Sexual harassment claims prompt venture capitalists to apologize, change policies and head to counseling

and Contact Reporter

Mark Suster, among Los Angeles’ most well-known venture capitalists, says he never fathomed that fellow investors would cross a line and sexually harass entrepreneurs.

But in the last week, Suster says he’s found that “what I think didn’t need to be said, I guess, needs to be said.”

Venture capitalists, the influential financiers who provide cash to start-ups, have begun making pledges, pursuing policy changes and even stepping down amid a flurry of accusations.

Venture capital firms, long dominated by male leadership, have slowly added more women to their ranks following a high-profile gender discrimination trial in 2015. Whether changes brought on by the latest series of revelations prove substantive and long-lasting remains far from certain.

Female start-up founders and other tech business leaders have begun identifying by name male investors whom they say have acted inappropriately around them. Complaints of undesired physical contact and flirtation have been whispered across the industry for years. But attaching names to both victims and perpetrators has called attention more than ever before in tech to the massive power venture capitalists have over entrepreneurs who need their backing to pursue business ideas.

The latest revelations came Friday as six women called out specific investors for poor behavior, including prominent figures Chris Sacca and Dave McClure, according to the New York Times.

McClure, the sandals-and-T-shirt-wearing founder of business mentorship program 500 Startups, was stripped of his chief executive title earlier this year after an internal investigation into his behavior toward women, according to 500 Startups spokeswoman Kelsey Cullen. He resigned from the firm Monday; managing partner Christine Tsai is the new CEO.

McClure, a longtime tech worker whose firm has helped software firms such as Twilio and Behance, was accused by Sarah Kunst of sending an inappropriate message on Facebook.

As she sought a job there in 2014, McClure reportedly wrote to her, “I was getting confused figuring out whether to hire you or hit on you.”

In a blog post published Saturday — titled “I’m a Creep. I’m sorry.” — McClure apologized for making inappropriate advances toward several women in work-related situations, with specific regard to Kunst.

“To all those I let down, and especially to those I directly offended and hurt: I’m very sorry,” the former CEO wrote.

McClure’s original plan was to assume a limited role as a general partner, but late Sunday night, Kunst called for his resignation on Twitter — a call soon echoed by others in the industry.

“The women hurt by his actions deserve to know that they did not speak up for naught,” she wrote.

After LaunchVic, an investment arm of an Australian state that partnered with 500 Startups in March, threatened to pull its support of the company, McClure resigned.

Sacca, who has served as a judge on the investment TV show “Shark Tank,” also apologized for his actions. In a blog post published before the New York Times story, Sacca said that he’d long thought that he was one of the “good guys.”

“The crucial lesson I am learning right now in real-time: It’s the unrelenting, day-to-day culture of dismissiveness that creates a continually bleak environment for women and other underrepresented groups,” he said, noting that he contributed with insensitive jokes, flirting and comments.

Susan Wu, who advises and invests in tech companies, told the New York Times that Sacca touched her face without permission in 2009 during a tech event.

Sacca, famed for early investments in Twitter and Uber, announced plans in April to focus on podcasting and TV show development. The former Google lawyer maintains a home in Los Angeles.

Though Upfront Ventures hasn’t faced criticism, Suster said the Santa Monica firm is drafting an internal policy to guide its team on interactions with entrepreneurs. He expects to make the policy public once it is drafted.

Suster said he’s never considered a formal document to make clear that the firm has zero tolerance for harassment because the possibility of a male investor acting indecently hadn’t been on his radar.

“That’s so below the ethical standards of regular venture capitalists,” he said. “But we want to make it exceedingly clear to [entrepreneurs] that we take this seriously.”

His action comes after a week of sexual harassment accusations against San Francisco venture capitalist Justin Caldbeck. Three women who interacted with Caldbeck in a professional capacity publicly said he made unwanted sexual advances. He resigned soon thereafter from his firm, Binary Capital, and acknowledged that he had used his influential position for sexual gain. Investors in Binary Capital are now weighing how to take over the reins of the small firm from Caldbeck and his co-founder, Jonathan Teo.

Women have raised concerns beyond the harassment. Many also have said that they tried to warn the investors’ colleagues and business partners. But instead of investigation or disciplinary action, the women found themselves being told to keep quiet. Encounters between entrepreneurs and investors fall into a tricky corner of employment law, though legal experts contend that sexual harassment litigation can pass muster in such situations in California.

At Upfront Ventures, partner Kara Nortman told female business chiefs within the firm’s investment portfolio that they could reach her anytime with concerns confidentially, according to Suster.

University endowments and other investment funds that provide venture capitalists with the cash they need to invest in start-ups are vowing to do increased screening.

Suster noted that the changes may already be coming into place. In a reference-check call he received this week, an investor weighing a bet on a venture capital firm was asking more difficult questions than he’s ever encountered in such a call.

A trade group of investors in start-up funds told Axios on Friday that it plans to develop new guidelines this summer in the wake of the evolving misconduct scandals.

Meanwhile, several venture capital firms posted tweets in recent days in support of a “Decency Pledge" promulgated by LinkedIn co-founder Reid Hoffman. It calls for severing ties to anyone in the industry engaging in sexual harassment.

“Any [venture capitalist] who agrees that this is a serious issue that deserves zero tolerance … should stop doing business with [venture capitalists] who engage in this behavior,” Hoffman wrote. “Entrepreneurs of all genders should stop considering those [venture capitalists]. 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.”

Investors at some of the best-funded firms, including Greylock Partners, Sequoia Capital, GGV Capital, First Round Capital and Technology Crossover Ventures, attached their names to the pledge. Whether the public support of the proposal translates to follow-through against newly called-out and high-profile investors such as Sacca and McClure is yet to be seen.

paresh.dave@latimes.com / PGP

Twitter: @peard33


UPDATES:

July 3, 12:25 p.m.: This article was updated to include news of Dave McClure’s resignation.

This article was originally published June 30 at 9:05 p.m.

Copyright © 2017, Los Angeles Times
EDITION: California | U.S. & World
73°