Investing in Diversity: A Fireside Chat with Melinda Gates

Hi, Melinda, great to see you too. Thank you so much for joining us for this year's annual meeting. To kick things off, we would love to hear more about the reason behind your decision to invest in Female Founders Fund. We've had an incredible experience working with you and your team, and we'd love to start off with that.

Great, sounds good. So at Pivotal Ventures, I know you've taken a really active approach to driving diversity within the venture capital industry, both by investing in funds that are led by diverse fund managers as well as investing in female founders. What really drove this? What precipitated it, and what do you hope to achieve by making these investments?

Well, I believe that society is better off when we have a diverse set of people at the table creating solutions or making decisions. For so long, I've watched this venture capital space and seen so few women in the space. What it means is, I talk to women over and over again about what it was like to run the venture capital gauntlet on Sand Hill Road. They couldn't get their ideas invested, and yet they had these fabulous ideas. So I started to realize, my gosh, I want to invest in a fund that's looking for different ideas from a diverse set of players, that over indexes on women-led businesses, because I believe there are a lot of ideas and innovations out there that are being left on the side and left off the table. And I think we ought to have those ideas come forward because I think society will benefit from them.

Well, I was so impressed with the track record on Female Founders Fund and the types of businesses that were being invested in and the ideas that were coming forward. I did want to fund where I certainly was expecting a return, but also over indexed on some of these newer types of ideas. And so as I looked at the portfolio and I looked at the fund managers, it just made sense to my team and I that this was a place we definitely wanted to put money down.

Well, I think that we look for people who are smart, who want to bring new ideas from society forward, who think about everybody else and not just the traditional ideas, and who are willing to say, look, society's better when it has diversity. The data shows us over and over again that companies do better when there's diversity, when we make sure that people are funded that have different ideas that benefit parts of society we often don't think about. And so I think a limited partner can play a role in saying, look, I expect my fund managers to be more diverse, I expect my fund managers to go out and look for different types of ideas from different people of different sectors of society. And so those were some of the things that we looked for.

Well, I think some of the most interesting learnings are ways that society might change because we invest in these different types of innovations. So I'll give you some examples. Some of the ones that are most interesting to me, quite honestly, are the ones in the caregiving space. Our economy is built on the backs of women's unpaid labor, and this caregiving space is ripe for opportunity. So matching parents who need caregiving for their young children at the last minute or long term, or caregiving for the elderly with another population that can help serve the elderly, to me those are really interesting opportunities. Women's health is another one. Oola Health is somebody that the fund found. Right now we know with COVID, there's always a shadow pandemic, we learn this from Ebola, that women won't go in for good obstetric care because they're afraid to go to the health system, and yet we don't really bolster midwives in the way that we should here in the United States. So Oola Health is pairing together obstetric care and good OB care with midwives. To me that is really exciting because then women will still get the health services they need and their babies will still be born safely. Another one I loved was Sawyer. That's really taking something I remember being very hard to do when my kids were little, which was to find the summer camp and the summer activities and get the calendar organized for those things, and to figure out how to pay for all these different events and activities. Those are things that parents are wrestling with all the time, working parents who have kids, and I think there can be great tech solutions for things like that.

You bet. I think limited partners, they help shape this ecosystem going forward in the future. And so I think limited partners should speak up and should really demand that places that they're investing, that they look through those investments and say, okay, is a fund investing in a diverse set of players? When a fund invests in a company, is the company diverse at all layers, and are they committed to it? If they're not now, do they have a goal and a target, and are they being transparent about when they will get there? An LP doing that can actually change the entire ecosystem. And I'm afraid today, the LPs that do this speak about it, but it's considered, oh, that's so great, isn't it great that that LP is doing that? No, that should be the norm for this industry. So we should expect LPs to have that look through and do that, and I think that that can be the future that brings this ecosystem forward so that it's healthier, quite honestly, for people who approach the venture capital industry. I think sometimes in the US we forget that the VC industry is what really helps capitalize businesses and move things forward and change society, and that's why I'm so interested in it, because you can't have these places where when somebody goes to get funded, less than two percent of businesses by women are funded, less than that of a woman of color. That makes no sense. And so we've got to change this ecosystem, and it does come down to the LPs really demanding different things, and it comes down to then funds being created that pull forward these ideas.

Yeah, I think there's much more of a conversation going on behind the scenes on that. It takes a few people stepping out and doing the right thing, and we've now seen that, which makes me encouraged that you'll see more of it. It always takes somebody to take what I call the tip of the arrow and say this is what's right for society and to lead. So that makes me much more encouraged in this space. And I'll say, separate even from the LPs, when I think about just the ecosystem of venture capital, I also think we need to go to other places. So Chicago, Austin, there's a good ecosystem already pretty much in Boston, but places where we can have these innovation hubs so that if a person of color comes in or a female-led business, that we both help incubate her idea and help her with her business plan, but then connect her to funding. That should just be built in in those places instead of trying to run it all through Silicon Valley or Boston or New York. I think we need more places to do that, and I think once we start doing that, again, I think you'll get ideas coming out of Chicago that you might not come out of the West Coast or come from New York, right? And same thing with Austin or another place that you might want to go in the country. So I think we need to build up some of these other hubs in the US as well.

Yeah, I would just say it's really inspiring to invest with other people who are like-minded. It makes a big difference versus you put your money in a fund and you kind of step away from it. To know that you have like-minded partners, I think back on the time that I was in computer science in school, and then I look forward and I say, what would I be proud of? Let's say I had had the money to invest in my 30s in a business. It's one of the ones you all invested in early: Tala. I run into the work that Tala has done when I travel in places like Kenya and the Philippines and others. There are men and women led businesses in the developing world now that without Tala would never have gotten funding, and it's because of the unique idea that came there that Shivani Siroya had to say, okay, let's go look and figure out how to help people with their credit rating and do a look through on could they afford to do a loan and are they organized enough. She was able with machine learning to look at different metrics, and so now I literally meet businesses in the developing world that if not for Tala would not have gotten their funding to get themselves started. And when you see it playing out in people's lives in that way and the good they're doing in their community or the funds that they're raising and maybe now helping somebody else, you go, wow, that was a really good idea. So I'm proud of Female Founders Fund for finding Tala and making sure that that idea got funded.

Great, thanks for having me, Anu.