A few #DecencyPledge ideas for VC firms

Last Friday, LinkedIn founder Reid Hoffman entered the fray around sexual harassment in Silicon Valley, and came out swinging. In condemning the reported harassment of six (now seven) female entrepreneurs by disgraced Binary Capital co-founder Justin Caldbeck, Hoffman created a #DecencyPledge, and suggested an industry-wide HR function to enforce standards in the VC community.

Hoffman’s call for a #DecencyPledge sets the industry up for change. But, as a venture capitalist friend of mine confided yesterday, “I’m meeting with my whole partnership tomorrow about this issue and we still don’t know what, specifically, to do.”

Based on that conversation, and subsequent conversations with my female entrepreneur friends, here are some thoughts about what venture capital firms might do over, both internally and with their portfolio companies, to get in front of this issue.

These suggestions are not perfect, nor are they comprehensive. They don’t solve the long-term cultural attitudes that systematically obstruct women’s advancement in tech. They are certainly not a substitute for legal advice! But I hope they provide a jumping-off place for conversations that will help the industry evolve towards a more equitable experience for female entrepreneurs.

For Venture Firms

· Reach out to your entrepreneurs now. My VC friend mentioned above is talking 1:1 with all his CEOs over the next week about harassment, to see if they have any problems (either in their company or that they themselves have experienced). In these conversations, it is critical to listen and not judge. As many posts shown over the past several months, entrepreneurs don’t disclose for good reasons — ranging from fear about retaliation to non-disparagement agreements to a desire not to relive a bad experience. Asking is a chance to reset expectations and build a higher level of trust going forward.

But…only ask when and if you are prepared to act if you find a problem. Also, don’t assume that a negative answer means nothing is happening. There are decades of mistrust to overcome. One conversation will not be enough to set this right, but it is a place to start.

· Formalize and enforce the common-sense guidelines set out in Hoffman’s post. Firm partners and employees shouldn’t express a romantic interest of any sort in an entrepreneur who is pitching the firm. If an entrepreneur has pitched and been turned down, wait until that person has closed a round with another fund or taken employment elsewhere. Most importantly, if you or your firm invests in someone’s company, don’t ask that entrepreneur or any employee of that company out or express a romantic interest — either to that person or to others — until your firm is no longer an investor.

· Set up clear guidelines for how to handle potential future conflicts of interest. It probably is not realistic to tell associates (or partners, for that matter), that they cannot date potential entrepreneurs, given how tight-knit Silicon Valley networks are.

But firms can require the investing team to disclose if they have been romantically involved with an entrepreneur, and insist that they recuse themselves from the deal process if so. That means no deal evaluation, no sitting in on pitch meetings and no asking that person to give a “backdoor” evaluation of the entrepreneur, which will affect the firm’s decision.

Why is this important? Venture capitalists say no all day every day, and entrepreneurs don’t usually know why. As a female entrepreneur mentioned to me yesterday, “I pitched to a company and a guy I had turned down for a date several years ago was in the room. They never called me back. I have no idea if they didn’t like my idea or if this guy had badmouthed me because his ego was hurt.” If there’s a hidden conflict of interest — like a prior romantic connection — it’s easy to assume that’s the reason. And, as the ever-worsening Binary Capital situation suggests, sometimes that is the reason.

· Identify a senior person internal to the venture firm who can confidentially evaluate potential conflicts of interest and decide if other means are necessary to handle those conflicts ethically. This should preferably be a general partner, and preferably not a woman. This person should have an ongoing relationship with high level external legal counsel who can provide objective advice.

· Offer an opportunity for people to “come in from the cold.” There may be existing situations that would fall afoul of these policies. Offer your firm members and entrepreneurs a grace period to come forward with any irregular situations now. If there is harassment, of course you must comply with the law and your own conscience. But if there are ambiguous situations, or existing relationships that contradict the new policies, there can be a good faith effort to eliminate conflicts of interest while being respectful of the people involved.

For Portfolio Companies

· CEOs should talk to their employees…now. The talk should reiterate the company’s commitment to a safe working place free of harassment, and should remind everyone of the company procedures for reporting and resolving reports. Again, before doing this, the CEO should make sure that there actually are such procedures, and that the procedures are functioning as advertised. If there is any doubt, designate a senior executive (sympathetic but not a woman) to be the person to receive reports until the procedures are fixed.

· Companies that are concerned can conduct a proactive audit. Eric Holder’s law firm reportedly firm did this for Uber. An audit could consist of a review of HR policies, personnel records, focus groups, anonymous surveys, or other analyses to uncover either actual harassment or problematic patterns of behavior. There are many reputable law firms that offer this service — -although I bet many of them are busy right now.

· Human resources should be a senior management function. In smaller companies, this means the CEO has direct responsibility, As companies grow larger, the senior human resources officer (CHRO) should report directly to the CEO. The CHRO should also have regular exposure to the Board, both to report on company affairs and to build credibility. The CHRO should be empowered to come directly to the Board if there is a harassment issue that the CEO cannot or will not address.

Industry

At the industry level, Hoffman suggests a third-party HR function with visibility across the entrepreneurial ecosystem to identify patterns of behavior. This function could be modeled on a university ombudsperson.

A university ombudsperson is empowered to hear reports of all kinds of misconduct across the distributed, complicated, territorial environment of a university. Given that venture capital firms are part of a closely-knit community, and often both cooperative and competitive, this model seems relevant.

What if the National Venture Capital Association set up an ombudsperson’s office, with a certification (#DecencyPledge?) for venture firms that voluntarily promote the program to their entrepreneurs? A venture industry ombudsperson could also offer ongoing education, support and advice to certified members, conduct research, and provide industry-wide insight into patterns of harassment that might otherwise go unnoticed, as Caldwell’s behavior evidently did for years.

There is certainly a moral imperative for venture to do better. It is also in the best interest of the industry to get out in front of these problems. While no one wants to go digging and find a bad situation, it is much worse to find out about it in your in-box or Facebook some morning. Because, in the current environment, you will.

As the Uber and Binary Capital situations show, the risk in letting these situations persist may now, finally, potentially outweigh the costs. Smart firms have an opportunity to get out in front and demonstrate leadership — and decency — in the industry.