FFF Investor Melinda Gates Discusses Female Founders, The Role of LPs, Diversity, and More
Female Founders Fund recently interviewed Melinda Gates, philanthropist and investor, about her decision to invest in diverse founders. Read the Q&A below.
In the past 24 months, you have taken a very active approach to driving diversity within the venture capital industry by investing in funds started by diverse founders. What precipitated this and what do you hope to achieve through these investments?
My company, Pivotal Ventures, was created with the mission of dismantling barriers to equality for women and girls and people of color in the United States. In addition to making philanthropic investments toward that goal, we’re also making venture capital investments in a few non-traditional funds — including Female Founders Fund — selected because they over-index on companies led by women and people of color.
When 2% of venture capital funding is going to companies led by women and just .2% is going to companies led by women of color, I think it’s safe to conclude that the current flow of VC dollars says more about who’s doing the funding than who’s doing the founding. What’s more shocking to me is that only .0006% of funding in the last nine years has gone to black female founders. As I deepen my investments, that fact is something I want to change. The data already makes a strong case that companies led by women outperform companies led by men, and I think it’s important to highlight that market opportunity. So, this is me putting my money where my mouth is.
As a limited partner, what types of fund managers or founders are you looking to invest in? What traits are you looking for in these fund managers?
I like working with funds like this one because it’s a chance to invest in a new kind of funder who is putting resources behind a new kind of founder. I think it’s important for us to be having these conversations and to be really thoughtful in examining how VC is using its resources and who those investments are benefiting. For example, there has been a lot of money put into dating apps and food delivery apps — which target just a certain narrow segment of the population — and a lot less invested in categories like child care and women’s health. I think the founders and funders who’ve had occasion to think about those issues in their own lives may be better equipped to recognize a breakthrough market opportunity when they see one. That’s certainly not the only thing women founders and funders have to offer — but it’s a perspective that has historically been underrepresented in these conversations, and it’s an important one.
Overall, less than 8% of investors in the venture capital industry are women. How do you think LPs can and should play a role in changing this dynamic?
LPs are powerful players in venture capital and have a role to play in shaping what’s next for it. They can start by really challenging themselves to seek to invest in new ideas from new places and to deepen their own understanding of the needs that are still going unmet for women and people of color.
They can also encourage they firms they invest in to be more deliberate about hiring and promoting women and people of color. Over the past year or so, we’ve seen a few of the big firms be very public about the women who are rising up their ranks. That’s definitely a step in the right direction — but I’d love to get to a point where it’s commonplace instead of newsworthy.
How have you seen the venture capital landscape evolve (or not) over the last year, with the #MeToo movement?
I think it did two things. First, it brought greater accountability into the industry. Women had been talking for years about the harassment and abuse they’d experienced in tech and venture capital, but once those stories started to make headlines, firms finally started feeling pressure to remove the perpetrators.
Second, as in other industries, the #MeToo movement has fueled a broader discussion in venture capital about the bias, discrimination, and sexism that have long kept women from rising to the top of the field. That conversation is far from finished, but I’m optimistic that it will drive the culture change the industry so desperately needs.
What advice do you have for limited partners who are looking to improve diversity in the venture capital industry?
Start by taking a look at your own portfolio. How diverse are the firms and funds you’ve invested in? If that data doesn’t exist, start pushing general partners to collect it. Then use the data to guide your decisions going forward. And as your investments in non-traditional founders and funders yield strong returns, you’ll be able to make a compelling case that other LPs should follow your lead.
We’re so thrilled to have you as an investor in Female Founders Fund. If you were to rewind the clock twenty-five years ago and pick up one company out of our portfolio that you would join, which one would it be and why?
When I was a product manager at Microsoft during the late 80s and early 90s, people were buying the first personal computers, and I loved imagining how the software I helped design would empower them to do things they couldn’t before.
I bet I would feel the same way if I worked at Tala. Their technology is reaching people who’ve never had access to even basic financial services — and giving them the opportunity to take out loans, build small businesses, and lift themselves and their families out of poverty. It’s exactly the kind of innovation I hope we’ll see more of as a more diverse range of founders get the chance to turn their big ideas into thriving companies.
