Founded by Melinda French Gates, Pivotal Ventures accelerates social progress by removing barriers that hold people back.

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Photo by Melissa Lyttle for Pivotal Ventures

Breaking With Tradition

By Erin Harkless Moore, Managing Director, Investments, Pivotal Ventures
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This article originally appeared in PitchBook's "All In: Female Founders in the VC Ecosystem" report on November 2, 2022.

In 2018, our founder, Melinda French Gates, announced that Pivotal Ventures had started investing in “nontraditional” VC funds. “Nontraditional,” she explained, is “industry parlance for any fund that isn’t completely overindexed on companies led by white men.”

My team shares Melinda’s conviction that VC has the potential to unlock market-based solutions to societal problems. To get there, we’re helping bring new attention and resources to founders who see the world through a different lens than most people in the venture ecosystem.

Take caregiving, for example. Anyone taking care of a loved one will tell you that this is extremely hard work, and there aren’t nearly enough products, services, or resources to make the job easier. Last year, the Investor’s Guide to the Care Economy, backed by Pivotal, sized the care economy at $648 billion. But established investors have been slower to fund startups in the space, and even though disruptive ideas are out there, founders often struggle to secure the capital they need for innovation to keep pace with demand. As the pandemic has made clear in many painful ways, caregivers need better solutions, and the market needs to do better at delivering them.

"As the pandemic has made clear in many painful ways, caregivers need better solutions, and the market needs to do better at delivering them."

A portrait of Erin Harkless Moore, Director at Pivotal Ventures
Erin Harkless Moore
Managing Director, Investments

Although Melinda is a philanthropist, not all her work through Pivotal is philanthropic. We invest in funds and companies with the expectation to turn a profit, because our goal is to signal to the wider venture ecosystem that investing with a diversity-first mindset will generate meaningful returns.

Fortunately, the conversation in VC circles has evolved in the past several years. There is general agreement that the sector is too homogenous and that it relies too much on networks that are hard for others to break into. The challenge now is to transition from believing in diversity and equality as principles to operationalizing them.

Here’s what that doesn’t mean: relaxing rigorous due diligence and fund performance monitoring standards. But diligence and rigor may need to be redefined if we want to disrupt old patterns. At Pivotal, we try to evaluate emerging fund managers in ways that don’t perpetuate unconscious bias. For example, relevant experience can come in many forms, and venture capitalists don’t necessarily need 15 years at a large firm before they start a fund.

We don’t have it all figured out, and we still miss out on great opportunities. But we adapt to try to close the gaps. We’re learning a lot from the funds we work with about what’s possible when the industry is creative enough to break with tradition.

Samara Hernandez and her Chingona Ventures team focus on “growth markets that are often overlooked,” including financial tech (fintech), female tech (femtech), foodtech, health and wellness, and the future of learning.

Leadout Capital, founded by Ali Rosenthal in 2018, has supported 35 early-stage companies whose leaders are committed to diversity and inclusion. More than 85% of their portfolio companies are led by women or underrepresented minorities, and seven of 22 Fund I companies have already raised subsequent rounds, proving that these businesses can succeed and grow if they get early support.

Monique Woodard’s Cake Ventures refers to the three “layers” of demographic changes driving her investing: an aging population, the shift to majority-minority, and the increased spending power of women.

We’re trying to contribute to a future of VC wherein Samara, Ali, and Monique are the norm, not the exception. They model for the industry what it looks like when equity and inclusivity help determine who has access to, controls, and benefits from investment capital.

How does society benefit when there are more women, specifically women of color and LGBTQ+ women, in decision-making roles in VC?

Chingona Ventures, Samara Hernandez

Portrait of a woman with long hair standing in front of a blank background.

"We believe in diversity as a differentiator, innovation source, and company culture driver. Seeking founders that lean into their unique perspectives as their competitive edge is central to our differentiated approach. For instance, Jade Kearney, Founder and CEO of SheMatters, a platform that connects Black mothers who experience postpartum comorbidities to culturally relevant care, demonstrates how diverse founders and funders can address societal inequalities through private sector innovation.

We don’t invest in just women and minorities, but our portfolio reflects the outcome of building a diverse network within an entrepreneurial ecosystem. By intentionally cultivating a diverse deal flow and network, we have built a portfolio that beats the industry’s diversity standards. We are proud to say that women CEOs—not just cofounders—make up 42% of our portfolio. Beyond gender diversity, we also track how many of our CEOs are immigrants (31%), people of color (69%), and are operating outside the Bay Area (78%)."

Leadout Capital, Ali Rosenthal

Portrait of a woman with shoulder-length blond hair wearing a grey shirt smiling in front of a grey wood wall.

"Representation matters. It demonstrates that being a woman, Person of Color, or LGBTQ+ does not prevent success in the venture environment.

Making investment decisions at the earliest stages of company building comes down to judgments about the founding team's edge for success, as well as the attractiveness of the pursued opportunity. Different people will make these assessments based on their own knowledge and experience. One venture capitalist may see opportunities for success where others do not.

We should want entrepreneurs who see opportunities to receive investment for two reasons. First, access to opportunity. We think a society wherein more people can pursue purposeful, interesting, and financially rewarding work is a better one. Investing in diverse teams creates access to opportunities for more of society. Second, a successful business benefits its customers by bringing a solution to a real need. Society benefits when more needs are met with creative innovation through technology. Identifying and supporting new ideas and potential solutions from all segments of society ensures that technological progress serves everyone."

Cake Ventures, Monique Woodard

A Black woman wearing a black sweater with a white collared shirt sits on a stage wearing a microphone in front of a black background.

"Founders of all backgrounds benefit when female investors have access to capital and decision-making power. Having diverse perspectives gleaned from lived experience on a board or cap table can help founders navigate everything from recruiting talent to exploring new markets to building company culture. This helps create stronger companies that are built to solve the unmet needs of more people.

As an investor, I can give founders a point of view on ways to approach consumer groups that other investors haven’t thought about and can’t authentically engage with. Over the past 15 years, 92% of the population growth in the US has come from ethnic minorities, or the rising New Majority. And while women have been treated as a niche market, they are actually a growth market that has accelerated the growth of businesses in categories like social, e-commerce, and healthcare. As consumers become more diverse, founders need new ways of building product and marketing to new audiences.

When women are given the space to show up and authentically deliver their perspectives and back that with real capital, founders reap the benefits."

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