Binary co-founder blames "corrupted" media for his resignation offer - Axios

Binary co-founder blames "corrupted" media for his resignation offer

Binary Capital co-founder Jonathan Teo slammed the media, investor leaks and at least one of his portfolio companies in an email sent to all Binary portfolio CEOs on Saturday, more than two weeks after his former partner, Justin Caldbeck, resigned over allegations that he had sexually harassed female founders. Axios has obtained the email, which is reprinted in full after the jump.

Some highlights:

  • Teo remains managing partner of Binary Capital, as its limited partners have not yet accepted his offer to resign.
  • Teo says that his resignation offer was not based on any personal failings, but rather was intended to stop a news cycle "by giving the blunt-tooled media activists what they wanted." He also writes: "The news we read and have access to is a problem. Media has been corrupted."
  • Teo claims only one entrepreneur has asked to buy back shares from Binary, and says that those who choose that route are engaged in "opportunistic grandstanding."
  • Teo lashed out at an investor who he believes has been leaking information to the media (psst Jon, it's more than one), and repeatedly complains about "whiners" who want to be "coddled."
  • He says he is "angry" that women have been hurt, although he also says it is "moronic" that some believe only a woman should be chosen as Binary's next general partner.

Below is the email sent to portfolio company CEOs by Jonathan Teo, followed by a letter he previously sent to limited partners in Binary funds. Both were provided to Axios by a source:

Thank you for being so patient with me.

I just hit send on the email I've copied below this to the Binary Capital LPs. Given the leaks, the best way to ensure everyone feels up to date is for me to send out simultaneous updates.

First of all, thank you to all of you who have written such strong messages of support to our Limited Partners. I really appreciate it. It's important that the entrepreneurs we work with have a voice and that voice is heard. We are all doing what we can in the capacity we are in and again, I thank you for being so honest yet supportive in all this. I could not even attempt to continue doing what I feel is the right thing here if it were not for your support. I will never forget that.

The news we read and have access to is a problem. Media has been corrupted. The voice of many have been diluted by the agendas of a few. My offer of resignation was made to quell a news cycle that we are almost positive was exacerbated by a leak from someone in our investor base that had an agenda not in the best interest of the entrepreneurs we work with. Nor the value of the portfolio we are committed to building. I did it so attention was on what matters and not a distraction based on my personal life. Yes my offer quelled the cycle by giving the blunt-tooled media activists what they wanted. Yes it made me have to come across as someone with something to hide. No I do not have anything to hide. And no, my resignation has not been accepted. Yet. If the most that the sensationalism press has on me is my personal life, so be it. The leaks however had their intended effect. It panicked an already nervous LP base, drove rash decisions, and in effect has left us all worse off.

The story in the public that you are all trying to buy back shares should be revised. Not for my sake. If that's what any of you want, ok, but know this. I strongly urge you not to be considered part of a group of entrepreneurs that would, at the first sign of trouble or opportunity, choose to renege. It is dishonorable. And it is opportunistic grandstanding. It will hurt the perception of your integrity and it will hurt your ability to raise capital down the line. No investor seeks out that risk. It's not an action of integrity. I would urge you to separate yourself from that narrative if it isn't true of your intentions. If it is, I hope you have a very credible reason to do it besides just doing a shakedown, or to stand outside your integrity for the sake of media perception. I also recommend you speak to each reporter who has quoted that erroneous article and have it corrected.

What I think is that we are an industry full of entitled human beings. Particular to silicon valley but not exclusive to it. There are victims out there paying for oppression with their lives. As for the people here that whine that they aren't taken care of, who have not to worry about their lives being taken from them or their basic needs met, who owes them more than the voice they already have access to? To these whiners who want me to constantly address their questions preemptively, I say that we all have priorities. Even I do. I spend my time working through those priorities. And maybe there are priorities beyond your personal feelings. I would love to get to them, but maybe I just have not prioritized it high enough. If you feel that, reach out, don't whine about what you expect me to do. Ask it. The world is better off when we take control of our own voice, and fight for those who have truly none. Most in silicon valley have a voice, not everyone in the world does. I learned the power of my voice again this past week when I allowed my trust in Justin to enable him to retain control of the voice of the firm, and gave my input up. I didn't claim it back fast enough, up till the prior Saturday night. Yes Binary had a statement conflict. And yes I'm responsible for allowing that to happen, as a co-founder of the firm. But we have a division of responsibilities. That is how partnerships work. And I was late in dissolving it in my heart and mind. The minute I did, I dissolved it in action.

For now, trust that I want to do what's right. My job is not to make you all feel good, or keep you updated on things that I have no clarity on (many decisions are now outside my control). My job is to preserve the integrity of the portfolio we built up and the value in it, and to ensure the resources you count on do not dematerialize. It is at risk of that. So forgive me if I have not prioritized pandering to the people that feel entitled to be coddled. From the entrepreneurs to the LPs to the public to the reporters.

Some ask what else has not come out. I will say that nothing will come out that truthfully points to me abusing my professional capacity to further any social agenda. I do not need to do that. And I will fight any attempt to paint me as such. Even if it takes time to do so. To my core I believe in respecting each our right to live the way we want to on this planet Earth, and do it without hindering another's.

I'm hopeful we all come out of this stronger than before. I am angry about this situation. I am angry that women have felt hurt. I am angry that many have been hurt. That we have allowed this hurting to go on for so long is inexcusable, and it is now changing. Fast. This situation has ripped apart something I have built with an intention to bring good into the world. I let it get ruined because of poor choices in people. I regret that and won't forget that lesson.

Now we move ahead, now I am committed to finding someone to carry on the work (when the LPAC decides to remove me). And to chart a plan that is not about some reactive pledge. Or some silly framework. I want to institute a set of metrics that measure impact on equality, in the companies we back, in the firm I will build or rebuild, and in the world we touch with our work. And when we find the right metrics, and understand how we can influence them positively, hopefully we show the rest of the industry and the world what can be done.

As for those who are moronic enough to ask for a general partner replacement as long as it is a woman, please question their motives. We must choose the best person, male or female. But that net must be cast wide. Far and wide. Talent is universal if we only choose to recognize it. Anything else is again grandstanding for a personal agenda. You want someone who understands your vision and your motivations. Anything else would not tide you through the tough times that will be ahead. Anything else will be negative to the value the companies we back can generate.
There is a sea change coming, away from concepts of ownership into concepts of access. Everything we've learned to believe about equity is going to be turned on its head. We will build this new world together. Either with this platform or the next.
I'm tired and I'm indignant. But I'll do what needs to be done to the best I'm able to. I'm committed to that for you all.



Dear Binary LPs,

Thank you so much for your patience as we work through the events of this past week. I wanted to send you a formal update as well as give you an idea of what are the plans moving forward.

As you know, we have had a number of leaks to the press and are keeping written updates to a minimum till we feel we have a bit more control of the situation. I understand it is frustrating so please do feel free to reach out to me directly for a verbal update if questions arise.

As of now, we are in Limited Operations Mode for both Fund I and Fund II. This has two primary consequences. First, the Management Fee rate is reduced. Second, the Funds will not make any investments into new portfolio companies without LPAC approval. We expect that future capital calls will be made solely to cover: (i) follow-on investments into existing portfolio companies; and (ii) Fund expenses.

My offer to resign still stands, but contrary to news reports, has not yet been accepted. I am committed to carrying out my responsibilities to you, to the entrepreneurs we work with and to the Binary Capital staff, and generate increasing value of the portfolio we have worked so hard to build up. In the event that the LPAC chooses to replace me, I will work cooperatively with my replacement to transition these responsibilities in a way that maintains the integrity of the mission the entrepreneurs have and the resources we have committed to them. I have advised the LPAC to choose a replacement solely on merit and not based on convenience or for appeasing any public perception. Doing anything less will be irresponsible.

A capital call was sent out yesterday. The call was accompanied by an explanatory memorandum which highlighted the limited uses to which proceeds will be applied. A copy of that memorandum is attached to this e-mail for your convenience.

The portfolio remains strong. We have a number of companies that no longer require support from Binary as they did in their earlier days. We also have a significant number of companies that are already profitable. We also have a portfolio company that has recently filed for an IPO on the HKSE. I am committed to ensuring the portfolio will be a driver of returns for you.

The news media reporting that all our entrepreneurs are looking to buy back their equity is utterly misleading. That is simply not true. I would be disappointed if you as a group believe that we have invested in entrepreneurs that would take advantage of such an unfortunate situation without knowing full facts to renegotiate and do a shakedown. I am aware of one single entrepreneur who has done this, and only 2 others who have asked to have a discussion regarding it.

I also want to remind everyone that we have always invested in great entrepreneurs, regardless of gender or race. We have 7 female led companies in a portfolio of 18. Far greater a number than the industry average. And there have been zero incidents of inappropriateness reported by any of them to me, and in contrast I have been constantly reminded of how positive the working relationship has been, barring some natural disagreements on business decisions.

We will continue in limited operations mode until the LPAC has confidence on next steps.

My plans for next steps are firstly to ensure a smooth transition away from the recent events, and to find a good partner or replacement to support making good decisions on behalf of you our investors, and the entrpreneurs who are working hard to build value that will ultimately benefit all of us.

I am also putting together a set of metrics we will use internally to measure the impact that our work has in encouraging equality of access both within the portfolio and at Binary itself. We will monitor these metrics and interate on them, and expect that when we do have a set of practices that can positively impact them, to publish them as findings on practical work that can be done. I do not plan to grandstand with public statements of a pledge or platitudinal suggestions driven out of reactionary dynamics to take advantage of the current press cycle. Sustainable change comes from understanding the real levers, which comes only from knowing what does actually work. And this needs to be measured to be discovered credible.



Sen. Corker won't seek re-election

J. Scott Applewhite / AP

Republican Senator Bob Corker of Tennessee won't run for re-election next year, according to the Tennessean newspaper. Corker says he wants to act "thoughtfully and independently" for the rest of his term without worrying about running for re-election.

Why it matters: Corker is chairman of the Senate Foreign Relations Committee and was a reliably GOP establishment vote. According to the Tennessean, Corker had "agonized" about running again in the face of a possible challenge from more conservative Republican opponents.


More STD cases recorded in 2016 than ever before

The bacteria which causes Chlamydia, the most prevalent STD in 2016. Photo: CDC via AP

The Centers for Disease Control and Prevention recorded over 2 million cases of STDs in 2016, the highest-ever number. The most prevalent disease, with 1.6 million cases, was chlamydia, followed by gonorrhea, with 470,000 cases.

Why it matters: The number of reported cases is on the rise. There were 4.7% more cases of chlamydia in 2016 than 2015, and an 18.5% increase in gonorrhea during that time period. Cases of syphilis, which are much less prevalent than chlamydia or gonorrhea, saw a 17.6% bump from 2015 to 2016.


Women in Saudi Arabia will soon be able to drive legally

Saudi Arabia announced Tuesday that it will lift its ban on female drivers. Photo: Hasan Jamal / AP

Saudi Arabia announced Tuesday that it will lift its ban on female drivers in June 2018, per the New York Times. The move is a victory for women's rights groups who have long campaigned for the ban to be overturned, and marks the end of what has long been known around the world as a symbol of the oppression of women in Saudi Arabia.

Between the lines: Despite the advancement, the country still has a ways to go in helping society adjust to the change. As the NYT points out, the kingdom has no processes in place to teach women how to drive or to obtain drivers licenses. Police will also need to be trained to interact with women, something that men and women in their Saudi society rarely do.


Sen. Blumenthal "99% sure" Manafort and Flynn will be charged

Senate Judiciary Committee member Sen. Richard Blumenthal D-Conn. talks to media. Photo: Carolyn Kaster/AP

Sen. Richard Blumenthal told Politico on Tuesday that he's "99 percent sure there will be some criminal charges" from the Russia investigation, and that Michael Flynn and Paul Manafort "are the most prominent" people for whom charges are near-certain.

Blumenthal, a member of the Senate Judiciary Committee, said there could be others charged, but he's unsure whether they might include President Trump himself. Roger Stone said today after a closed-door appearance before the House Intelligence Committee that Manafort's lawyers believe he will be indicted soon.


Study: Autism is rooted mostly in genetics

People commemorating World Autism Awareness Day (April 2) in Brazil. Photo: Felipe Dana / AP

The risk of developing autism is 83% genetic and 17% due to environmental factors, according to a new model, TIME reports. Scientists studied sibling pairs — ranging from half siblings who share one biological parent to identical twins who share 100% of their DNA — and tracked diagnoses of autism among them, per the study. They also accounted for the fact that siblings may be diagnosed at different times.

Why it matters: The new model adds perspective to the debate over whether the disorder is rooted in genetics or environmental factors. Previous studies of just twins have found a 90% correlation between developing autism and genetics.


McConnell: Graham-Cassidy is dead, moving on to tax reform

Majority Leader Mitch McConnell said the Graham-Cassidy bill is dead, and the Senate's focus is now on tax reform. Photo: Ron Sachs / MediaPunch via IPx

Senate GOP leaders announced Tuesday that they will not hold a vote on the Graham-Cassidy health bill before the Saturday deadline, with Sen. Bill Cassidy conceding, "we don't have the votes." Mitch McConnell said the Senate will now focus its energy on "our next priority," tax reform, and added that they will return to health care once that's dealt with.

Go Deeper: What the Dems are saying

Next steps: McConnell said the Senate Budget committee will mark up the FY18 budget next week, which will set up the tax overhaul process.

Key quotes from the Senate GOP's briefing:

Mitch McConnell:

  • "We haven't given up on changing the American health care system. We're [just] not going to be able to do that this week."

Lindsey Graham:

  • "With a process that gives more attention and time, we will repeal and replace Obamacare with a block grant to pass Graham-Cassidy-Heller-Johnson... It's a matter of if, not when."
  • "The leadership team has done everything we've asked them... anyone out there who thinks Mitch has not done all he could, I don't know what you're talking about."

Bill Cassidy:

  • "We don't have the votes. We made the decision that because we don't have the votes, we will postpone the vote."
John Cornyn:
  • "I think we ought to leave the health care debate for a different track." Added that he wants the FY2018 budget reconciliation instructions to focus on taxes, not health care.

Senate Dems say it's time for bipartisan Affordable Care Act fix

Chuck Schumer takes questions from reporters at the Capitol. Photo: Alex Brandon / AP

Following news that the Graham-Cassidy health care plan would not receive a vote, Senate Democrats said that they were ready to move forward with the GOP to better the Affordable Care Act. At the Democrats' weekly press conference, Chuck Schumer said, "We are ready at this moment to roll up our sleeves and work in a bipartisan way to stabilize this system and make improvements."

One more thing: Schumer said that he'd spoken with Puerto Rico's governor and pushed back on President Trump's comments that recovery efforts in Puerto Rico were going well, saying, "I'm not blaming. I'm beseeching for quick action…It is not going fine. Absolutely not. They need help now."

Go Deeper: What the Republicans are saying


Alabama Republicans go to the polls

Roy Moore (L) and Luther Strange (R) arrive to vote. Photo: Eric Schultz / AP

When most senate candidates arrive to vote, they don't have to tie up their horses first. Luther Strange, the Trump-nominated incumbent, arrived on foot, while Roy Moore, the Bannon-backed front-runner, was on horseback.

Polls close at 7pm local time (8pm Eastern) in the Republican runoff for senate.


Facebook to stream NFL recaps, highlights


Facebook and the NFL have finally struck a deal to stream game recaps and highlights, per Reuters. Some NFL documentaries will be included in the deal.

Why it matters: The move comes as both companies start to invest heavily in streaming video. Facebook launched its video platform "Watch" for video viewing across devices, especially on digital TV. New England Patriots owner Robert Kraft said in June, "There has been a dramatic shift … This year we're with Amazon and for us the future is OTT [streaming services.}"

Rounding it up: Discussions about streaming have been ongoing between the NFL and Facebook. The NFL has been aggressive about striking distribution partnerships with social platforms and Facebook has been aggressive about striking sports partnerships with leagues. Earlier this year, Facebook lost a bid to stream Thursday night NFL games to Amazon — which won the contract for $50 million dollars for the season. Twitter announced in May it will stream exclusive NFL content. Facebook landed professional baseball and soccer distribution deal earlier this year.


Apple, Fitbit and Samsung part of FDA trial aimed at speeding tech development

AP file photo

Some of the biggest names in tech and health care are taking part in a pilot program from the FDA that looks to make it easier for companies looking to offer technology approaches to issues that fall under the agency's purview.

Why it matters: A lot of tech companies have been focusing on relatively modest products in the "wellness" space rather than more ambitious efforts that require cumbersome and time-consuming regulatory approval.

"We need to modernize our regulatory framework so that it matches the kind of innovation we're being asked to evaluate, and helps foster beneficial technology while ensuring that consumers have access to high-quality, safe and effective digital health devices," FDA Commissioner Scott Gottlieb said in a statement. "These pilot participants will help the agency shape a better and more agile approach toward digital health technology that focuses on the software developer rather than an individual product."

Who's in: Apple, Fitbit, Verily (the health unit of Google parent Alphabet), Samsung, Roche, Johnson & Johnson, Pear Therapeutics, Tidepool and Phosphorus.

How it works: The program looks to those with a proven process in place to make it easier for the companies to more quickly create new products and update existing ones.