Bite: Investing in Diversity with Erin Harkless Moore, Pivotal Ventures

Erin Harkless Moore:

At the end of the day, the performance will speak for itself. I do believe that. And diversity makes us all better.

We have to listen, though, and really understand where someone is coming from, why they're putting up that resistance or asking those questions. And it may require a little bit of going slow to go fast as well. Reflecting back on some of the experiences I had earlier in my career, you're hard charging. And sometimes you have to slow down and hear what other people are saying.

There're going to be moments that feel tough and challenging and difficult, but if you're communicating well, if you're building that trust and listening to your partners and respecting their perspectives and the voices around the table, I think that's when the magic happens when you start to see that change really settle in.

And the performance and the outcomes will show us again. Investing in diversity, full stop, is a strategy that I think will deliver great returns.

Sarah Chen-Spellings (Intro):

Hey there. I know I’ve said this multiple times on various occasions, but this much I know is still true: investing in women is the smartest thing you could do right now. 

In many parts of the world these days; its shocking to think that statement CAN BE controversial. 

But we must remain steadfast: progress is never linear. 

This was well articulated by Erin Harkless Moore, Senior Director of Investments at Pivotal Ventures, a Melinda French Gates company created to drive social equity in the world of investment. 

We are bringing back Erin's episode aired last year where we discussed everything from the mission of Pivotal Ventures and her investment strategy to why Melinda French Gates is still betting $1 billion on women. This is a MUST-LISTEN.

Part 1: on Pivotal Ventures and driving societal change

Sarah Chen-Spellings:

How did you then come to find this opportunity with Melinda Gates?

Erin Harkless Moore:

Every day I wake up and I'm almost wondering, is this a dream? Because I feel like I have the best job in the world.

Pivotal has allowed me to do that, to live my values every day. I was very fortunate to be approached about this opportunity to lead the investment team at Pivotal a little over three, gosh, now almost four years ago. And as I said, when I got that call, I thought someone was playing a prank on me.

I said, this can't be a real job. And I learned quickly that it was Melinda's commitment, her willingness and ability to use her voice, her platform as a philanthropist, as an investor to drive change that is incredibly impactful. And to sit in the seat that I sit in driving our investment portfolio, allows me to do that every day to interact with some amazing women, fund managers and founders that are building and innovation is going to drive our economy forward. Gender is foundational to moving our country, our society forward. And we use a couple of different levers at Pivotal to do that: philanthropy, high impact, strategic partnerships, policy and advocacy work, and investing.

All four of those are essential to moving the needle and across a variety of themes like building a more equitable caregiving system in our country, getting more women into tech and STEM so that they can build the businesses that are going to drive innovation for our country, activating more women into public office.

We're sitting here and in the Washington area. I live in D.C. and in the dysfunction, frankly, that's occurring all around town and at the capital of I'd argue if we have more women in power, we might be seeing some different results. So we're trying to create the conditions for women to control more resources in our country. And investment capital is an essential part of that as well.

Sarah Chen-Spellings:

Yeah. So I want to go back to, when you first Have the first meeting with Melinda, and you were sort of thinking about the impact that someone like her, with her resources, her connections, capital connections capability, right? To be able to create the change that we all want to see in the world.

Because we work with a lot of next generations, right? We have some of that access as well. How should someone with that level of ability, right, connections; what I call the three C's, connections, capability, capital. Think about where is my biggest point of impact? How did she land on "Alright, it's gonna be women and girls".

Erin Harkless Moore:  

Melinda's long been a champion for women and girls, so for her, my sense is that's been her core value and a motivating factor for her and her life as a businesswoman, a philanthropist and an investor. So that was clear is our mission, objectives, and the outcomes that we want to see and drive towards from an investment lens.

Again, if we're not putting more capital in the hands of women, we're going to be locking them out of the innovation that's going to drive our country forward tomorrow. So we think again about the tools, the resources that Melinda, that our principal has, that we have to deploy, and it's all of those to drive change and impact.

One alone is insufficient. They all have to be working together, but the investment capital is so important. And the time is now, I mean, despite the work that we're doing at Pivotal, some of the data is not great, Sarah, you know, still 16 percent of decision makers, check writers at venture capital firms in the United States are women, only 2% of venture funding goes to female founders, female led teams.

Let's pause here for a second, two percent. That's terrible. We could be doing so much more so much better. And that's the core of what's driving our investment strategy. Again, us seeing the resources that we have to be able to deploy more capital against that problem, getting more capital in the hands of women investors and decision makers so that we can build the type of businesses that we want to see in our society.

Part 2: Investment in diversity initiatives under attack - what are the solutions?

Sarah Chen-Spellings:

Diversity initiatives are under attack - women of color, black women specifically as well, at a time when we desperately need investment. And we're hearing all this pushback, right? A lot of these initiatives are pulling back. Thinking back to the time when you have experienced that in your previous chapter, is this the same feeling of what's happening in the moment, you know, what was the biggest pushback and how did you address it back in the day?

Erin Harkless Moore:  

Back in the day, again, it's all about building that consensus and listening. I think sometimes we lose track of how important it is to meet people where they are and understand their perspectives, even if there's a difference in opinion, and work to build that trust and dialogue together to move forward to something that's more productive. Sarah, you asked specifically, the news today is disheartening.

It's challenging. Black women, women of color are under attack and various Lawsuits et cetera, that are being filed every day. As a black woman myself, I feel that acutely. I say, you know, a lawsuit against one is a lawsuit against all of us. But we're not stopping our work. I'm not stopping my work.

We're not stopping our work at Pivotal Ventures. To achieve gender parity in our society, we need to have women of color be a part of that. Full stop. And we're going to keep doing that work and pushing, but listening at the same time and bringing hopefully others along with us.

Sarah Chen-Spellings:

Thinking about your time in Cambridge Associates, when you had that pushback from clients, what can we learn from that in actually maneuvering this tough moment that we're in to be able to invest in the change we want to see.

Erin Harkless Moore:

At the end of the day, the performance will speak for itself. I do believe that. And diversity makes us all better. We have to listen, though, and really understand where someone is coming from, why they're putting up that resistance or asking those questions. And it may require a little bit of going slow to go fast as well. Reflecting back on some of the experiences I had earlier in my career, you're hard charging.

You're like, I want to get this done. I want to make this investment. I want to make this commitment. And sometimes you have to slow down and hear what other people are saying and listen and know that this journey, this fight that we're in is, it's a long one and they're going to be setbacks.

There're going to be moments that feel tough and challenging and difficult, but if you're communicating well, if you're building that trust and listening to your partners and respecting their perspectives and the voices around the table, I think that's when the magic happens when you start to see that change really settle in.

And the performance and the outcomes will show us again. Investing in diversity full stop is a strategy that I think will deliver great returns to investors.

Sarah Chen-Spellings:

And Erin, I'm on your side. This is the one that we live and breathe every day. But there is still resistance. Where do you think this resistance comes from? 

Erin Harkless Moore:

It's easy to stick with the status quo, right? No one gets fired for continuing to invest in a fund that's maybe been around for 10, 20, 30 years, to stick with strategies or people from a certain pedigree or background that feels safe and trusted.

We have to examine the incentives as well that are in place. I feel very privileged to sit in the seat that I sit in at Pivotal Ventures where our mission is to drive social progress, create more equality and opportunity for people here in the United States. Gender is essential to that. That's the world I want to see.

Sarah Chen-Spellings:

Looking at consultants because you were there for a significant period of time, right? Arguably, in the recent years, we started seeing a lot with the anti woke movement, anti ESG, and all of these things. And consultants are frankly under fire on what to do because they have client needs, they have other stakeholders, they've got their firm to run as well. How do you think investment consultants specifically should be thinking about this time in advising their clients and stewarding this capital?

Erin Harkless Moore:

It's an excellent question, Sarah. Consultants are often described as the gatekeepers. They work with some of the best and largest institutions, endowments, foundations, families, pension funds. All of our jobs as fiduciaries is again to promote the interests of our clients and the portfolios and drive great results. And to ignore whole swaths of people, women, people of color and investing to me is not being a good fiduciary.

So I think it's incumbent upon the consultants to have those conversations. They're tough, right? Some clients may push back, may not like it. It takes time, but if you listen, if you go back to the data, I think that's what's going to move the needle forward more meaningfully.

Part 3: Melinda’s $1B commitment, investment strategies & getting to a 'yes' as an LP

Sarah Chen-Spellings:

So market returns above market returns. And we were sort of mapping this out a little bit in your office, months ago when we were together about the strategy here, with the investment capital and different levers that you're deploying, whether that through fund managers, changing the face of who writes the check, direct deals, drive the innovation that we want to see. Can you talk to us a little bit about how you thought about the strategy here?

Erin Harkless Moore:

Love that question, Sarah. Our investment strategy has those two pillars, investments into funds that are women owned and led to start to move the needle against those stats. The 16 percent of female check writers in US venture firms.

We want to get more capital in the hands of women that are making the decisions and backing the entrepreneurs of tomorrow. We also want to deploy capital directly as an investor into companies that are tackling some of the big problems and innovations that will create better solutions for caregivers.

That care economy that we've been discussing. So both of those together are going to allow us to tackle the problems of facing female founders and funders. We see them as sort of very closely tied together and essential parts of our investment strategy.

Sarah Chen-Spellings:

So $1 billion was Melinda's commitment. Where are we today? What's the update?

Erin Harkless Moore:

Yes, we are continuing to deploy capital, scaling the portfolio of both fund and direct company investments. It's exciting. We've had so many, it's almost, I think of some of our relationships with our partners as a family too.

And I love both my children equally. Some days I might like one more than the other. And so, you know, when you're talking and asking about our progress, it's hard. I would love to share with the listeners and you can go to our website, as follow up and see some of our partners, they're all building and doing amazing things.

But a couple of examples I think that illustrate the progress that we've made and the path that we're on. We incubated an anchor to fund at Pivotal called Magnify Ventures that's tackling that caregiving crisis, investing in technology that supports modern families. They raised 52 million, have been deploying that over the past few years now into some really interesting companies, one called Milo, which is a personal assistant leveraging AI for the home. So we look to a fund investment like Magnify that's, helping to catalyze this market as a success as some of those companies are now growing and scaling.

One other example, we invested in Impact America Fund led by Keisha Cash. They raised 112 million this year, one of the largest raises by a black woman in venture. And they are investing in lower moderate income communities, black and brown communities, the products and services that uplift folks in our society is that team and they raise that fund much more quickly than their last fund. And I think that's a testament to the partnership of limited partners like us and others who are willing to invest early, perhaps bring a more creative lens to our diligence to get to a yes, and allow that success to come to bear.

Sarah Chen-Spellings:

I love that last point there. Getting to a yes. I love this fundraising environment, which feels for many like a fundraising winter. Can you talk to us a little bit about why that 16 percent number is still the reality today of women writing the checks when we see a lot more women in finance actually at least in the early entry levels. Leaky pipelines happen and all that. Talk to us a little bit about that, the structural problem that exists and how you're thinking about that.

Erin Harkless Moore:

As an investor, we're in the business of pattern recognition and unfortunately still a lot of the patterns we are creating more of them every day with our investments at pivotal and that many others are making still are not enough women to point to you. As we have built our process, this is one of the things that makes us differentiated and I'd even say unique at Pivotal, when we try to invest early to tackle that question you asked about the fundraising winter, it is hard out there but if we have conviction, we want to move as quickly as our diligence to get to that.

And then be a signal to others to join us around the table, sharing our diligence and being as collaborative as possible with other limited partners so that they can get to yes as quickly as possible. And we can start to speed up and knock down some of those barriers that are holding women back.

Also on the process front, just trying to check some of the biases that are in place. And this gets back to your question to Sarah of it's all about the patterns.

I would love to see someone that has 10 years of experience at a brand name, you know, Sandhill Road firm with their audited track record and I can look at each company and vet that. That may not exist though. And there are some folks that have raised funds that have that pedigree and profile, but there are many others out there that do not.

And I'm constantly asking the question, what risk are we trying to assess or get comfortable with or try and minimize as much as gain an understanding around as much as we can in our investment diligence process, seeing the value of someone who is maybe been an operator for a decade, how that fits to the strategy they want to execute.

And using that is a mosaic of building a track record that again, may not fit the traditional markers. But honor is the experience that, say, this woman operator is bringing to the table that will allow her to build a fund that will be successful and ultimately deliver value back to us as limited partners and also to the founders that they're supporting.

Sarah Chen-Spellings:

We're doing the access play, right? Access play meaning we have a small venture allocation, 10%. I'm going to spend that on brand names. And I want to prove, even if I'm a family office, and that's a whole different topic altogether. I need to prove to the patriarch that I can get into the sequoias of the wallet. Why should I take all this risk for, frankly, returns in venture have not been as it seems? With interest rates, what do you say to that pushback?

Erin Harkless Moore:

Excellent pushback. I've heard it before. I go back to the data. What does the data show us?

My former employer, Cambridge Associates, reams of data on this and has shown that emerging managers typically funds one to four when you look vintage year over vintage year outperform. Funds that are 5, to me, that makes the case for, you should, sure, if you can get access to Sequoia, have Sequoia in your portfolio, but you should also be looking to the talent of tomorrow that's perhaps more diverse, bringing different perspectives to the table and carving out a portion of your 10% allocation.

And I think, you know, again, just relying on those old patterns, you're going to miss out on innovation to those diverse perspectives and backgrounds are going to bring are going to see the challenges and problems and maybe come at them, solve them in a different and a different way. 

The family office community, me specifically, I've always found it to be very open. Once you’re in the network, people want to co-invest together. They want to do deals together with other like minded families and thought partners. And so if you're a next gen, join some of the communities that are geared towards next gen investors and start sharing ideas and deal flow. And testing out your thesis, then get the buy in.

That's essential too. And that involves some of the more complicated conversations. That's hard work, but you have to set the conditions of governance to have a successful investment program, full stop. So I'd encourage people to start deploying. Lean on your networks and your peers and make sure that the decision making architecture around it has the space to do these type of investments that you're excited about exploring.

Sarah Chen-Spellings (Outro):

And there you have it folks, our short but powerful bite featuring Erin Harkless Moore - this episode released on what I believe is perfect timing, as we celebrate Black History Month and soon International Women’s Month. As always, I’d encourage you to listen to the full episode that will be linked in the show notes; in the meantime - keep making Billion Dollar Moves.