New bill would crack down on VC sexual harassment
State senator seeks to revise civil rights law to bolster protection for founders against investors
Appalled by the recent spate of sexual harassment allegations shaking Silicon Valley’s venture capital community, a California legislator is introducing a bill that would, for the first time, lay out explicit legal penalties for investors who harass founders.
California State Sen. HannahBeth Jackson (D- Santa Barbara) on Thursday unveiled plans to update the state’s existing civil rights law to specifically prohibit sexual harassment in the investor-founder relationship. Jackson hopes to help break down some of the barriers women face when trying to enter the tech industry — which she calls the “crown jewel” of the state’s economy.
“There are too many of these men abusing their power against women who are looking for funding for their ideas, as these women try to break into an industry that is overwhelming dominated by men,” Jackson said Thursday in an exclusive interview with this news organization, before publicly revealing the bill in a media conference call.
The bill addresses a hot-button topic in Silicon Valley. In June, venture capitalist Justin Caldbeck resigned after six women accused him of making unwelcome advances — ranging from latenight test messages to groping — sometimes as
they were seeking funding or business advice for their startup. In July, David McClure, founder of startup accelerator 500 Startups, resigned after he was accused of hitting on a female job candidate during the recruiting process. After he stepped down, another woman published a blog post accusing him of pushing her into a corner and trying to kiss her following a work-related gathering. Last month, Frank Artale, a Seattle-based managing director at Ignition Partners, resigned after he was accused of unspecified misconduct.
Other powerful men also have been publicly called out for inappropriate behavior, including retired investor and “Shark Tank” personality Chris Sacca, who openly apologized, saying he “contributed to the problem.”
Jackson’s bill would address the issue by updating a section of the Unruh Civil Rights Act that already prohibits sexual harassment between people who have a business relationship but don’t work for the same company — the section covers harassment by attorneys, landlords, teachers, physicians and other professionals. The bill would add investors to that list, clarifying that they risk being hit with a lawsuit — and potentially being forced to pay large sums of money — if they behave inappropriately with an entrepreneur.
Lawsuits under the Unruh Act are subject to a two-year statute of limitations.
Jackson is introducing her bill — which will be dubbed Senate Bill 224 — in the final month of the legislative session. But instead of rushing to push it through this year, she plans to wait until the legislature reconvenes in January before seeking a vote. The Southern California-based senator has made women’s equality one of her core issues — she wrote the California Fair Pay Act that Gov. Jerry Brown signed into law in 2015, giving California one of the toughest equal pay laws in the country.
Jackson says it’s already illegal under the existing Unruh act for a venture capitalist to sexually harass a founder, but because the re- lationship is not specifically mentioned, it creates a perceived gray area.
“Because there hasn’t been that clarity, I think women have been reluctant to step forward,” Jackson said during Thursday’s call with reporters. “They have been unsure that they actually have any of these protections.”
Employment law experts have said female founders often are unsure of where to turn when they experience harassment by an investor. Since they aren’t employees of the venture capital firm, they can’t just walk down the hall to the human resources department. And many Silicon Valley VC firms don’t have policies that explicitly prohibit harassing founders.
But Silicon Valley investor Elizabeth Yin, who quit 500 Startups last month in protest of the sexual harassment scandal surrounding founder McClure, doesn’t think Jackson’s bill is the answer.
Part of the problem is the vague and nebulous definition of “investor,” she said. Yin wonders how the new law would handle harassment by people like angel investors, who aren’t tied to a VC firm and don’t make a career of funding startups.
And even if female founders are granted explicit protection under Jackson’s bill, it likely won’t be enough to convince them to come forward, Yin said. Women won’t want to jeopardize their startup’s future by suing an investor with deep pockets — especially if the harassment they experienced wasn’t particularly egregious, she said.
“I think ultimately the problem is less about creating legislation about it, and more about just stopping the behavior in the first place,” Yin said.
But Noreen Farrell, executive director of San Francisco-based women’s rights non-profit Equal Rights Advocates, said the bill represents a step forward for the tech industry. Women are tired of being treated as sexual opportunities instead of investment opportunities, said Farrell, who has been working with Jackson on the bill.
“We’re saying to women everywhere that the law has their back,” Farrell said, “so they can get down to the business of launching their enterprises.”