Reid Hoffman’s Human Rights Women Entrepreneurs:
In the meantime, anyone who wants to improve our industry’s working conditions and overall ethical climate should be clear with each other that the kinds of behaviors cited in The Information article are unacceptable.
This means a few different things:
- VCs should understand that they have the same moral position to the entrepreneurs they interact with that a manager has to an employee, or a college professor to a student.
That is to say, as soon as you start discussing potential business deals of any kind with an entrepreneur, there is no such thing as an innocent or appropriate sexual proposition or remark. If you are interested in pursuing a business relationship of some kind, you forfeit the prospect of pursuing a romantic or sexual relationship. If you want to mutually pursue a romantic or sexual relationship, then forfeit the prospect of a business relationship.
- If anyone sees a venture capitalist behaving differently from this standard, they should disclose this information to their colleagues as appropriate – just as one would if one saw a manager interacting inappropriately with an employee, or a college professor with a student.
- Any VC who agrees that this is a serious issue that deserves zero tolerance – and I certainly hope most do think this way – should stop doing business with VCs who engage in this behavior. LPs should stop investing. Entrepreneurs of all genders should stop considering those VCs. This behavior occurs in our industry not just because some believe it’s no big deal, but also because those who do find it unacceptable don’t do enough to actively discourage it.
Founders should expect and push their investors or those they consider partnering with to have made a clear commitment to eliminating harassment.
Purpose And Context
- Declaration of the goal to eliminate sexual harassment and discrimination in startup funding
- Statement of values regarding why protecting founders from harassment by investors is necessary due to the imbalanced power dynamic
- Explanation that standard sexual harassment law does not adequately cover the investor/founder relationship, so voluntary policy is needed
- Recognition that harassment and discrimination perpetrators and recipients can be of any gender or identity, though most often women are harassed by men
- Discussion of the need for a culture of explicit consent
- Encouragement of founders and LPs to demand formal sexual harassment policy from investors with whom they work
- Note that meetings after-hours or in informal locations are part of the fundraising process, and that typical sexual harassment policies do not prohibit appropriate contact in these settings
- Acknowledgement that startups also need strong internal sexual harassment and discrimination policies
- Context that fixing sexual harassment and discrimination is part of a larger need to address all kinds of discrimination and harassment in the technology and startup industry, including sexism, racism, ageism, and ableism
Investor/Founder Sexual Harassment And Discrimination Policy
- Zero-tolerance for investors overtly sexually assaulting, harassing, or discriminating against founders or their teams
- Stern punishment for other violations of the policy
- Scope of those bound by the policy that beyond investment partners may include any investment decision makers including VC firm staff, advisors, scouts, board members, or anyone else that could retaliate against a founder, or influence the funding decision about a startup
- Scope of those protected by the policy beyond founders receiving investment, including founders who pitch or discuss potential investment with the firm, their fundraising teams, and potentially all staff, plus anyone the firm tries to recruit to their portfolio companies
Prohibited Forms Of Harassment Or Discrimination
Level A: Verbal Or Gender Harassment
- Inappropriate comments about physical appearance or romantic life
- Degrading sexual or sexist remarks, innuendos, and jokes
Level B: Direct Sexual Propositions
- Sexual advances including repeated requests for dates, drinks, or personal contact
- Inappropriate sexually-themed communication in person or online
- Sexual invitations including requests for sexual activity or romantic meetings at one’s home or hotel room
Level C: Sexual Coercion Or Bribery
- Quid Pro Quo harassment including implicit or explicit requests for sexual activity or silence about harassment in exchange for reward including funding, referrals, future employment, promotion, or invitation to exclusive events
- Sexual coercion under threat of punishment including defamation, firing, negative reviews, or blocking funding
Level D: Sexual Assault
- Unconsented physical contact of a sexual nature, including touching, groping, or kissing
- Sexual contact without proper consent due to intoxication
- Enforcement policy with consequences for each level of violation will be internally published and available to prospective portfolio companies, LPs, or hires to the firm as part of the due diligence process
- Training in following the policy, its enforcement, and complaint reporting procedures will be mandatory all new and existing firm team members, and updated regularly
- Violators of the policy face punishment including ejection from the firm
- Subjects of harassment will be protected from retaliation or being publicly named
- Whistleblowers will be protected from retaliation or being publicly named
- Firm members aware of violations who do not report the problem to the firm or outside mediator will be punished in compliance with the firm’s enforcement policy for willfully ignoring or enabling violations
- Complaints will be swiftly addressed with priority over day-to-day business
- Resolution disputes will be referred to independent third-party review and mediation
- Agreement to do due diligence on prospective firm employees and not knowingly hire or work with those rightfully fired by other firms for violating the policy
- Clear guidelines on how past violations by someone prior to working with the firm will be handled, including whether all past violations are punishable or if there is a statute of limitation
- A process for what happens to prior investments, in-progress deals, board seats, and fundraising connected to a venture partner fired for violating this policy, such as adding clauses to terms sheets, limited partner agreements, and general partner operating agreements
- Scheduling regular in-person anti-harassment and anti-discrimination training for all new and existing firm members
- Setting aside long-term funding to pay for outside independent review and mediation of disputed resolutions to complaints, such that mediators aren’t incentivized to protect the firm
- Avoiding non-disparagement clauses in contracts that are designed to silence those who are harassed or whistleblowers
- Proactively surveying portfolio companies regarding whether they or their colleagues have been harassed
- Disclosure to LPs, portfolio companies, staff, and when appropriate, the public, if someone is ejected from the firm because of sexual harassment or discrimination policy violations to discourage them engaging in the same behavior elsewhere
Example of pledge:
Our zero tolerance policy applies as follows:
- Any allegation of sexual harassment within a company we are investors in will result in an immediate investigation, with a goal of having it resolved as promptly as possible. If found to be valid, we will request an immediate termination of the harasser, regardless of job position. We will work with all of our companies to put this policy in place.
- Any allegation of sexual harassment by an employee of a fund we are an LP in will result in an immediate investigation, with a goal of having it resolved as promptly as possible. If found to be valid, we will request the immediate resignation of the harasser, regardless of job position. If the harasser is a GP, we will ask for the immediate resignation of the harasser and, if refused, we will engage with other LPs to explore legal removal of the harasser. We will work with all of the funds that we are investors in to put this policy in place, recognizing that we have much less power and influence as an LP than we do as a direct investor and board member of a company.
Only by working together across our industry can we truly make a difference.
Why it matters: Silicon Valley, and venture capital in particular, has swept sexual harassment under the rug for decades. Binary Capital, coming on top of the situation at Uber, has grabbed that rug and begun to shake it vigorously.
Who are limited partners in VC funds? Usually institutional investors, like college endowments, pension funds and charitable foundations. Also a lot of funds-of-funds that invest money on behalf of those aforementioned groups.
A big problem: Investing in a VC fund is really investing in people, even more than investing in a startup. But LPs rarely spend more than a few hours face-to-face with prospective managers, and often live outside the startup hotbeds where it’s easier to hear market rumor. Instead, they often rely on past investment performance (which wouldn’t reflect something like harassment) and references (both “on list” and “off list,” if they’re doing proper due diligence). The reality, however, is that few in the venture ecosystem are willing to be honest with LPs are the personal failings of a peer, particularly if it’s a former colleague launching a new firm. Even if that colleague is only “former” because they’ve been told to find a new place of employment.
Need proof? When’s the last time you heard of a VC being fired from his or her firm, outside of some extraordinary situations that involved outside legal action (e.g., Michael Goguen with Sequoia, Ifty Ahmed with Oak). Instead, firms ask troublesome partners to leave, and then play along with cover stories like the ex-partner leaving “to pursue a different investment strategy.” Binary is an obvious example of this happening, but it’s hardly unique.
What can LPs do? For starters, many LPs need to improve their due diligence. “Check the returns and check the box” no longer cuts it and, if an LP walks into the next Binary that way, they deserve what comes from their superiors. There has been some talk of inserting morals clauses into LP agreements, and that could be helpful if well written. A better option, however, could be to require that any allegations of sexual harassment, discrimination (sexual or racial), violence or other misdeeds by a member of the VC firm be confidentially reported to the firm’s limited partner advisory committees (LPACs). Even if no action is taken, the largest fund investors would be aware, and it would better inform future commitment decisions.
What VCs can do: Stop covering up for bad behavior. Perhaps you are legally prohibited from telling an LP why a former partner has gone solo, but that doesn’t mean you need to give a reference. An un-returned phone call can speak volumes without counting as defamation. If you believe your partner harassed women but you still tell LPs that they should support his new fund, then you’re Silicon Valley’s version of Catholic Church officials who moved around pedophile priests.
What’s promising: I never before recall hearing LPs discuss these issues. Change is coming.
At MIDA Women In Tech Network, we will be collecting instances of these policies and working with the media to publish their existence. Please send us a link to your policy once live and we will include you in the list of companies that are openly doing their part to make a difference.
Your support and assistance is needed to go beyond awareness to truly create the change we all want to see. Together, we can change the status quo.
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