A man walks in to his local bank and says:

“I’ve had 4 amazing ideas and I raised $5M for each idea. They all went bust, but now I have this really truly special idea and I want $5M for this one.”

The bank manager says: “So basically you have lost $20M of other people’s money?”

“Yeah, but they were amazing ideas”, says the man.

The bank manager says: “Next in line, please”.

The same man walks to his local early stage VC and says:

“I’ve had 4 amazing ideas and I raised $5M for each idea. They all went bust, but now I have this really truly special idea and I want $5M for this one.”

The VC associate says: “So you successfully raised $20M of other people’s money?”


The VC associate says: “Please sign this term sheet here.”

For those who have been following the Silicon Valley news in the past weeks, a number of high-profile VCs have been outed due to their inappropriate behavior and sexual harassment. The responses have been varied. Most of the accused have fessed up as gracefully as possible. Some see the problem of sexual harassment as systemic. Others are rallying around the home team, claiming that one bad apple shouldn’t ruin the bunch.

I, too, have been tracking these developments. I tend to fall in to the “cultural” camp, where I see the rampant sexism as something deeper than just one-off incidents by high profile men. But I think the issue of sexual harassment is just one facet of a larger trend in the whole industry, particularly in the Bay Area.

More specifically, Silicon Valley has become the Land of No Consequences.

Over the last decade or so, the high tech VC-Startup culture has become one where ramifications for poor decisions are negligible. You can see it everywhere. The housing struggle and forced gentrification of San Francisco. The housing crunch in the Bay Area that effectively locks out teachers, first-responders, and even municipal employees.

You can see it in the continued support for dubious products that clearly cater only to the top one-percent without any consideration for the entire rest of the country.

You can see it in the bizarre logic behind Google and Facebook’s support for increasing the toll on the Bay Bridge.

And yes, you can see it in the persistent sexual harassment, bubbling just below the surface.

I think the core of this is money, as it has always been. LPs simply don’t care that VCs are making bad business decisions. (Remember HomeJoy?).

In the early stages of startup investing, the time span to returns is so long, and Venture Capital comprises such a small portion of the portfolio of large LPs, that there is little impetus to care about where VCs distribute cash.

In the later stages, a startup will go public or be acquired, and even if it is horrible, the VCs (and LPs) will cash out, leaving others — your mom and dad’s pension fund — to deal with the fallout. (#BlueApron)

This can be seen bottom-up as well. The money and perks offered to young (overwhelmingly white&male) employees, before they have even had a taste of “real life” and “real struggles”, just perpetuates the frat-boy culture of college.

Here is what I would like to see… Air out the dirty laundry. All of these “me too” articles that support the women who came forward, and encourage others to come forward, have failed to actually name names! Do it! It is hypocritical to tell others to come forward, when you yourself don’t do it for fear of your job/company. All this does is feed back in to the cycle of no consequences! You know you will have a better work/life balance anyhow if you move to Boston or Chicago, so screw the jobs and the perks and take a stand.

Secondly, I would love to see someone, anyone, speak out about the financial aspect of the VC-Startup world. Unfortunately, I don’t think this will ever happen, as there is too much too lose. But the only way for the culture to change — for bad apples to start feeling repercussions to their crap actions — is for those in power (those with the money) to speak up. Where is the LP who is coming forward and actually withdrawing money from a sketchy VC? Where is the VC who admits they propped up an unsustainable company, along with underwriters, in order to make money and flip the risk to the public market?

Here’s what I believe. First, like all instances of sexual harassment, what comes out to the open is a small fraction of what actually goes on. To this day, it is estimated that only a third of all rape/sexual assault is reported to the police, still! Therefore, everything that has come out so far in the past few weeks is only the tip of a larger iceberg.

Secondly, I do believe that most people are good and normal, but there is a deeper cultural trend that needs to be addressed. There is simply no financial impetus to make sound decisions, or to behave properly. Say what you will, money matters and can change the behavior of people, for better or worse.

Third, Silicon Valley is amazing. The VC-Startup interaction is critical to innovation, even with the bumps in the road. The entire world is better for efforts made in the tech industry over the last 60+ years. But even so, there does seem to be some paradigm shift in the mentality of the Valley, and we would all be better served addressing the issues head on.

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