Erin Harkless Moore of Pivotal Ventures on Investing in the Next Generation of Venture Capital Leaders
Published by Raise Global, October 6, 2021
In this new episode of the Tipping Point Series, This post has been edited for length. Joanna Drake, RAISE co-founder and Managing Director of Magnify. vc interviews Erin Harkless Moore, Investments Director at Pivotal Ventures and a veteran producer of the RAISE Global Summit
- Helping young people manage their mental health and their wellbeing
- Supporting caregiving innovation and modern families
- Expanding the representation of women in tech
Joanna: Today. I’m delighted to shine a light on Erin Harkless Moore. Erin has a remarkable background, having worked with some of the industry’s most respected investment firms and clients. She’s also one of the most approachable and genuinely kind LPs in our RAISE community. Erin, can you outline the journey that brought you to your current role overseeing venture fund investments for Pivotal Ventures?
Erin: Thanks, Joanna. It’s great to be with you today and with the RAISE community. I started my career on Wall Street. I don’t think anyone knows they want to be an allocator of capital and sit on the LP side of the table. But with equal parts luck and some hard work, it was that first role on Wall Street that launched me on this path.
At the earlier stages, though, there was a much clearer line between what I like to call the purely financial and the socially oriented side of my life and career. The social activism and DEI (diversity, equity, and inclusion) work were what I was doing on the weekends and in my volunteer and spare time. But it did not directly intersect with allocating capital, conducting diligence on fund managers, and building portfolios. Over the last decade, I’ve achieved greater harmony and alignment and see my values and a great degree of financial rigor and analysis that goes into the diligence that I do in my job come together.
And in some ways, Pivotal, which I joined about a year ago, has been the sort of ultimate culmination of that alignment: driving social progress, having an impact, but also seeking market-rate financial returns. Our ultimate goal at Pivotal Ventures, and my goal in leading our investment efforts, is to pave the way for more companies to deploy capital that will drive returns and have a positive social impact.
Joanna: Well, needless to say, we are big fans of Pivotal’s mission. Can you walk us through the specific prongs of your strategy?
Erin: We believe investments in venture capital are a tool to advance social progress in our portfolio and to expand women’s power and influence, strengthening communities, and the wellbeing of all people in the US.
Our venture investing and the capital that we deploy with a market-rate, return-seeking lens aligns very closely to the programmatic strategies for deploying philanthropic capital at Pivotal including:
To date, we focused primarily on the fund investments and have opportunistically invested directly in companies and co-invested alongside our partners. And that focus has also let us drive to expand women’s power and influence to focus on female-led funds for established and emerging managers.
Joanna: Let’s dive into your investing processes. What are your most important criteria when you’re considering backing a new, emerging manager?
Erin: We have several criteria. One is the team’s diversity, and specifically, seeing significant female leadership or ownership of the general partnership is foundational for us to invest. Two, we focus on early-stage investments-pre-seed, seed, series A. We’re looking at a minimum of around 25 million to invest, but we are open to engaging with fund managers below that threshold.
Further, we’re open to including both generalist firms and those with a specialist focus. Team-wise, we want to see healthy team and partnership dynamics, which could be multiple or solo GPs.
Joanna: How about geographic criteria, since we’re continuing to advance the boundaries of RAISE?
Erin: I’m always interested in connecting with fund managers outside the US, but our strategic outcomes are domestically focused at this time. Within that, though, we are very open to people that are investing and based all over the US and particularly interested in supporting technology ecosystems outside the Bay Area and New York. Whether in the Southeast or the Midwest, we’re open to building those communities and supporting fund managers in those markets.
Joanna:Regarding sourcing deals, how do you source your new managers?
Erin: We source investment opportunities through external and internal networks at Pivotal Ventures. I have deep connections in the LP community-often a good source for introductions and referrals. I also recognize that you have to look in some unconventional places to find emerging manager talent, so I am very open to introductions from anyone.
- Do your homework in advance. Because I’m going to be doing a little of my own homework on you in advance. Sometimes I’m surprised when fund managers show up for a meeting and ask questions that imply that they’re not familiar with our strategy and approach.
- Be able to clearly articulate why you’re investing in a certain space. What really is motivating you, and what is the problem you want to solve? Why are you better than the next guy or gal that’s going to be pitching me next? If I am not able to parrot back who you are, why you’re doing this, and what makes you different, there you fail.
At Pivotal, we want our process to be collaborative. Given the intersection between deploying philanthropic capital and investment capital from the same organization, sometimes exciting opportunities may come across the desk of one of my colleagues or partners elsewhere on the team. And I have met and made several investments coming out of RAISE and others.
Joanna:How has the RAISE Global Portal helped you?
Erin: The portal is excellent. Even after the annual gathering, I still log onto the portal to gather information about GPs that attend. That work doesn’t stop when the event stops.
Joanna: How do you think about portfolio construction across your fund investments at Pivotal?
Erin: When it comes to portfolio construction, the number one question is, where does a fund or investment strategies fit into that broader portfolio? Is it meeting an unmet need across our key dimensions-geography, sector, stage, etc.? When you’re trying to manage different dynamics for fund portfolio construction, you do not want to over-index too much on any one type of strategy or a fund with the same or similar investment thesis.
Another question I’m trying to answer is what the fund’s edge is? And, how does that edge get applied across three different elements: sourcing, strategy or thesis, and stewardship.
Joanna:I love the emphasis on stewardship because that’s when all the hard work begins. When GPs pitch you for the first time, is there one piece of advice you’d give them?
Erin: Where do I begin? No, and all seriousness, I’d say probably a couple of things jump to mind:
Joanna:That’s really helpful. So being succinct in your vision and your fit, particularly around credibility from backgrounds and motivation, is critical for you?
Erin: Spot on. Investing in venture funds generally, but specifically early-stage investing, are long-term relationships or marriages. We’re going to be sitting alongside each other for a decade-plus. I try to get, as quickly as possible, a sense, of who you are as a person and what your motivations are.
Joanna:Let’s go a bit more into the diligence process itself. What makes you dive deeper into diligence after that initial call or meeting? In other words, how do I get the next meeting?
Erin: Excellent question. I’m happy to take an initial call with anyone that comes across our radar to be helpful or connect them potentially to other interested LPs. But, it’s a limited number that makes it to that second meeting.
As an investment team, we debrief each other on the meetings that we’ve done over the prior week. We look at who we’ve met, but also more broadly, who’s in the market, and what the pipeline looks like. We look for gaps in our portfolio and whose strategy or thesis could fill one of those.
Joanna:Many emerging managers grapple with staying disciplined to the ownership goals of their construction models while getting access to hot deals that may only allow for lower ownership positions. Can you share your lens on ownership strategy, particularly in the early years of emerging funds-funds one or two?
Erin:It’s a difficult needle to thread. One of the things I’m assessing is the ability to source. Sometimes getting into a hot deal can show excellent sourcing, talent, and access. But, my bias is to show discipline. I think consistency in executing the strategy and showing your ability to repeatedly and sustainably do that is what’s going to resonate over time. In fund one, have you done what you said you were going to do as you come back to fund two, fund three, and beyond?
- What is the previous working relationship of the partners?
- How did they come together?
- How long have they’ve known each other
- Why are they coming together to launch this fund?
- How complementary are their skill sets?
I’m not suggesting if you have a compelling, hot deal that you should let that pass you by. If you’re going to pursue it, be clear on the reasons why you invested or why you passed.
Joanna:What advice would you give a first-time fund manager without a formal investment track record?
Erin: That is a great question. At Pivotal Ventures, we’re seeing more folks coming from different backgrounds to venture. That said, you still have to be able to find your advocates and build relationships with the LPs that you’re targeting.
Also, we want to see sustained performance over time. We want to have a sense of your ability to repeat and deliver results if you’ve just recently started investing. We’ve been in a market that’s gone straight up, so it’s much harder to see your ability to deploy capital through different environments.
How do you operate or behave in difficult situations, for example, when a company is going sideways or in a problematic board situation? Or, what have you learned from your mistakes? I am shocked when I sit down and talk to GPs and first-time managers, and they can’t answer these questions.
Finally, be forthcoming with references and recognize that many LPs will probably go off a reference list as well. In the absence of formal investment history, the LP is going to want to spend time getting to know you and how you show up as a person in whatever role you’ve been operating in previously. Choose your references wisely.
Joanna: Great advice-calibrate your list of target LPs. We know from six years of RAISE data that if you’re working on a first- or second-time fund, and you don’t have a high-performing track record, it is a better use of your time to spend the bulk of fundraising with high net worth individuals from family offices than the institutional investors. So how do you underwrite new teams and partnerships?
Erin: One of the most fun parts of my job is getting to know the team and understanding the partnership dynamics. And I’ve sat on the side of the table where it’s gone great. And I’ve also sat on the side of the table and made investments where it has not. Assessing team dynamics is more art than science. So there are a few basic questions that I’m trying to answer:
I’m also looking at the working relationships to get a sense of the strength of the foundation that’s in place, internal dynamics, and how decisions actually get made.
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And then the third thing would be assessing the commitment of the partners and the team to grow the business. I want to know if you’re a good investor, but can you actually manage a business beyond that? Are you going to have the right operational team behind you? Can you recruit and retain and develop talent?
For solo GPs, the questions are not too dissimilar, but I want to understand your vision and the support system around you. What networks or communities are you a part of? How do you source the best companies as a solo GP?
Joanna: Can we talk a bit about how Pivotal Ventures is prepared to be a value-adding LP?
Erin: At Pivotal, the capital we’re investing is one piece of how we show up, and I’m hopeful that that’s the case for other LPs investing in emerging managers as well. To support and watch these funds beyond that first fund, you have to be willing and able to do more than just write the check.
So for us, the value add comes in a couple of ways. One is using our network and our voice to support our investment partners. And that could be something as simple as picking up the phone to review a list of targeted LPs and providing some candid feedback about who is serious about investing in emerging managers. And then the next obvious step is picking up the phone or drafting an email to make that introduction to support our GPs.
The second piece is our brand and how we can connect, partner, and amplify the work of our investment partners-whether it’s mentioning our name in a press release, providing a quote from someone on our team, or even showing up at an annual meeting to speak about our commitments.
Interested in meeting the next generation of venture capitalists? Request a Limited Partner invitation to attend the RAISE Global Summit on October 19 & 20.
Originally published at https://www.raiseglobal.co.