ON LEAD­ER­SHIP

The Washington Post Sunday - - BUSINESS - ON LEAD­ER­SHIP BY JENA MCGRE­GOR jena.mcgre­gor@wash­post.com More at wash­ing­ton­post.com/ news/on-lead­er­ship

Sil­i­con Val­ley needs old­fash­ioned HR know-how.

As new rev­e­la­tions tum­bled out re­cently about sex­ual-ha­rass­ment al­le­ga­tions against a ven­ture cap­i­tal­ist in Sil­i­con Val­ley, LinkedIn co-founder and Grey­lock Part­ners ven­ture cap­i­tal­ist Reid Hoff­man wrote a widely read post call­ing for peo­ple in his in­dus­try to adopt a “#De­cen­cyPledge.”

“This is en­tirely im­moral and out­ra­geous be­hav­ior,” he wrote in the piece. “And it falls to us to stand with you, to speak out, and to act.” The hash­tag took off on Twit­ter, prompt­ing ap­plause from some. Oth­ers said the next step needed to be more fund­ing for ven­tures run by women.

What got less at­ten­tion in Hoff­man’s post was a call for the in­dus­try to “ac­tively work on build­ing a kind of in­dus­try-wide HR func­tion, so that ven­ture cap­i­tal­ists who en­gage in such be­hav­ior face the same sort of con­se­quences that they would if their over­tures were di­rected at an em­ployee.”

While he was not clear how that might take shape, he did spell out the prob­lem: Com­pa­nies have sex­ual-ha­rass­ment poli­cies and in­ter­nal hu­man re­sources de­part­ments that gov­ern re­la­tion­ships be­tween man­agers and em­ploy­ees. But as en­tre­pre­neur Gina Bian­chini re­minded him, he wrote, noth­ing sim­i­lar gov­erns the re­la­tion­ships be­tween ven­ture cap­i­tal­ists and the founders who seek fund­ing from them. “On a struc­tural level, ven­ture cap­i­tal­ists un­for­tu­nately have no HR de­part­ment to pre­vent preda­tory and in­ap­pro­pri­ate be­hav­ior,” Hoff­man wrote, “and so try to char­ac­ter­ize (falsely) their ac­tions as in­no­cent flir­ta­tious­ness or ban­ter.”

He isn’t the only one in Sil­i­con Val­ley to rec­og­nize this lack of ac­count­abil­ity. Af­ter the res­ig­na­tion of ven­ture cap­i­tal­ist Dave Mc­Clure, who was de­scribed in a New York Times ar­ti­cle as en­gag­ing in of­fen­sive be­hav­ior, Sil­i­con Val­ley in­vestors Mitch and Freada Ka­por said in a state­ment, among other things, that “the tech ecosys­tem could pi­o­neer safe, ef­fec­tive, con­fi­den­tial com­plaint mech­a­nisms to sur­face is­sues early if it cared. Oth­er­wise, we’ll con­tinue to see blogs, tweets and leaks to jour­nal­ists serve as the de facto chan­nels.”

Rep­re­sen­ta­tives for Hoff­man and the Ka­pors said they were not avail­able to com­ment.

Mean­while, a group called SheWorx, a com­mu­nity of fe­male en­trepreneurs, has con­ceived of an on­line data­base that would al­low en­trepreneurs to con­fi­den­tially re­port un­eth­i­cal be­hav­ior by ven­ture cap­i­tal­ists. Co-founder Lisa Wang said she hopes to form a com­mit­tee of big-name in­vestors and part­ners to whom SheWorx would flag firms or peo­ple who had been the sub­ject of re­peated re­ports of bad be­hav­ior.

“Th­ese are the peo­ple who need to have some kind of stake in mon­i­tor­ing or be­ing will­ing to react ap­pro­pri­ately,” Wang said. “I see our role as fa­cil­i­tat­ing, be­cause of our unique po­si­tion.”

Bian­chini, who is the chief ex­ec­u­tive and founder of Mighty Net­works, a plat­form for cre­at­ing niche so­cial net­works, said in an in­ter­view that she has spo­ken to Hoff­man about the con­cept and that high-pro­file names would need to be part of the so­lu­tion.

“You’ll know how se­ri­ous the in­dus­try takes this by see­ing who gets in­volved. If it re­sults in yet an­other women’s con­fer­ence, it’s a bunch of hot air,” she said. “On the other hand, if high-pro­file in­vestors like Reid Hoff­man or, say, [An­dreessen Horowitz’s] Marc An­dreessen or [Bench­mark’s] Peter Fen­ton de­cide it’s im­por­tant and treat this with the same ur­gency as get­ting into the next hot deal . . . then I’ll re­main as op­ti­mistic about change as I am now.”

Un­less the in­vestors in ven­ture cap­i­tal funds are say­ing they’ll with­hold their money from the firms not mak­ing good de­ci­sions on th­ese is­sues, she said, “the self­polic­ing of ven­ture cap­i­tal is all hat and no cat­tle.”

Bian­chini said that if a fe­male founder is sex­u­ally ha­rassed, “there is lit­er­ally no one to talk to about it,” other than an at­tor­ney or the me­dia — both steps that are costly for an en­tre­pre­neur start­ing out. “Ven­ture cap­i­tal is a cul­ture where soft re­la­tion­ships and ac­cess — coded as ‘the qual­ity of your net­work’ — is how peo­ple raise hun­dreds of mil­lions of dol­lars. That’s not a sys­tem with trans­parency or ac­count­abil­ity.”

With­out the gov­er­nance struc­ture that al­lows a com­pany hu­man re­sources de­part­ment to con­sider a ha­rass­ment com­plaint, it’s un­clear how the kind of “in­dus­try­wide HR func­tion” Hoff­man sug­gests could work.

Bob Sut­ton, a Stan­ford Univer­sity man­age­ment pro­fes­sor, said that some of the larger ven­ture cap­i­tal firms al­ready pro­vide enough help with re­cruit­ing and men­tor­ing tal­ent at the com­pa­nies where they in­vest that it’s not a stretch to think they should do more to mon­i­tor their con­duct with in­com­ing founders. “There’s an ar­gu­ment that the VC firms al­ready have that func­tion and what they need to do is crank up the pres­sure,” he said.

He said that even if there were some kind of trade as­so­ci­a­tion or com­pact among ven­ture cap­i­tal­ists to deal with com­plaints, hav­ing a struc­ture to deal with them is only one piece of a broader shift.

Then there is the is­sue that HR de­part­ments — even within in­di­vid­ual com­pa­nies — don’t al­ways have a great record of set­ting con­se­quences for peo­ple who en­gage in sex­ual ha­rass­ment or of fol­low­ing through on com­plaints.

“In or­der for some­thing like what Reid is propos­ing to make sense, we would need to get to what are the key drivers and who are the key cre­ators of the prob­lem,” said Drew Koven, man­ag­ing di­rec­tor of Los An­ge­les-based in­vest­ment firm LDR Ven­tures.

Bian­chini said the two things that will re­ally change the in­dus­try dy­namic are when lim­ited part­ners — the peo­ple who fund ven­ture cap­i­tal firms — eval­u­ate their in­vest­ments along the lines of both re­turns and in­clu­sion and de­mand trans­parency around how much di­ver­sity is rep­re­sented in the deal flow, the same way tech com­pa­nies are ex­pected to re­port their in­ter­nal di­ver­sity num­bers. “If there’s enough pres­sure in­ter­nally by ven­ture cap­i­tal­ists and ex­ter­nally by their in­vestors, I think the sys­tem will start to change,” she said.

Hoff­man hinted at some­thing sim­i­lar in his post. “Any VC who agrees that this is a se­ri­ous is­sue that de­serves zero tol­er­ance — and I cer­tainly hope most do think this way — should stop do­ing busi­ness with VCs who en­gage in this be­hav­ior,” he wrote. “LPs should stop in­vest­ing. En­trepreneurs of all gen­ders should stop con­sid­er­ing those VCs. 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.”

DAVID PAUL MOR­RIS/BLOOMBERG NEWS

LinkedIn co-founder Reid Hoff­man called for an “in­dus­try-wide HR func­tion” to com­bat sex­ual ha­rass­ment.

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