Investing Billions - E66: Melinda Gates’ Pivotal Ventures on Investing in VC - Erin Harkless Moore

Starting point is 00:00:00 There's an implicit strategy to start in the venture asset class and expand over other asset classes. Why go with venture first? Because it's where innovation starts. And for us, you know, that tech innovation, you know, Melinda herself early at Microsoft, she was a computer scientist and studied that. So she always is someone who's seen the power of innovation in business and how that can transform industries, transform communities and lives. And when we saw and we're thinking about, again, these key sectors that have a disproportionate impact, again, on our economy, the tech industry

Starting point is 00:00:30 is a big one. It's probably one of the biggest. Who funds that? It's venture capitalists. So if we want to change innovation, who has an opportunity for their ideas to get funded and to build big businesses, you have to start with that asset class. So you've seen different governance structures going back to PR big businesses, you have to start with that asset class. So you've seen different governance structures going back to Printco, Cambridge, now Pivotal. What is your philosophy on the best governance to maximize returns? It's without good governance, you're going to... For more ideas on how to raise venture capital in this market, make sure to subscribe below. Aaron, we've been going back and forth. I've been excited to chat.

Starting point is 00:01:02 Ever since our friend Eric Tornberg made the introduction, welcome to the 10X Capital Podcast. Thanks for having me, David. It is wonderful to be here with you today on the podcast. Thank you, Erin. And I do want to get into your background, but first tell me a little bit about Pivotal Ventures, how it was created, what your strategy is, and what you guys stand for. Sure. So Pivotal Ventures was founded in 2015 by Melinda French Gates, and we're on a mission to bring more opportunity and equality to people here in the United States.

Starting point is 00:01:29 Gender is a big component of that. And our principal and founder, Melinda, has long been a champion for women and girls through her work at the Gates Foundation. And stepped back again over a decade ago and was looking at the pace of gender equity, specifically here in the United States. And realizing that it was going to take hundreds of gender equity, specifically here in the United States, and realizing that it was going to take hundreds of years for us to get there. And that was not good and was willing to put resources behind it and also recognize that we need others to join us in that journey. So one of our biggest commitments at Pivotal is a billion dollars toward expanding women's power and influence. And this means getting women in positions to make decisions, control resources, shape policies and perspectives in their homes, their workplaces,

Starting point is 00:02:09 and their communities. So we work across a variety of sectors and pull different levers to drive social progress in this goal that we're seeking. That includes traditional philanthropy, policy and advocacy work, high-impact strategic partnerships, and investing, which is, again, the work that I lead and I know where we'll be spending most of our time today. But there was a recognition, again, early on at Pivotal that one of those planes alone was not sufficient, again, to drive the type of change that we wanted to see. And you really have to have good policy and sound government resources. You need to have the private sector, you need to have philanthropy, you need to have other donors and individuals all working together to achieve this goal of greater gender equity and parity here domestically

Starting point is 00:02:48 in the United States. And I'm incredibly proud to lead our investment team and do the work of getting more capital in the hands of women. How do you close the gender gap? It's a multi-pronged approach is needed to closing the gender gap. And we looked at a couple of different indicators as we were setting up this women's power agenda at Pivotal. Again, focus on resources, the wage gap, the wealth gap, and many other things. And it comes back to, again, having women in the rooms and in the seats to make decisions. And if you think about, again, a lot of those different spheres that I was mentioning, that includes having more women running and winning elected office, right? Sitting in public office, that means more women as investors. And with our strategy on the investment front, you were looking across the landscape and frankly, seeing a pretty sad state of only 16%

Starting point is 00:03:36 of check writers at venture capital firms. And again, this is just in one asset class, but I think the stats are largely consistent. Elsewhere are women. That's in the last year, and that's grown somewhat, but it's still far too small. I think to close that gender gap, you need more women writing the checks, making the decisions of where the capital is being allocated, because hopefully that'll lead to a more diverse set of founders, more diverse set of ideas, also getting capitalized, which will help to close some of those gaps that we see. Before you were at Pivotal, you were at the Princeton Endowment, PRINCO. What did you learn at PRINCO?

Starting point is 00:04:09 Yeah, I spent a summer interning at PRINCO, and it was such a tremendous experience, really foundational to my learning as an allocator and as an investor. I'd say a couple of things that rang true and came away as learnings from that. The biggest one was the value of hearing all the voices around the table and in the investment decision-making process. And when that was manifested, I thought that Andy Golden, the longtime CIO at Princo, one thing that he did was the team would come together and give an asset class. One, everyone was invited to those meetings. So it wasn't just, oh, the venture capital team is meeting or the real assets team is meeting. The door was open. Everyone could join in.

Starting point is 00:04:44 And Andy would often start or ask a question of the most junior person in the room. Maybe it was one of the analysts. Maybe it was me as a summer associate and intern. And what did you think of this meeting? What stood out to you? And for me, the most senior person, the CIO, I think sometimes when you speak, that can influence or have an impact on how others engage. And Andy really cultivated a culture of openness, of dialogue, of debate. I think that started by making that safety, right, for the team to really speak their mind, to probe and ask questions. And that's really influenced how I lead, you know, my own team now at Pivotal and how I show up talking to fund managers and to

Starting point is 00:05:22 founders and asking them questions and just being really thoughtful in how you engage. Certainly, there's some benefits to having collaborative workforce, but you also don't want everything to just be consensus, especially in venture. How do you balance making sure that everybody is heard without having to be consensus on every decision? That's a great question, David. I think one is slowing down and just creating the time and space for people to contribute is one. I think we can get in the trap of, okay, you know, this fund, they're having to close. It's moving fast. Like, let's get to decision quickly.

Starting point is 00:05:51 This round is coming together fast. We need a decision quickly. Slowing down is incredibly important. The second is recognizing that there might be different modalities in which people communicate most effectively. As an example, one of my colleagues on the team here at Pivotal, she likes to write her thoughts down. And we were having discussions in our weekly team meeting, and she was speaking

Starting point is 00:06:08 a little bit less. And so I pushed and I said, well, I want to hear from you. She said, well, I prefer to send kind of my pros and cons around in this given investment in an email. And I said, great, let's do that. And we'll make sure to leave the time and space for you to offer that opinion. And I think it's being okay to see all sides of an argument, not saying, okay, yeah, everyone has to be on board. Everyone has to agree and leaving the space and time to register those objections. The third thing I would point to is then archiving that or kind of keeping notes. It's one thing I've always done. I think maybe from my training at Cambridge Associates as well, which has like reams of data and databases and

Starting point is 00:06:44 manager comments going back like 40 years. But I think that's one way you can check yourself and allow for some of that contrarian thinking to come in is to just have those detailed notes. And when the next time that fund comes around, or you're looking at a re-up, going back and reviewing those comments and saying, hey, you know, we had a concern about this. Has that borne out or no, and taking the time to talk through it. I don't want a bunch of yes, men and women on the team. I think we can often mistake consensus for, again, a good outcome. And that's not the case. People can disagree and still work well together. And I think that drives ultimately better decisions and outcomes. You've seen different governance structures

Starting point is 00:07:18 going back to Prenko, Cambridge, now Pivotal. What is your philosophy on the best governance to maximize returns? Without good governance, you're going to fail as an investor. I firmly believe that. You can have the best deal flow, the best access. And if you have not set up the conditions and structures for effective decision-making, it's all for naught. And effective decision-making can look different in different organizations. And I think I've had the benefit of seeing that working with a lot of different types of asset owners, family offices, it might be very principle driven, a foundation that has a big investment committee, but it's making sure that you're very clear about what the process is for making those decisions. One, two,

Starting point is 00:07:56 how you go back to sort of review those and whether that's things like your policy statement or your charters and having a real clear lens on kind of what the goals and objectives are for this portfolio. That can differ, right? Our mission and mandate at Pivotal, advancing social progress, women's power and influence is at the core of what we do. It's very different from some of the clients I served at Cambridge, very different from Princeton's mission and endowment. So you need that decision-making structure to suit the objectives of the organization. You saw a lot of asset managers at Cambridge. A lot of them were entering the venture asset class. A lot of them had been in there for decades. What is one mistake

Starting point is 00:08:34 that asset managers routinely make in the venture asset class when it comes to governance and structures? It comes back to incentives. I think I've seen a lot of mistakes around a lack of alignment of incentives, and that cuts in a couple of different ways in the team itself. What the managing partner, general partner, how they're sharing carry, how they're thinking about succession and growth for their team. Having different perspectives on that is, I think, a big mistake. And different perspectives on it, one. And then two, not communicating it effectively. Because then when you come back to raise the next fund, the next fund, you haven't put the structure in place to really grow a firm. I want to invest in firms, like lasting franchises in venture, in any asset class,

Starting point is 00:09:17 but again, specifically in venture here, not just a fund. And not paying attention to those team dynamics, those incentives is a huge mistake that I've seen many fund managers make that can come back to buy them later. Just to play devil's advocate, would you not invest in a top manager knowing that they had just two vintages left? Not necessarily. I would point back to what is my objective, right? And at the end of the day, we all have that goal to generate great returns. I think that's foundational. And what we're doing at Pivotal too, oftentimes I'll get the question, oh, this is great. You're a mission-oriented organization.

Starting point is 00:09:50 You only care about this data, getting more women, et cetera, et cetera. And I'm like, yes, I care about that. I want to change those stats. But I also want to do that because I think it's going to lead to better returns and better results. And you also want to make it sustainable. And sustainable. Exactly.

Starting point is 00:10:02 To invest into future managers as well. Exactly. If our track record over time doesn't stand up as being on par with other leading investors in the private markets and in venture, then I haven't done my job. My team, we haven't done our job well. The thing that Melinda often asks me about, again, stories about the fund managers, opportunities they're seeing, the underlying portfolio companies. But it always starts with performance.

Starting point is 00:10:28 She's like, how much money are we allocated and how is it doing? And I think, again, if it's a fund manager that only has two vintages left, but I feel confident that their eye is on the ball, that they're going to deliver the results that they've been delivering over time. I'm OK with re-upping there with an eye towards, okay, well, what's next? And supporting that team, supporting that talent as they maybe think about their next move. Obviously, you're not on Melinda's head, but what do you think her rationale was to allocate to fund managers, to female fund managers versus, say, pay for scholarships for females in engineering? Well, to be clear, too, at Pivotal, we're doing actually a lot of different things.

Starting point is 00:11:05 So our work is spanning multiple sectors and levers, as I mentioned. And we wanna see more women in tech and STEM. As an example, we were trying to create a more modern chairgiving system by advancing paid leave in this country. We're trying to increase the number of women running for public office

Starting point is 00:11:22 and succeeding when they get into public office. So it's not either or for us, but I think specifically in an investment context, why investing in fund managers, it's a great way to diversify and I think amplify that impact. If we pick one early stage fund, it's then going to go invest in 30 companies, right? Hopefully that's a more diverse set of founders that are getting a shot. That firm will hopefully hire a more diverse talent that can then over time,

Starting point is 00:11:51 that's the next generation of leaders coming up in venture that have been kind of trained and schooled at these firms. That's success, many definitions of success, but one for me is that I hope if someone looks at the Pivotal portfolio, our fund portfolio in 10 or 15 years and says, wow, they identified some talent very early that have gone on.

Starting point is 00:12:10 Some may not work, but hopefully more than we're due. Some power law outcomes. Some power law, exactly. They've built some enduring franchises and maybe some women, people of color in those firms have then gone on to become emerging managers as that next generation. And we've seen that play out over time all up and down Sand Hill Road and just hasn't reflected the true tapestry of talent.

Starting point is 00:12:30 It's been too homogenous. And Melinda is sort of stepping back and seeing these big sectors, business, finance, tech, investing, politics, and recognizing that there are different levers to pull in each to drive our goals of greater equity. And there's an implicit strategy to start in the venture asset class and expand over other asset classes. Why go with venture first? Because it's where innovation starts. And for us, that tech innovation, Melinda herself early at Microsoft, she was a computer scientist and studied that. So she always is someone who's seen the power of innovation in business and how

Starting point is 00:13:05 that can transform industries, transform communities and lives. And when we saw, and we're thinking about, again, these key sectors that have a disproportionate impact, again, on our economy, the tech industry is a big one. It's probably one of the biggest. Who funds that? It's venture capitalists. So if we want to change innovation, who has an opportunity for their ideas to get funded and to build big businesses, you have to start with that asset class. The second thing I'd point to you is perhaps it's maybe the barriers to entry in venture are, I think, a little bit lower for emerging managers to get started. If you're trying to raise a mega buyout fund, I think it's harder to do that if you haven't followed a very

Starting point is 00:13:44 clear path over time. There are lots of different archetypes of what could make a successful venture capitalist. And so I think that piece as well, aligned with the broader focus on tech and innovation as a key sector in the economy, led us to venture to start. You guys had a very unique approach to how you started Pivotal. How did it start? Tell me about the first few years and how did you develop your strategy over time? We'll continue our interview in a moment after a word from our sponsor. Most businesses use up to 16 tools to hire, manage, and pay their workforce, but there's one platform that's replaced them all. That's Deal. D-E-E-L. Deal is the all-in-one HR and payroll platform built for global work. Smartest startups in my portfolio use Deal

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Starting point is 00:14:41 from a single and easy-to-use interface. Click the link in the show notes below to book a free no strings attached demo with Deal Today. So Pivotal started in 2015. So we've been around now almost 10 years. Very early, you know, doing some grant making very, very quietly, actually. I joined in 2020. So in the very early days of the pandemic, and when I was approached about the job, the

Starting point is 00:15:04 first thing I did was Google Pivotal Ventures and Melinda Gates. And I was like, is this a real company? There was a website, but it didn't have a lot of information on it. So backing, again, some very well-known women that I think were probably more established, but were still emerging managers by the classic definition that we're raising fund one or a fund two or a fund three. So some of those early commitments included firms like Acru, Teresa Gao, Kirsten Green at Forerunner, and building up those relationships with them and making the case again for why we thought this was a strategy that we could again drive meaningful returns and hopefully start to see some impact as well in the diversity of the types of founders that were getting funded. So those early days, we were very quiet. Again, I joined

Starting point is 00:15:51 and then sort of turned the focus towards starting to scale and ramp up the portfolio a bit more from there. Came in 2020. How did you develop your strategy and have you evolved that, made some tweaks to it or have you stayed on the same exact strategy from day one? The strategy has largely stayed the same. I think it's just been refined a bit on the margins. So there are two pillars to where and how we invest. We have that portfolio of fund investments, all women owned and led. And we've scaled that up now to about 20 firms that we've backed, all funds one to four.

Starting point is 00:16:22 And I think a differentiator of our approach too is that we're not just writing that one check the first time. Again, we hope to be catalytic and an early first close investor, but providing that support over multiple fund cycles, because it's just as hard to raise. I think it's actually harder to raise fund three than it is hard to raise fund one. Especially today. Especially today, exactly. So, because there's been no DPI. I mean, what are you measuring, right? It's really hard. So we've set that portfolio construction and are continuing to build out that piece of the portfolio, looking across a variety of different levers and thinking about diversification from both

Starting point is 00:16:54 a sector standpoint, geographic, making sure we're covering different parts of the country as well. Everything we do is US-focused fund size. We're willing to invest in smaller funds, $25 million, $30 million and up, as well as some bigger funds. And the fund portfolio, I'm pretty proud about where it sits today. So we've just been consistently deploying over the last few years and staying disciplined, even as the market was making it a little more difficult, perhaps, to do that. And then the second pillar of our strategy, and actually, this is the one that we've refined a bit more over the last couple of years, is we also do some direct investing. And one of the first questions I asked when I joined was, what is our right to win as a direct investor? We're backing what I think are some of the best

Starting point is 00:17:36 investors through our fund portfolio. So an incremental dollar could go to them. Why are we keeping that and deploying it ourselves directly into companies? So we were very targeted around what is a thesis that we have and can own that's differentiated, where we can hopefully add value to founders as they accelerate and grow their businesses. So we've aligned on a strategy where our investments are very closely tied to programmatic priorities and policy work we do at Pivotal. So allowing us to lift up and really bring the full breadth and depth of our platform to support these companies at Pivotal. So allowing us to lift up and really bring the full breadth and depth of our platform to support these companies at the early stage. So that theme for us right now is the care economy. I can talk a little bit more about how we define that. So the care economy,

Starting point is 00:18:15 I was shocked when I started digging into this. And again, as I mentioned, I joined Pivotal at the height of the pandemic. When I was sitting in this room, my kids are like running outside, trying to, you know, run a Montessori preschool and, you know, build this investment portfolio and manage a team that I had not met in real life. So all that was happening. And so caregiving was front and center. And I often say we're all caregivers at some point in our lives, whether you're a parent, child caring for your aging parents, all of those things. But we did some research to size the market. It's a $648 billion market. It's kind of crazy, right, David? It's bigger than the pharmaceutical industry. It's huge. And that's everything from childcare, parenting, all the way over to the aging and longevity space.

Starting point is 00:19:00 And so we see that as a market that's, again, been somewhat underinvested and ripe for innovation. We have fund investments that are playing in this space as well. One that we incubated and anchored in our fund portfolio called Magnify Ventures. It's investing in technology for modern families. But we saw still a continued gap and an opportunity for us to double down on some of those companies that we were seeing through our fund portfolio and elsewhere. Just the deal flow that we have coming our way and to invest around that broader care theme and pieces. So it's been pretty cool to see that portfolio start to ramp up a bit more over the last year and change. And we're aiming to build a portfolio of about 12 to 15 companies with that care theme over the next two to three

Starting point is 00:19:40 years. I know more than 50% of the fund needs to be female, both owned and managed, but after you get over that barrier, is it a pure alpha strategy? Alpha in returns are front and center and foundational for sure. The other piece of this though is, and we have a scorecard we develop where we rank and assess this and hold, you know, and try and hold our fund managers to it over time. You know, we also want to understand and make sure that they're building and creating a diverse team and culture. And that can be reflective in a lot of different ways. Geography, age, ethnic background, gender, all of those. And we track that data. So we require all of our fund managers to report to us on the demographics of their portfolio, of their team

Starting point is 00:20:21 and their portfolio. We try and get it down to the portfolio company level where we can. Because I think it's important to know what you own. And then over time, this will hopefully allow us to your earlier question, demonstrate that investing in these diverse teams is leading to good outcomes back to that point of return. So we want to move the needle on some of those metrics, hopefully greater parity in the number of check writers, partners at firms that are women. So we're tracking all of those metrics, hopefully greater parity in the number of check writers, partners at firms that are women. So we're tracking all of that alongside, again, making sure that this portfolio is generating best in class returns. You're on the inside, literally ivory towers of Print Co, one of the top LPs in the world. So let's go behind the scenes, you get a fund manager,

Starting point is 00:21:01 let's say it's a fund two or fund three, what is the process for determining whether you want to invest in that venture fund? I'd say the process is consistent. I apply the same process that I learned from the very beginning of my career as an analyst at Goldman Sachs, that summer at Pernco, almost over eight years at Cambridge Associates, a fund one or a fund three or four, it's the same. What might be different is that the information that you have, but I'm always trying to answer the question, what is the edge that this team, that this fund manager is bringing to the table? Is their mousetrap better, faster, bigger than the next guys? And is that going to, again, consistently and hopefully persistently deliver great returns over time? So you're looking at things like track record, right?

Starting point is 00:21:47 And for us at Pivotal, we're very much willing to take, I think, a more expansive view of what a track record could look like. It's pretty easy if someone has spent a decade plus at, insert brand name, venture firm, and has done this number of deals, et cetera, et cetera. Andreessen, Horace, Lightspeed, Sequoia, you name it. But if we want to have... And again, those firms have done, I think, realized the value of having diverse talent, right? Like they're bringing more diverse people in, but it's going to take, I mean, I'll have a lot of gray hair and hopefully be retired,

Starting point is 00:22:15 you know, if we're waiting by for that to happen. So, you know, we're willing to look and perhaps be a bit more creative of understanding understanding what the holistic view of someone's prior performance. So if you were in a scout program or doing some angel investing, how does that fit with your current portfolio strategy and thesis? What is the strength of the network and the relationships that you bring to bear? That attribution, the role that you played, what were you really doing in supporting this company? I love operators too, right? I think an operator background can be incredibly valuable at the early stages and supporting founders as they're figuring out product market fit and their go-to-market strategy. So I think that diligence kind of comes back to around track record, whether it's a fun one or a fun three or four,

Starting point is 00:22:58 does that mosaic, that picture you're painting tie back to your strategy, your thesis? And then again, where does that edge lie and how it's differentiated relative to others? You've seen a lot of funds, probably hundreds at this point. In terms of funds with track record, sometimes attribution is an issue. Have you seen a lot of questionable attribution practices by VCs that are starting funds? We'll get right back to the interview. But first, to stay updated on all things emerging managers and limited partners, including the very latest data on venture returns and insights on how to raise capital from limited partners, subscribe

Starting point is 00:23:34 to our free newsletter at 10xcapitalpodcast.com. That's www.10xcapitalpodcast.com. It's a great question. I'd say it varies. I think I've seen a few instances where someone isn't able to maybe bring the track record cleanly or they're a little bit more maybe creative in how they talk about it. They weren't able to pull the spreadsheet over and send that right to us. But I think despite that, I want to understand the company that you invested in, the founders you've worked with, what you did. And then it's on us as the LP, right? Like that's core.

Starting point is 00:24:12 And I think the fun part of diligence is digging in and doing those reference calls. That to me, so you can have questionable attribution or not. And I think, yes, like that does happen, but you can very quickly figure it out or get to the bottom of it by doing those reference calls. I spend way more time on references, I think, than I probably over time, like, you know, it's the one of the most important tools in our toolkit and doing diligence on an investment. In terms of references, though, what is a reference that

Starting point is 00:24:39 sounds bad to a lot of people, but that you believe to be a good reference? It's the reference that I think is revealing. I always ask the question, what am I not asking when I'm doing a reference call? And that often leads people to pause for a second. And then they kind of start to fill that void with information that might seem like, well, and I actually have people say like, oh, wait, is that what you wanted? Or is that like, oh, and I actually have people say like, oh, wait, is that what you wanted? Or is that like, oh, I don't want to sound negative about this person or, you know, I don't want to, again, jam them up.

Starting point is 00:25:12 And now have you pulling on this thread to go find something that's going to lead you to not back them. But I think that reveals a lot about in that moment of kind of quick reflection, what you really think about this person. And it can open up a whole new avenue and line of inquiry that we haven't even thought of in our diligence. So sometimes people kind of come

Starting point is 00:25:32 and look at me askance when I ask that question, like, ooh, like, is this bad? And I'm like, no, it's good because I think it's going to reveal again, information that is perhaps not quite as scripted. One thing that I've seen in the very top managers and entrepreneurs is that they tend to be polarizing to people with different types of ambition levels.

Starting point is 00:25:50 So extreme levels as Steve Jobs, Elon Musk, people either want to go work at Tesla and work for 100 hours a week or don't want to do that. And the people that want to kind of work life balance, all those things, hate working there. And the people that want to bring in the electrification and change the world as they see it. Is there room for that? And because I have also seen that in top CEOs. Now there's different nuances. There's a lot of nuances there. But is there something there that somebody that's really top performing might

Starting point is 00:26:17 polarize some people? Yes, the examples you gave are spot on. Maybe I'd flip it a little bit and tie it back to our thesis and kind of goal at Pivotal, you know, wanting to have more women in some of these positions of power. Women, you know, we differently bring different traits to the table. So I hope we maybe see some new paradigms or new examples of what that good leadership looks like. But there are plenty of women too that are polarizing. It could be, you know, difficult or hard to manage. I go back to something very simple. My mom and dad always said to me, and I hold true as like a value to me today, you don't have to be nice,

Starting point is 00:26:50 but you have, you should be kind to people. And I think that's the thing that, again, I may not, I don't have to love everybody that I need to work with or that I give money to. I do think though, if you don't have that kind of value of at the end of the day, like treating people with respect and dignity, then that's that's the problem. You can maybe be more abrasive or, you know, you don't have to be my best friend. You're out here delivering on the objectives that you've set for your fund and your strategy. But if you're not treating people with that kindness, I think those those can be conflated. Oh, you know, he's not nice. That's fine. I'll be nice. But I think you do need to be thoughtful and, you know, kind of respectful of people.

Starting point is 00:27:27 You've managed many people. How do you manage from a kind perspective if the person is underperforming? I've, you know, been pretty lucky in my career to have worked with, you know, talented folks who have performed at a high level. So I feel pretty fortunate in that, but have had some struggles too. And I think the thing there is just to be clear and transparent. I was just talking with my team. We had a kind of facilitated session this week on feedback and how to deliver feedback.

Starting point is 00:27:58 And oftentimes as managers, I think we get kind of scared and particularly giving feedback to women or people of color. It's like, we're the most under, kind of given over feedback to in ways that are not helpful, right. Or getting at the root of the problem. So I always come back to that kind of shared vision and you kind of, what are we driving toward as our goal? And then just being very clear about, look, this is, you're not meeting the mark on this. Well, let's unpack why,

Starting point is 00:28:22 how can I support you in getting there? And if it's not getting done, that's the tough part, right? But then I think that's where you have to manage with empathy and kindness of trying to help that person move to the next thing. What would be your advice for a male manager on how to best work with female reports, and you really get the best out of their female colleagues? It's a great question. I've gotten it. Actually, I was at a conference and a male GP came over and he's like, I love what you're doing at Pivotal. I know we're not a fit for your strategy, but how can I be better? How can I make sure we hire a bunch of women?

Starting point is 00:28:55 And then I see all the stats that they all leave. What can we do better? So I appreciate you asking that question because I've seen we need allies out there. I grew up in my career, very male dominated investing finances. And I started on Wall Street of Goldman Sachs. I didn't have a female, there were no female partners in the group that I joined when I started, right? So it wasn't like I've ever really been managed until more recently by women. And I think the thing that works and the thing I would say to get to the heart of your question of what to do, again, be very clear and transparent and slow

Starting point is 00:29:26 down to check some of your biases. Right. And I've seen this play out. Again, no one, nothing intentional. Right. But like, we like to all hang out or do things with people that are like us. Right. And some of this is creating an inclusive, more inclusive culture. So instead of like, let's go play golf. And I mean, I actually don't mind playing golf, but it's like, can we all go bowling? Cause like everybody kind of sucks at, at least I do. I think most people suck at bowling and, you know, kind of connect on that, that human level, which then creates the conditions for the trust to provide that real feedback. And I've had male leaders and bosses kind of not maybe take me as seriously or say,

Starting point is 00:30:02 oh, you just had a kid. Are you like, are you going to come back and be able to serve that client internationally? You probably don't want to travel. Why would you assume I don't want to travel? You don't know my situation. That's my decision to make. So I'd say the other piece is don't make those decisions. Don't opt the women out of the room. Don't decide that for them. Let them decide. Communicate with them to decide for themselves. I would also open up your Rolodex. And this is a very specific fund manager comment. Relationships are in many ways, I think are some of our best currency. If you open up the door for the women on your team to get to know your LPs, like have them present at

Starting point is 00:30:37 your annual meeting and then don't send them back to the office. Like everybody stays for the cocktail hours. They can start to develop those relationships. So then when that person is ready to go raise their fund, yeah, I know there's a competition for capital. But if you're really investing in the success of your talent, you should hope and want them to get to know someone like me. So that, you know, over time, we can back those those folks as they're ready to make their next leap in their career. Smart GPs try to get ahead of that and see their kind of their top associates to go start. Exactly. In a win to go start. Exactly. In a win-win manner.

Starting point is 00:31:06 Totally. You're at Golden Saks, you're at Print Co., Cambridge, you're at Pivotal Ventures. You captured all the brands, I think, in the market. What do your parents think about your success? And what did you learn from your parents that allowed you to be so successful in your career? Well, one, I think my parents still don't quite understand what I do. I'm sort of chuckling because my grandmother did this and then my mom started to do it. But my grandmother would just say like right on, like a literal index card.

Starting point is 00:31:29 She'd be like sort of in a couple sentences, like where you went to school and what, you know, kind of what you do. So for her, for granny, it was like when she would go to church or like the hour, you know, walk around, like she'd pull out her index. Well, my granddaughter works for Goldman Sachs. So she had it written down. But no, I mean, I think I have learned so much from my parents. My dad is a doctor. He managed his practice, was a stay-at-home mom for a long time, taught at a community college. She had many jobs and wore many hats. And I think that call to kind of service, that service mindset to who one much is given, much is expected, they've lived that and i i hope they see my

Starting point is 00:32:06 success irrespective of oh i work for you know work with melinda gates or was it cambridge or went to harvard business school it's that you know i i've come into this with a humbleness and a value to serve right like i often will talk to our gps i'm like you know what can i do to help you and they're like you guys are already so helpful but it's like i think that's really important because i could very quickly be gone from the seat and I want to leave it in a better position than I found it, our team in a better position than when I arrived. And I think, you know, I've looked to my parents and how they've lived their lives, how they've impacted their community and served and sort of have seen them do that. So I hope that they're proud, you know, of me and

Starting point is 00:32:39 the way that I've shown up and hopefully will continue to show up. And I try and, you know, do that with my kids and set those models for them as they are growing up. I just interviewed a children's hospital of Atlanta and LPs are some of the biggest believers in their foundations and in their mandates. And when they get in those seats, they see that, you know, maybe life's not all about maximizing dollars. Maybe 10%, 20% of your time could be spent on making a difference and it just leads to a richer life. I'm not preaching. It just seems to be more happier people when I talk to those kind of LPs with mandates behind them. Totally, totally.

Starting point is 00:33:14 For me, I feel like my career was on this path towards harmonization of that values. Again, that my parents just sold in this very traditional technical kind of finance training you know and i didn't know 20 years ago what a you know an allocator was an lp was kind of stumbled into this as a career you have my podcast okay yeah if if someone is like listening to that trying to solve that yeah trying to solve that you're doing a good job dude so like the next generation will be like well i listen to 10x and i like know how to be an LP and I want to do that. But I had no, I had no clue, but you know, to me, life is too short. Right. And I hope to be doing this for a very long time, many more years to come, but I wanted it to, to have some real kind of meaning behind it. And that work is a hundred percent true at Pivotal. That's why I say

Starting point is 00:34:00 I have the best job in the world, but it was true at Cambridge Associates where most of the clients I served there were private foundations. They were aligning their values and their mission with their investment portfolio, very philanthropically oriented family offices. Again, Princeton, like the mission, you're trying to generate the best returns. So Princeton can be free for the students that go there and you have that amazing educational experience. So all of those felt like, okay, I'm getting to do the technical part of this job and dig through the track records and the, you know, the data and talk to people that are way smarter than me out in the world, but I'm doing it to hopefully have some good in the end. I also did my own office references on you. So you're clearly making an impact.

Starting point is 00:34:43 On that note, I want to really thank you for jumping on the podcast for sharing so much wisdom with the audience. What would you like the audience to know about you, about Pivotal Ventures, anything else you'd like to shine a light on? Sure. Well, yeah, David, thank you so much. I just love what you're doing with the 10X podcast. You've got some amazing just friends, co-conspirators, you know, co-investors on. So it's been a real treat to chat with you today. I'd say, to learn more about me or Pivotal, you can follow me on LinkedIn, follow Pivotal Ventures. We're on all of the channels, LinkedIn, Twitter, X, I guess,

Starting point is 00:35:15 Instagram. So follow us there and you can learn more about our work. And actually also check out our website. Our team has done a phenomenal job revamping our website we have a page dedicated to our investment strategy now and you can see all of the fund managers i name checked a couple but there are like 18 more that i didn't name that again i think are just tremendous and then some of the companies that we backed as well are all on our website you can hear from our founder melinda french gates there as well so i encourage folks folks to check us out on those various channels. Pivotalventures.org. Pivotalventures.org. Thank you, Erin. And hope to sit down very soon.

Starting point is 00:35:50 Likewise. Thanks, David. Be well. Thanks.

Investing Billions - E66: Melinda Gates’ Pivotal Ventures on Investing in VC - Erin Harkless Moore

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