Melinda Gates is known as the co-chair of the Bill and Melinda Gates Foundation. But the longtime philanthropist is also the founder of a for-profit organization called Pivotal Ventures. Through her for-profit enterprise, Gates is trying to get more women and minorities in tech by funding venture capitalists who invest in more diverse entrepreneurs. Such funders are known as limited partners, or LPs, but the name is misleading because limited partners hold the purse strings and can set a venture capitalist’s agenda if they want to. Marketplace Tech host Molly Wood spoke with Gates about how being at the top of the VC food chain can have an impact on the whole system. The following is an edited transcript of their conversation.
Molly Wood: Are you doing things to pressure LPs into asking for better diversity metrics or asking for more diverse investments?
Melinda Gates: We’re trying to create an ecosystem. So we’re both trying to get some leverage by moving money and saying, “These funds can make a difference, they can be smart business, we know they are.” But then I want to make sure that there’s an ecosystem there that really fosters this community so that more and more women and minorities come forward with their ideas so that they’re recruiting more women, they’re retaining more women and minorities. Really that they’re also collecting better data on how they are doing truly on diversity.
Wood: Let’s talk about LPs and the venture capital universe for a minute. You know usually it’s university endowments, it might be pension funds, high net worth individuals like yourself. Is it easier for you, in some ways, to fund a fund with these expectations than it might be for something like a pension fund, or is that a misconception?
Gates: That’s a misconception. If a pension fund wants to move money to women-led businesses, they can absolutely do it. They just need to decide to do it. But believe me, they’ve got a pot of money inside their pension fund that does a little bit more risky investing versus the sort of more traditional. You just have to make the decision that you care about it and you want to do it.
Wood: What can you say to people who run those pension funds say to convince them that it’s worth taking the risk or reshaping their priorities?
Gates: I would say, look at the track record. If they’re going to move money to the VC space anyway, which many of them are, a certain piece of their portfolio goes to the VC space, there are great VCs out there who maybe haven’t been at it as long as some of the other ones in terms of having their own fund, but these are very smart investors. They’ve learned this space over more than the last decade. So just over-index a little bit in terms of what you look at, because they’re out there. But I think sometimes the pension fund doesn’t even know to look and say, “OK, are there funds specifically for women-led and minority businesses and have they gotten a return?” People have this image in their mind that, OK we have to do what we’ve done before and anything else is risky. Well, no. I mean, think about what has changed society. It’s sometimes the small one-person or two-person organizations that disrupt whole industries, but they don’t always come like a white male in a hoodie. It turns out one or two women can disrupt an industry, but you have to look for people who know how to find those women or find those minorities.
Wood: And of course, everyone knows that you worked in tech yourself. You were at Microsoft in the ’80s and ’90s, you have a degree in computer science, an MBA, but to your point about what’s happening in the United States, there were more female computer science grads back then than there are now. What do you think has happened?
Gates: Nobody actually knows. Again, I’ve gone back to look at the data, what has been collected, on why we’ve lost so many women getting computer science degrees at the undergraduate level and nobody truly knows the answer. But the belief is from when you look at when that peak happened, which was about at the time I was in computer science, the industry became a few years after that very gamified. The big thing being sold on personal computers at the time were these games. And a lot of them were sort of shoot-em-up games, war kinds of things. And when you used to have Pac-Man or the adventure kinds of games, girls were interested in those things, women were interested in those things. The more, sort of, social or neutral games. But as soon as the gaming industry became very male-dominated, very male-focused, girls sort of started to leave the field in droves, saying, “I’m just not interested in that.” And it became sort of a self-reinforcing wheel. And the more men and boys that went into tech, the more young women and girls would say to themselves, “I don’t see role models. I don’t want to be like that guy behind the computer with a hoodie on who’s sitting there every day. I want to have a life.” And so less and less girls and young women went into the field, and we have to reverse that.
Wood: That’s so interesting. So, do you think that if the computer industry had developed more around utilities and maybe social media earlier as opposed to around video gaming that it might have been more female friendly all along?
Gates: I think there’s a chance of it, certainly. Yeah, I think there’s definitely a chance of it.
Wood: Do you have a research project in the works at Pivotal to find out? Because that would be really interesting to try to quantify.
Gates: It’s honestly hard to go back to say to somebody, to a woman, “Well, why did you choose this major? If you go back 20 years, did you consider computer science, and why did you choose biology instead? Or why did you choose political science or creative writing instead of computer science? It’s hard for people to say, “Well, I was truly thinking of computer science and I didn’t go down that route.” Now we can go back, and people have gone back and interviewed women who were in computer science and had done a few years of it in college and then dropped out. Those interviews have actually been done. And again, women will talk a lot about bias. They’ll talk about a professor who turned them off. They’ll talk about no teamwork, and it felt so individual and I couldn’t find anybody like me. So we actually know women who went into the field and left, we know why. But we don’t know the women who considered it but then didn’t enter.
Wood: So then I guess that gets to the question of whether — you’re doing incubation, too, at Pivotal Ventures — but whether money is enough to help women succeed? What other factors need to be built in? What other things need to happen?
Gates: Well, we need to make sure that we create multiple pathways for young women into the tech sector. So whether they want to go in and get a four-year computer science degree, whether they want to go in and get a two-year degree, whether they go somewhere else first and then switch into computer science, we need to make that part work for them. We need to make sure that we role model and we use the great female technologists who are out there and innovators, we need to hold them up and show that they look different from one another and that they had a lot of the same doubts these young girls had, but how they succeeded and how they got where they are. And then we basically need to do the VC thing that we’ve been talking about, which is how do you move more money to women-led businesses and how do you create this ecosystem so the whole thing feels more welcoming to young women and girls?
Wood: And then, of course, the Gates Foundation on the other side of the table has made women’s equality a big issue in general. Is it sort of a part of a holistic effort of Melinda Gates’ work to kind of close the loop with a for-profit entity also?
Gates: Definitely. So I felt like with the foundation assets that we have, I started to very intentionally have our organization from top to bottom start to really look at equity for women and minorities. And so as I started to look at the work for many developing world countries, I started to ask myself, “Well, how far have we really gotten in the United States on women’s equality or minority’s equality?” And the answer was, as I’d be flying back home from these countries, “Not far enough.” And so I then created Pivotal Ventures to make sure that we could actually start to make investments in places that we could change society even in the United States.
Wood: And what’s the benefit of a for-profit entity over a nonprofit in that case?
Gates: Well, a for-profit entity can expect to make a return on its money for one thing, but I do through Pivotal Ventures do both sides of the equation. I do both grant making and investments. And so, I have a little bit more freedom to do that through Pivotal Ventures than I would necessarily at a nonprofit.
Wood: And then is there also a scenario where you’re able to actually demonstrate the functioning ecosystem that we talked about?
Gates: Yeah, I demand on both sides of the equation, whether it is nonprofit or for-profit, real data. I mean, one of the reasons that we don’t move money, quite honestly, to women’s issues, let’s say [women’s] health issues around the world, is we don’t have the data. Nobody actually collects the data, good data, about women’s lives. Well, the same thing is true on the for-profit side. What does pay look like at all levels in the technology sector? How many women do you actually have in different types of roles? I’m going to demand that in terms of some of the VC investing as well because again, that data shows us where we truly are as a society and then where we want to place money down. Because the thing I know from the foundation is what gets measured is what gets done. And we need to get this done.