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.