer find­ing and fund­ing new ideas from new places. About 40% of her firm’s port­fo­lio com­pa­nies were founded by women, and 30% were started by mi­nori­ties. They in­clude com­pa­nies like Ellevest, the Muse, and Ur­ban­sit­ter (which is prov­ing that there is in­deed a mar­ket for new plat­forms that con­nect par­ents to child­care).

In ad­di­tion to in­vest­ing in her firm, we’re sup­port­ing re­search to iden­tify the best strate­gies to en­cour­age more There­sia Gouws to en­ter the field—and we’re work­ing with pro­fes­sional or­ga­ni­za­tions like All Raise that can help VC firms bring th­ese best prac­tices to scale.

Can th­ese new funds ever com­pete with the more es­tab­lished ones? Ab­so­lutely. (In the past year, the #Metoo and Time’s Up move­ments have dra­mat­i­cally in­creased the so­cial pres­sure on ven­ture cap­i­tal firms to di­ver­sify.)

In­evitably, ven­ture cap­i­tal will stop cat­e­go­riz­ing funds that make a point of in­vest­ing in women and peo­ple of color as non­tra­di­tional and start see­ing them as com­mon sense. That’s go­ing to hap­pen with or with­out Piv­otal Ven­tures—and with or with­out me. But I will be do­ing every­thing I can to help ac­cel­er­ate it.

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