Jul 6, 2017

Venture capital's problem with covering up sexual harassment

Beneath the last few month's headlines about sexual harassment in venture capital, another theme has emerged: The cover-ups.

Why it matters: Although more women are finding the courage to come forward publicly with their stories, much of this can be undermined by company efforts to cover up the misconduct, especially via legal means like non-disclosure and non-disparagement agreements. When firms work to protect the transgressors' professional image and opportunities, they're saying that the men's careers are more important than the women's safety.

The cover-ups:

  • Binary Capital, the VC firm co-founded by Justin Caldbeck, long denied rumors about his misconduct to everyone from the press to business partners. Co-founder Jonathan Teo initially denied knowing anything about the stories floating around about his partner. Moreover, a former employee has filed a lawsuit alleging that she was pressured and threatened to not discuss her experience at the firm after she left.
  • Lightspeed Venture Partners, where Caldbeck was previously a partner, had a female entrepreneur sign a non-disparagement agreement about his conduct toward her. Lighspeed also kept quiet about Caldbeck's actions when he left to start his own firm, actually serving as a reference for prospective investors.
  • 500 Startups, whose co-founder Dave McClure recently resigned after allegations against him surfaced in the NY Times, didn't tell employees of the changes in management following an internal investigation, according to (now former) partner Elizabeth Yin. It also didn't disclose the investigation to employees, she says.

Proposed solutions: Groups of entrepreneurs and investors, plus one major limited partner trade group, have started to draft policies and codes of conduct that would mandate the disclosure of such allegations. Many have also called for investment firms and companies to end the practice of non-disclosure agreements that commonly prevent women from speaking up about misconduct.

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