Proposed law targets sexual harassment by venture capitalists

A rash of sexual SAN FRANCISCO harassment scandals this summer involving venture capitalists has laid bare a major weakness in laws meant to protect workers from unwelcome advances. While legislation is clear on many workplace interactions, there’s next to nothing on the books concerning the investor-entrepreneur relationships accounting for billions of dollars in startup funding.

California legislators want to address that shortcoming, creating the prospect of a wave of lawsuits against VCs. Changes to California law would also provide a template for other states.

One of the first bills the California legislature will consider when it returns from recess in January would prohibit investors from sexually harassing founders. The proposal is simple: Add one word, “investor,” to a list of professionals who can be held liable for harassment. The state has carved out similar provisions to cover landlords, teachers and real estate agents.

Venture investors somehow escaped scrutiny previously, despite their outsized roles as technology kingmakers. The industry is about 90 per cent male, and women are similarly outnumbered when it comes to raising venture capital. Female founders represented seven per cent of venture-backed companies in an analysis by Bloomberg last year.

The industry recently began to grapple with harassment issues after more than a dozen women told stories of mistreatment when they sought funding, pushing at least four men to leave their VC firms in recent months. The initial response was to create a “decency pledge,” in which investors promised not to be predators and report bad behaviour.