“MY NEMESIS!” SIR MICHAEL Moritz declared loudly, the moment he saw me. We were both guests at Vanity Fair’s 2016 New Establishment Summit, and I had successfully, if awkwardly, avoided eye contact with him during cocktails. When I discovered that we had been seated directly across from each other at dinner, I briefly contemplated moving the place cards. Now Moritz had arrived at our table and found himself opposite perhaps his least favorite journalist in Silicon Valley.
“Why is she your nemesis?” asked a CEO seated beside us.
“I’ll let her explain her way out of this one,” Moritz said as he grudgingly took his seat. In my defense, let me say this: It wasn’t what I had said about Moritz that had brought him headaches. It was what he’d said about himself.
A year earlier, I had conducted a wide-ranging TV interview with Moritz about his recently published book, Leading (which he co-wrote with the famed former Manchester United manager Alex Ferguson), and his near-legendary Silicon Valley career. He had arrived alone that day, a few minutes late, without the typical army of public relations handlers—surprising for a man who is, arguably, the most successful investor in Silicon Valley history. Moritz made his fortune investing early in companies like Google and Yahoo; now his firm, Sequoia Capital, is among the most sought-after venture capital outfits in the world. Moritz stepped back from day-to-day duties at Sequoia in 2012 due to what he called a “rare, incurable medical condition” but remains very engaged in the firm to this day. In 2013, he was knighted—for his success in investing and generous charitable giving—yet on the TV set he displayed none of the airs you would expect from one of the world’s wealthiest men.
As soon as Moritz began to answer my questions on camera, I realized there was nothing casual about him. He speaks slowly, choosing his words carefully, like a painter selecting colors from a palette. Most of his answers to my questions were sharp and insightful. Which was why his comments about the absence of women partners at his venture capital firm were so jarring.
At the time of the interview, the number of Sequoia’s female investing partners in the United States was zero (though there were three in China and two in India). When I asked Moritz about Sequoia’s responsibility to hire women, he responded, “We think about it a lot. I like to think and genuinely believe that we are blind to somebody’s sex, to their religion, to their background.” He went on to give the typical Silicon Valley answer: that too few women elect to study the sciences, so therefore the pool of hirable women is much smaller than the pool of men.
To my ears, this explanation was too glib. Yes, women are underrepresented in the STEM pipeline. But Sequoia is a relatively small firm (with about a dozen U.S. investing partners at the time), and no one disputes the fact that there are thousands of exceptional women working in tech (though still not nearly enough). Sequoia couldn’t recruit just one? Perhaps, I suggested, Sequoia might not be looking hard enough.
“Oh, we look very hard,” Moritz said, bristling. He then noted that the firm had just hired a young woman from Stanford into a junior position. “And if there are more like her, we’ll hire them. What we’re not prepared to do is to lower our standards.”
This was the line that would haunt him for the foreseeable future. The Silicon Valley chattering classes exploded, as did the mainstream media. Vanity Fair proclaimed, “Here’s some news for all the many smart, driven, capable young women interested in working in technology: apparently, you don’t exist.” For the next several months, industry folks stopped me everywhere to express their horror at what Moritz had said. The idea that Sequoia had never hired a woman because the firm couldn’t find even one who met its high standards was just plain ridiculous. One female venture capitalist, Jennifer Fonstad of Aspect Ventures, told me Moritz’s words would be “his epitaph.” Bijan Sabet, a co-founder of Spark Capital, put it this way: “When you make a lot of money, you either become a superhero or a superjerk.”
The irony is Moritz himself didn’t study the sciences on his way to becoming one of the most powerful VCs in the Valley. Born in Wales, he earned a history degree at Oxford and an MBA at the University of Pennsylvania’s Wharton School. He then became a San Francisco–based correspondent for Time magazine, where in January 1983 he published a controversial piece on Steve Jobs. Then, in the mid-1980s, Don Valentine, founder of Sequoia, who was one of Apple’s original backers, offered Moritz a role as an investor at the firm. Despite his lack of a technical background, Moritz was promoted to full partner in short order.
“I’m a history major, knew nothing about technology, nothing about Silicon Valley,” Moritz told me in our TV interview. “Eventually, through a stroke of great luck, a fellow who had started Sequoia, Don Valentine, took a risk on me.” Later in the interview he added, “I think it’s very difficult to tell from somebody’s background whether or not they’ll be successful in the venture business.”
Moritz isn’t the only venture capitalist in Silicon Valley who didn’t need a computer science degree in order to succeed, among them Peter Thiel of Founders Fund (BA in philosophy, plus a JD, early investor in Facebook) and Peter Fenton of Benchmark (also a philosophy BA, plus an MBA, early investor in Twitter). What about all the others? On the heels of my interview with Moritz, the entrepreneur and angel investor Sukhinder Singh Cassidy took a close look at the Forbes Midas List of standout venture capitalists in 2015 and discovered that 61 percent of the top male investors had a STEM degree. All but one of the few women on the list had STEM backgrounds.
Putting those numbers a different way, Cassidy is telling us that the absence of a STEM degree is not the deal breaker Moritz (and many others) make it out to be, because almost 40 percent of the top male investors do not have that background. The excuse that VCs aren’t hiring women because there are not enough of them getting science and computer degrees just isn’t valid.
In the midst of the backlash to our interview, Moritz sent me an email with what he called a clarification. “I know there are many remarkable women who would flourish in the venture business,” he wrote. “We’re working hard to find them and would be ecstatic if more joined Sequoia or other firms.” Sequoia Capital followed up with a tweet from its official account: “We need to do better.”
A few months later, Moritz managed to give new life to the controversy while taking questions from journalists at the San Francisco Exploratorium, saying, “We’re not going to run an affirmative action [program]. And I happen to think it’s an insult to a woman we hire, a black we hire, or a Hispanic we hire, to feel like they’re coming to work at Sequoia because of their gender or their race. The people who want to come to work for us want to be the very best.” He again mentioned the “spectacular” female analyst Sequoia had recently hired: “If she had five sisters we’d hire them all!”
Moritz’s comments dogged him, illustrating the almost comical difficulties late-career VCs have in navigating this unfamiliar terrain. But even if you judge Sequoia only on its actions, Moritz and his colleagues would fail the loosest diversity tests. Sequoia didn’t hire a single female U.S. investor in the firm’s first forty-four years.
As part of a panel discussion just before our awkward dinner, Moritz was asked—again—to clarify his “lowering standards” remark. This time his answer was more polished: “It makes zero sense to exclude 50 percent of the human race who’ve got some of the smartest brains around . . . the more the merrier.”
Beth Comstock, vice-chair of General Electric, who shared the stage with him, was prepared to speak her mind. “Diversity fuels innovation,” she said emphatically. “It’s just that simple. And part of the challenge is people want to hire people like themselves.” She continued, “Who’s setting the standards? Are you working hard enough to make the standards wide and inclusive and have the right access? . . . You got to work really hard to hire people who don’t agree with you, who don’t look like you . . . You have to say, bring me enough women and diverse candidates . . . flood the zone with better candidates . . . There are no women in software who can do this? That’s absurd. Keep looking until you find them!”
After that public scolding, it was understandable that Moritz was less than delighted to find, only a few hours later, that I was his dinner companion. After I explained to our CEO tablemate why Moritz had branded me his nemesis, he politely offered that he felt he understood exactly what Moritz had been trying to say. “See?” Moritz said to me, as if his words had been validated. “We discriminate against all dummies equally.”
Moritz and his firm would soon receive another black eye. Sequoia’s partner Michael Goguen became the talk of Silicon Valley when a former stripper named Amber Laurel Baptiste slapped him with a $40 million lawsuit claiming he kept her as a sex slave for thirteen years. Although Goguen denied the allegations, claiming he was being extorted, Sequoia fired him as soon as the case went public. Insiders at the firm insist they knew nothing about his extracurricular affairs. While Goguen’s relationship with Baptiste wasn’t related to his job, the Valley’s intense interest in the scandal, I believe, came from the feeling that Goguen’s sexual behavior was emblematic of a cavalier attitude toward power and sex that existed inside many VC firms. There was a swirl of rumors about the behavior of venture capitalists across the industry, and I was often told off-the-record stories, but it would take another two years for many of those stories to break.
Though venture capitalists make their names by betting on massive technological innovation, their own business has changed little over time. The first VCs in America were the wealthy families of the late nineteenth century—the Vanderbilts, Rockefellers, and other dynasties who invested in high-return undertakings such as railroads, steel, and oil; they also funded some of the earliest tech entrepreneurs, including Alexander Graham Bell. The industry became more organized in the 1940s, when the first venture capital firms were formed. Then, in the 1970s, it became clear that there were great fortunes to be made in the emerging field of technology, and an entire subindustry of tech-focused venture capital firms was spawned. Sequoia Capital and Kleiner Perkins Caufield & Byers set up shop in 1972, just a year after the microprocessor was born. These firms were all-male—with many partners who were former employees of chip companies such as Intel and Fairchild Semiconductor—but as women became full participants in the post-1970s workforce, they started seeking a place for themselves at this rich table.
Few of them found one. By 1999, women accounted for just 10 percent of partners at venture capital firms, and that number actually declined over the next fifteen years, to 6 percent in 2014. VCs have had little incentive to change. Two of the top firms in Silicon Valley, Sequoia and Benchmark Capital, made billions of dollars before hiring any women partners at all. Why mess with a good thing? In other words, while investors expect the start-ups they fund to take extreme risks, VCs themselves have chosen to take very few chances in how they run their own firms. Unfortunately, one company that did make changes became something of a cautionary tale.
Sequoia and Kleiner reached the top of the VC hierarchy by roping “unicorns,” that is, making early investments in companies that later reach the billion-dollar valuation mark. During the dot-com boom, a top partner emerged at each firm: Moritz at Sequoia and John Doerr at Kleiner. As the men who led their firms’ investments in Google and served on the search engine’s prestigious board of directors, they delivered the lion’s share of the returns and thus became the most influential partners within their respective fiefdoms. As such, they closed deals with investors and entrepreneurs, spoke at industry conferences, and had the greatest sway over internal hiring and operations.
After it became clear that Google was going to be huge, Moritz and Doerr took different approaches to finding the unicorns of the next decade. Sequoia stayed small and lean, making early investments in some of tech’s biggest hits, such as YouTube, Airbnb, and WhatsApp. Most founders dream of getting a check signed by Sequoia and the contacts and bragging rights that come with it.
Kleiner, on the other hand, changed its approach, scaling up in staff size and widening its investment focus to include new energy and clean tech—changes made largely at the behest of Doerr. Among the slew of new partners hired were big names such as former vice president Al Gore, the famed former Wall Street analyst Mary Meeker, and the esteemed doctor Beth Seidenberg; the new junior partners included a number of promising women. Doerr continued to push recruiters hard to find more women, even when other partners didn’t agree it should be a top priority. With these new hires, Kleiner became one of the most gender-diverse top-tier venture capital firms in Silicon Valley.
Despite its ambitious expansion, over the next decade Kleiner’s reputation suffered. The firm failed to invest early in some of the most successful web 2.0 companies such as Facebook and Twitter (though it invested in both at a later stage and a much higher price tag); Kleiner even found itself playing catch-up to the hot new venture capital firm on the block Andreessen Horowitz. Then came the biggest blow yet. On May 10, 2012, Kleiner was sued for gender discrimination by an employee named Ellen Pao.
Pao had joined the firm as Doerr’s chief of staff in 2005. She came with an electrical engineering degree from Princeton as well as a JD and an MBA from Harvard and had already worked at several tech companies. At Kleiner, she was promoted to junior investing partner but didn’t make the cut for senior partner when the firm decided it was time to downsize. Pao charged that she was denied partnership because of her gender, while the firm maintained she simply underperformed. Pao’s work ethic was never in question. She put in so many hours that at one point Doerr wrote to her, “Please, please, really take a real leave. You deserve it!” Nonetheless, many current and former Kleiner employees agree that Pao, however hardworking, was an unremarkable investor. Current Kleiner partner Beth Seidenberg says of Pao, “She was always quiet in meetings. She never spoke up. She didn’t take a seat at the table. She did a lot of things that do not serve women well.” (Pao later told me she didn’t get opportunities to take a seat at the table.) Still, Doerr continued to be Pao’s champion, asking other partners to give her more time to prove herself.
But things got messy. Pao had a romantic relationship with a married junior partner, Ajit Nazre. It was consensual, by all accounts, but then soured. Pao reported to her managers that Nazre was harassing her and excluding her from important emails and meetings. A few years later, Nazre also hit on another female junior partner, Trae Vassallo, once showing up at her hotel room wearing a bathrobe and carrying wine. When Vassallo reported this to the firm, Ray Lane, a managing partner, allegedly joked that she should have been “flattered” by Nazre’s attention. In court, Lane denied making that comment but admitted he did not handle the complaint appropriately.
After an internal investigation into Nazre’s behavior, he was fired, but in the meantime several incidents that built Pao’s case piled up. One senior partner gave her a book of erotic poetry by Leonard Cohen on Valentine’s Day. She also claimed two male partners (Ted Schlein and Matt Murphy) and a CEO (Chegg’s Dan Rosensweig) discussed porn stars and their preferences for sex workers on a private plane ride to a business meeting, which she later wrote about in vivid detail in her memoir, Reset. Schlein, Pao writes, said he preferred “white girls—Eastern European, to be specific.” Pao also alleged that women at the firm were excluded from all-male ski trips and dinners. Specifically, she claimed a male partner, Chi-Hua Chien, suggested that women not be invited to an upcoming dinner hosted by partner Al Gore, because they “kill the buzz.”
On the stand, Chien denied saying this but confirmed that an all-male dinner did occur at Gore’s home and that the number of guests was limited because of the size of his living room. Chien also testified that he often invited Pao to get-togethers that might lead to deal flow but she was too busy to attend. Kleiner’s attorneys presented multiple emails that showed Chien inviting Pao to meetings he thought she might find interesting. The implication was that Pao chose to pass on critical social opportunities that might have advanced her position within the firm.
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WHETHER PAO WASN’T INVITED, or chose not to attend, or was invited but didn’t feel welcome, her experience is a stark reminder that venture capital partnerships are deeply competitive and political. Not only do you have to persuade the most desirable entrepreneurs to choose you and your firm as backers; you must also convince every single partner who may be less enthusiastic about that start-up than you are. Plus the more money you get to invest in your companies, the less there is left for others. When the final vote on the deal happens, you need to wield serious influence in that room, and whether you’ve got it depends on several factors: your track record and your partners’ confidence in you, of course, but also how smart you are about pushing your agenda through the organization. If you don’t have sufficient personal and political capital, it can be hard if not impossible to succeed. Pao claims that she advocated for the firm to invest in Twitter earlier, but couldn’t persuade another partner to agree.
When promotion time came, Kleiner promoted three men to senior partner. Pao and Vassallo were passed over. Pao didn’t think that it was a coincidence. In a letter to John Doerr in 2012, she wrote, “The two people who have made recent complaints of discrimination, harassment, and retaliation—have been . . . relegated to more junior status.” She also expressed her disappointment and called for change. Later that year, she filed her suit.
It’s useful to compare Pao’s career at Kleiner with that of Aileen Lee, who joined Kleiner in 1999 as an associate partner, also working very closely with Doerr. Colleagues tell me that Lee was more successful than Pao because she worked harder to build personal relationships and was ultimately promoted to senior partner. But Lee left Kleiner just before the downsizing that sparked Pao’s suit got under way to start her own seed fund. Now, assessing her own chances of becoming a managing partner at that time, Lee says, “I don’t think I would have gotten a seat at the table. Internally, [Kleiner] had changed a lot and I wasn’t happy. We had gotten big. Seed was an important new category where I felt like I could have a chance to repot my plant.”
Lee won’t speak specifically about Pao’s case against Kleiner, but I asked if she herself ever felt she was treated differently there because she was a woman. “It’s confusing how much was boys’ club and how much was just mismanagement,” Lee said. “I think VC has been a boys’ club, and even if many of those boys have great intentions, many of them don’t realize the privilege that they have being male and mostly white and how things they do or say may unintentionally make others feel excluded or uncomfortable or discouraged. At the time, I didn’t think of a lot of those things as bias. I just thought, ‘Oh, there’s a cool kids’ club, and I’m not in it.’”
Lee added that when women aren’t invited to male-only social events, or don’t attend, they often don’t know what they’re missing. “You don’t realize they trade deal flow and talk about what they’ve learned and what’s a hot deal,” Lee said. “When that hot deal is raising their next round and someone says, ‘Who should we call?’ Someone says, ‘Oh, how about Jeff?’ And Jeff gets the deal.” When I asked Lee if she felt that these circumstances qualify as gender discrimination, she paused, then said, “I think most women at VC firms, most women in business, if they wanted to could probably put together a case.” When Lee was on maternity leave, for example, her seat on the board of the solar company Miasole was eliminated. The company had decided to change its board structure, reducing the number of Kleiner’s seats from two to one. Doerr, the other Kleiner board member, kept his seat. No one called Lee to inform her of the change, and she found out on her own when she returned.
Ellen Pao ultimately lost her case against the firm. The Pao jury cleared Kleiner of any wrongdoing, including gender discrimination and retaliation. But in the court of public opinion, Kleiner’s reputation was badly damaged. Pao’s story appeared on the front page of the New York Times, and the tech blogs had a field day reporting the salacious details and mocking the firm’s poor management.
Despite the controversy surrounding the trial, when I told Doerr I was writing a book about the challenges facing women in technology, he quickly agreed to talk to me.
“A partnership is a family business. It’s like improv,” he told me. “There’s an ensemble. The cast takes risks, and if someone is in trouble, your partners are there to help you do better.” In Doerr’s recounting, his efforts to help Pao advance within the firm had backfired, leading him to believe that he should have more carefully considered his partners’ pleas to move Pao into an operating role at one of the companies Kleiner had funded. Doerr speculated that had he acted differently, he might have avoided the lawsuit altogether. “If we had transitioned Ellen a year earlier, if I had listened [to my partners], I don’t think we would have gone through the trial.” It is a thought Doerr has lost sleep over for many nights since.
In 2016, Doerr stepped back from his investing duties at Kleiner but as chairman remains focused on recruiting. He says he hasn’t given up on working on tech’s diversity issues. “I think the problem begins early. Yes, there is a pipeline problem. Yes, there is a leaky bucket problem. Yes, there is a hidden bias problem. Yes, there is a role model problem,” he told me. “You have to get up and work harder every day to prioritize and source outstanding candidates that are going to cause the culture of your organization to reflect the world you want to win in.”
While Kleiner Perkins is still working to rebuild its reputation post-lawsuit, Pao’s reputation has evolved considerably in the two years since the verdict. After the trial ended, I would often hear Pao discussed as a cautionary tale.
Many women I spoke with applauded her bravery, but some who felt they had been victims of gender discrimination took her experience as a warning. They vowed they would never sue, because they didn’t “want to end up like Ellen Pao.”
The case also weighed on VC firms. “[Kleiner] got seriously burned in this very, very public way that makes everyone else have a natural excuse: ‘Oh, hey, Kleiner was trying to do the right thing, and look what happened to them,’” Greylock’s Reid Hoffman told me in 2016.
When I spoke with Pao about a year after the verdict, she said she wouldn’t recommend that other people pursue legal action if they can help it. “If you think people will listen, you should try to change from within, if you have the energy for the path you want to take,” Pao told me. “But I tried to change from within, and it did not work.”
By fall 2017, however, amid a deluge of sexual harassment and gender discrimination allegations in Silicon Valley and beyond, Pao herself seemed to feel differently. I asked if she thought she might win her lawsuit in today’s climate. “I don’t know that we would be here if I hadn’t filed my suit. We’ve changed the conversation. No longer are women forced to defend themselves. It’s a much easier experience to say, ‘I’ve been harassed, I’ve been discriminated against.’ People believe it. If it hadn’t been for all these women who have come after me to share those stories, we wouldn’t be where we are today.”
In this new climate, some VC firms have slowly started to recruit and hire more women. Some seem to be doing so at the point of a gun, afraid to be called out publicly. Others believe that doing so will be a competitive advantage. Chamath Palihapitiya told me that his firm, Social Capital, beat out Sequoia for a recent deal with a female entrepreneur: “Just yesterday, those fucking bozos, we ran circles around them and did a deal from right under their nose . . . they’re going to ask, why did they not see it?”
Palihapitiya claimed to see an opportunity where other investors haven’t, to hire partners—both men and women—from a variety of ethnic and religious backgrounds. (His wife, Brigette Lau, as well as three other women are investing partners.) “We have more empathy in the room,” he asserted. “These people are making really emotional decisions about who they connect with.” Palihapitiya has built his firm’s brand, in part, on trying to rectify the visceral inequality in Silicon Valley. Whether it will be more than marketing bluster remains to be seen. (The firm lost a key male partner to Kleiner in 2017.) Though Sequoia’s returns still dwarf those of newer funds like Social Capital, Palihapitiya declares that the next decade will see a shake-up in the VC hierarchy. Exploiting the perceived weakness of one of his largest rivals, he calls Sequoia’s partners “a bunch of soulless milquetoast bros”—and says they have created a massive blind spot by not hiring women: “There is no excuse for that kind of stuff if your goal is to win.”
Other firms have a similar strategy. Canaan Partners was the first of the big firms to hire not one, not two, but three female general partners: Maha Ibrahim, Wende Hutton, and Nina Kjellson. In meetings with female CEOs and founders, says Ibrahim, “You can almost see their surprise . . . when they sit across the table and say, ‘I’ve never seen a firm like this. I can have a voice here. I can be heard.’” In her view, however, the rest of the industry isn’t changing so fast. “The bias exists. It’s going to exist for a long time. We have umpteen stories we can tell you. It’s a sad situation,” she says. “The only thing we can do is just dig in.”
Some firms seem less motivated by potential profit than by the desire to do what they see as the right thing. When LinkedIn’s co-founder Reid Hoffman joined Greylock Partners in 2009, he tells me, the conversations about hiring a woman were already under way. “Everyone agreed strongly that it was embarrassing that we didn’t have women partners, and it was kind of like saying, ‘Are we part of the problem?’” Hoffman says. “We decided that we were going to go to the ends of the earth to recruit a female partner. We would not stop making it a weekly partnership discussion until we had one.”
Greylock then made a critical decision: it redefined the talent pool it would draw from. Did every partner really need to have a technical background? In those conversations, “we mentioned Mike Moritz and his dumbass comments on women. He’s got a literature background, and, you know, no one disagrees he’s a pretty damn good VC,” Hoffman points out. As part of the search, Hoffman says, he had a conversation with every powerful woman he knew about potentially joining the team as an investor. Greylock pursued a few female candidates who turned it down. Then the firm discovered Sarah Tavel, a philosophy major from Harvard who had also worked as a junior VC. Tavel might not have studied computer science, says Hoffman, but she had something else Greylock decided was key: “company-building” experience at Pinterest.
Tavel doesn’t believe an engineering background is essential to a venture capitalist’s success. “Would my life be easier if I was technical? Yes,” she says. “But the more senior I get, the less it matters.” In fact, she believes the analytical rigor of her philosophy studies prepared her perfectly. “When you’re investing in a company, you have hypotheses that you’re assuming,” Tavel says. “I believe this is the way the world’s going to evolve, this is the product for that world and this is why, and if you believe those things, this is going to become a big company.”
Before Pinterest, Tavel worked as an analyst and, later, as an associate at Bessemer Venture Partners, where she was often the only woman in the room. “I was the youngest person; I was the smallest person. You feel the physical difference especially because everybody’s voice is literally stronger than yours. It was intimidating in a way I was totally unprepared for, and I blamed myself for being intimidated by it,” Tavel says. “There were three other analysts, all men, and they were chummy with the male partners in a way that I didn’t feel comfortable [being] . . . It could have been about sports, or it didn’t even have to be a male topic, but it was the way in which they had that conversation that didn’t feel natural to me.” Still, Tavel stepped up to the plate and ultimately co-led Bessemer’s investment in Pinterest, where she later became one of the discovery site’s first product managers.
A year after I spoke with Tavel, she made news in the venture capital industry by jumping ship from Greylock to Benchmark, another firm that had yet to hire a woman. Tavel had only positive things to say about her former Greylock colleagues but explained that she felt Benchmark’s smaller, more intimate team was a better fit. On the one hand, it was encouraging to see another top, all-male firm welcome a woman. On the other, it was discouraging to see two firms fight over the same woman, rather than expand the overall female-partner pool.
As for Sequoia, the firm did hire its first woman partner, a year after I interviewed Moritz on TV: Jess Lee, a Stanford computer science major who was the CEO of the fashion site Polyvore. Other partners at Sequoia spent years recruiting her and actually offered her the job before Moritz’s controversial comments, but she did not accept immediately. At the time, she was working for Yahoo’s CEO, Marissa Mayer, a longtime mentor, after the company had acquired Polyvore, and it took a great deal of persuading before she agreed to leave for Sequoia.
“One of the things that really mattered to Jess was knowing she wasn’t hired because she was a woman,” said Sequoia partner Roelof Botha. Botha, who co-leads Sequoia’s U.S. operations, told me that he personally works very hard on finding new partners and that over the last three years he has interviewed more than 150 people, including a few dozen women. Sequoia has typically hired its partners from its portfolio companies. (Remember Botha came from PayPal, which Sequoia backed.) In order to find women and other exceptional candidates, Botha is now looking beyond the obvious suspects and casting a wider net, which is how he discovered Lee.
“The industry and Sequoia need to do more, and we’re taking action to help move the needle. We still have a long way to go,” Botha said.
In 2016, Sequoia launched a mentorship program called Ascent that pairs women in technical roles with senior women across the industry (though one female founder who was asked to join the program as a mentor said she felt as if Sequoia was asking her to do free work, while the firm took all the credit). Botha has also been working to add more women to Sequoia’s super-secretive “scout” program, a large group of mostly entrepreneurs who unofficially refer deals back to the firm, then get a cut. It’s an ingenious way to get deal flow, but once again male dominated. When the Wall Street Journal compiled a long list of known Sequoia scouts in 2015, only 5 out of 78, or about 6 percent, were women. By September 2017, the number of female scouts had jumped to 25 percent.
Still, women have a long way to go before they can have even close to an equal voice at the venture capital table. Though many firms now claim they are working hard at gender diversity in hiring, Hoffman believes that not all the firms are as serious as they would like observers to believe. “I’ve seen more explicit sexism [in Silicon Valley] than I’ve seen explicit racism,” he says, noting that he’s spotted one reliable clue that a firm may be a boys’ clubhouse: “super-attractive receptionists.” It’s “bullshit,” Hoffman says. The attractiveness of the assistants out front, he insists, is a direct indicator of which firms have problems in the way they treat women. “Literally, from the offices I’ve gone to, it’s a one-for-one match.”
In Silicon Valley, the power of the top-ranked venture capitalists cannot be overestimated, because while all money is good, all money is not created equal. From a start-up’s point of view, the best money comes from the top firms, because their initial investment ends up delivering a lot of other benefits. For example, a business funded by Sequoia or Andreessen Horowitz during the initial Series A round will likely have little trouble finding follow-on investors for its Series B. But money isn’t the only advantage that flows from having a top firm on your team. The right VC can also open doors to key power players within both the Silicon Valley ecosystem and the larger business community. Marc Andreessen’s personal relationship with Mark Zuckerberg might, for example, be critical to an entrepreneur launching a company in any area where Facebook does business. VC firms also help with hiring, because they know the best talent in the Valley. And if the time comes for an IPO or sale, they can connect you to the best bankers and law firms around. If entrepreneurs are the princes of Silicon Valley, a few dozen VC partners at a handful of firms are the kingmakers. Every founder wants the top VCs’ helping hands up to the throne, but each investor makes only one or two investments a year, so the competition is crushing.
Most venture capitalists are men, and they most often back male entrepreneurs. In fact, men run 92 percent of VC-backed companies nationwide. What may be more surprising—and discouraging—is that even firms with female partners back the same (small) number of female founders as all-male firms do, according to one Bloomberg report. Some believe this is because female VCs worry about being accused of bias in favor of female entrepreneurs and also do deeper due diligence to avoid making mistakes, feeling as if they have more to prove. Either way, female founders lose. In 2016, VCs invested a little over $58 billion in companies with male founders, while female founders received just $1.46 billion. The average size of an investment in a company led by a man was about $10.9 million, up from $9.7 million the year before. Women-led companies received $4.5 million on average, actually decreasing from $6.1 million over the same period.
Female entrepreneurs, including Katrina Lake, the founder of Stitch Fix, an online personal shopper that went on to become one of the most promising start-ups in the Valley and went public in 2017, often lament the challenges of raising money from mostly male investors who may not connect with them easily or appreciate business ideas that cater mostly to women. (And some of the businesses they do fund benefit from sexist behavior. Think trolling on Reddit and Twitter.)
Lake is a no-bullshit, straight-talking CEO who grew up in Minneapolis and San Francisco, the daughter of a public-school teacher and a doctor. She was always surrounded by strong women, Lake tells me at Stitch Fix’s buzzy San Francisco headquarters, including a grandmother who fled an arranged marriage in Japan and encouraged her granddaughter to march to her own beat. As such, Lake had her own iconoclastic sense of style. In high school, you might have found a teenage Lake wearing green cargo pants or baggy jeans and neon raver boots. “Surprisingly, it didn’t stop me from making friends,” Lake jokes.
When she arrived for her freshman year at Stanford, Lake thought she wanted to be a doctor. She enrolled in premed classes and scored highly on the MCAT. This was just as Facebook was starting to take off with its soon-to-be-iconic founder. “Mark Zuckerberg . . . had quit Harvard and would go to parties at Stanford,” Lake recalls. “That was what I thought of as an entrepreneur. Someone who coded in their basement.”
At school, she gravitated toward economics and abandoned medical school for management consulting. After graduation, she joined the Parthenon Group, where she focused on retail and restaurants and realized that many retail businesses either don’t have or don’t effectively use customer data. She then became an associate at a small venture capital firm, in hopes of finding a retail start-up she might like to work for. After meeting hundreds of entrepreneurs, she didn’t find a single company appealing as an employer, but she also realized that not all founders actually look like Mark Zuckerberg.
“That was inspiration,” Lake says. Finally realizing that she could simply create her own dream company, Lake went to Harvard Business School, which is where she hatched the initial idea. She’d read about an online service that connected men to personal shoppers, and she decided to take a crack at something similar for women. She teamed up with the wife of a Stanford classmate, Erin Morrison Flynn, who had worked as a direct merchant at J.Crew, and the pair began by asking classmates, friends, and friends of friends to fill out style profiles to indicate what kind of clothing they liked and needed. Then they bought a bunch of pieces at retail, on their credit cards, and started delivering boxes of clothes to their first “customers,” who reimbursed them for the clothes they liked, leaving them to return the rest. They didn’t make any money but did get a feel for how the business could work: they could style customers to their satisfaction, even if they didn’t know them personally and even if the customers didn’t recognize the brands they were receiving. Eventually, they started sending five items per box, which Lake refers to as their “fix,” because people who like the service get addicted. Hence the company name, Stitch Fix.
Stitch Fix started to take off thanks to an initial investment from her mentor and fellow entrepreneur Sukhinder Singh Cassidy (whom Lake had met during an internship at Polyvore). Lake and Flynn later parted ways. “We had a good partnership . . . the company was scaling and we were going in different directions,” Lake tells me. Forbes reports there was an ownership dispute, a lawsuit, and a settlement and ultimately Flynn left the company. Though Stitch Fix had successfully raised a Series A, the next round of fundraising proved much more difficult.
In the fall of 2012, Stitch Fix was running out of money. Customers kept coming back, suggesting that an online personal styling service could be something big. The company needed to scale, which meant it needed cash. But even though Stitch Fix’s revenue growth was promising, some fifty VCs passed on investing. Those who gave an explanation suggested they just didn’t want to invest in a women-focused business or simply didn’t understand the opportunity. “One investor literally in the first minute said, ‘I don’t know why anyone would ever want to receive something like this,’” Lake says. “In a lot of cases, men aren’t going to see the same thing [that women see].”
Investors generally do see women’s businesses differently than their founders do. One VC told me, “I’d love to fund more women, but I just don’t want to fund another e-commerce company!” This comment points to the same issue that some VCs have complained to me about privately: that too many women choose to start companies in sectors where growth is expected to be lower, such as e-commerce and parenting, rather than in areas with huge growth potential, such as artificial intelligence. A lot of low-growth businesses are viable; they just don’t have the kind of enormous upside that excites investors who are successful enough to pick and choose. In 2011, Mashable reporter Jolie O’Dell tweeted, “Women: Stop making startups about fashion, shopping, & babies. . . . You’re embarrassing me.” Her comment triggered the typical social-media uproar, but there is some truth to it.
In a comprehensive survey in 2017, TechCrunch found that 31 percent of start-ups with a female founder focused on e-commerce. Other sectors popular among women were education, health care, and media and entertainment. But the vast majority of venture capital in 2016 went into fintech (meaning financial tech, such as apps that disrupt banking and retirement planning), security, genetics, augmented and virtual reality, and artificial intelligence, in addition to an outsize amount in transportation (dominated by funding of Uber, Lyft, and other ride-hailing services). These numbers indicate a big mismatch between ideas that attract mostly male VCs and ideas that attract female entrepreneurs.
Is this a true gender gap? Maybe, but not necessarily. There is evidence to suggest that women choose lower-cost-of-entry, lower-growth sectors simply because they have fewer resources available to them. Not only are women less likely to receive venture capital than men, but they are also less likely to have business loan and credit applications approved. That said, the data also shows that women ask for smaller amounts of credit and hesitate to take on more debt. The author Sharon Hadary, who has closely studied entrepreneurship, says men tend to set bigger goals for growth while women focus instead on making their business sustainable. Hadary believes the problem is twofold: “First, you have women’s own self-limiting views of themselves, their businesses and the opportunities available to them. But equally problematic are the stereotypes, perceptions and expectations of business . . . leaders.”
Supporting Hadary’s view is evidence that venture capitalists talk about male and female entrepreneurs differently. In one study of a group of investors (including five men and two women) discussing future funding decisions in Sweden, male founders were more likely to be described as “young and promising,” while young women were described as “inexperienced.” Being cautious was viewed as positive for men and negative for women. Ultimately, women were denied funding more often than men, and when they did receive it, they got 25 percent of the money they requested, whereas men received 52 percent.
The data clearly also shows that when a woman walks into a pitch meeting, she is already at a disadvantage. In one study in which women and men voiced the same slide presentations word for word without ever showing themselves, investors funded male-voiced ventures 60 percent more often than female-voiced ventures. When entrepreneurs presented in person, attractive men were particularly persuasive, whereas good looks didn’t give a woman an extra edge, even if she said the same thing as the man who came before her. Sarah Thébaud, a sociology professor at the University of California, Santa Barbara, has found that both male and female investors tend to have lower expectations of women entrepreneurs and systematically perceive them as less competent and skilled.
Thébaud writes in Newsweek, “On an aggregate level, this dynamic suggests countless ideas that could have blossomed into successful businesses and benefited the economy never did, simply because the individuals who pitched them weren’t the ‘right’ gender . . . This finding suggests that when a man proposes a business idea, he can typically expect others to respond on the basis of a simple risk-benefit calculation, the kind any venture capitalist might make when deciding whether to help finance a project. But when a woman proposes the same idea, she can expect others to simultaneously be looking for cues that she in fact possesses the types of skills and traits needed to make a venture a success—abilities she’s often assumed to lack because of her gender.” In essence, investors are prone to selling women entrepreneurs short.
“There is not a single woman that I can think of in this industry that is publicly labeled as a ‘visionary’ or a ‘genius,’” Rent the Runway CEO Jennifer Hyman told me. “There are dozens and dozens of men in the country where those adjectives are used. Because we label men as geniuses and visionaries, we give them a lot more chances, we allow them to fail a lot more times, and we make excuses for things that we wouldn’t make excuses for, for women . . . Unless we change the public vernacular of how we lift up and recognize women and how we all give women the same sorts of chances . . . we are not going to see that change.”
VCs will argue that many female entrepreneurs are guilty of underselling themselves. Investors have told me that women often focus on pitching their skills, data, and metrics rather than selling a big vision, something men are more comfortable doing. That vision may be grandiose and nearly impossible to achieve, but it sure sounds good. Investors want to fund outsize successes, and telling a good story is critical. That’s why you will often hear investors say they fund people instead of ideas. VCs want to believe in an entrepreneur’s idea, but they want to believe even more in that entrepreneur’s willingness to think big and drive to succeed at any cost. That said, if investors are already predisposed to doubt that women have what it takes to deliver a big return, would they believe a woman who said she could? VCs want to hear a visionary pitch, the story of a billion-dollar opportunity that will justify the financial risk required to make it happen. But if a woman does make a visionary pitch, VCs are prone to doubt that she will be able to bring that vision to life. With men, they are more willing to believe that the sky’s the limit.
On top of this, VCs generally spend years working closely with the handful of founders they’ve chosen to fund, helping them make the dream a reality. Given that level of commitment, it’s no surprise they want to bet on companies they are truly passionate about. But here’s the catch-22: because most venture capitalists are men, they are likely to be more passionate about ideas that appeal to, well, men. When Lake was raising her seed round, she noticed that a fair number of little league coaching apps were getting funded. “I’m like, how big of a business is that? Seriously, a T-ball league? But your target audience is these VCs who manage their sons’ T-ball league,” Lake says. “There’s bias that gets introduced in terms of what people’s passions are, what people’s interests are . . . what industries people understand, and what they personally feel an affinity toward. I do think there ends up being a bias against where women are the primary opportunity.”
When VCs do fund women, however, they often do right by them. Julia Hartz co-founded Eventbrite with her husband, Kevin, the early PayPal board member. Sequoia backed Eventbrite and Roelof Botha joined the board. When Kevin stepped down as Eventbrite’s CEO in 2016, Julia became one of the few female chief executives in Silicon Valley. “You start to think, okay, there are a million different ways I could fail here,” Hartz says. “So you look for signs of people who are going to support you or people who are going to judge you.” Sequoia definitely fell into the first category, Hartz says. She visits the firm’s offices monthly to discuss strategy with Botha. “I get the sense that I’m not a sideshow [for them],” she says. “I’m not somebody that they are even trying to exploit. I’m like any other CEO, and they are there to help.” As for Moritz’s comment that hiring women would involve lowering the firm’s standards, Hartz says, “It certainly runs counter to what I’m experiencing.”
Adi Tatarko, CEO of the home design company Houzz, says her Sequoia investors have been very understanding of her working-mom issues—for example, when she has to schedule around her sons’ birthdays and basketball games. “I’m not trying to protect Mike [Moritz] or anyone else there or being diplomatic here,” Tatarko says. “I have had lots of discussions with them, and they are truly looking for more, to do more, to invest more, to support more, and bring more relevant women forward.”
Ultimately, Katrina Lake secured Series B funding for Stitch Fix from Benchmark, and one of its general partners, the acclaimed investor Bill Gurley, joined her board. Gurley discovered Stitch Fix via his assistant who was spending an inordinate portion of her income on a personal styling service. As soon as he met Lake, he was impressed. She is “nutty smart,” Gurley told me in May 2016. Fifteen minutes into her presentation, he asked for more details on the start-up’s cash flow. “She opened up her laptop and said ‘Let’s look,’ and she had a three-year-forward financial model, balance statement, income statement, and cash flow statement. I’ve never seen an entrepreneur do that in twenty years,” Gurley said.
In just a few years, Stitch Fix became one of the most promising e-commerce companies in Silicon Valley. In 2017, Stitch Fix filed for an IPO and revealed that it was profitable with $977 million in annual sales and about six thousand employees. Other female entrepreneurs hoped Lake would prove to all venture capitalists that they should be investing in more women. That same year, however, a disturbing scandal made it clear that one insanely successful female founder would not change an entire industry—not when that industry had a much bigger problem than it had ever admitted with male investors sexually harassing female entrepreneurs. And Lake was one of the most prominent victims.
In 2013, an investor by the name of Justin Caldbeck, of Lightspeed Venture Partners, led an early investment in Stitch Fix and became a board observer. Multiple sources who were close to Lake at the time say that Caldbeck initially provided invaluable help to the promising start-up, including recruiting new Stitch Fix executives. But at some point he made Lake feel so uncomfortable that she asked Lightspeed to remove him from the board. The following year, Caldbeck left Lightspeed, ostensibly because he wanted to start his own fund, Binary Capital. Lake was asked to sign a nondisparagement agreement, mandating that neither party ever speak of what happened.
Jeremy Liew, a managing director at Lightspeed, told me, “Justin was with us for a few years. He made some excellent investments, and we mutually decided he would not be part of Fund 10,” that is, Lightspeed’s next fund. To some industry insiders, that was code for “he got fired.” Others I spoke to had never heard rumors of Caldbeck’s being disciplined for questionable behavior. Caldbeck and his new partner, Jonathan Teo, were able to raise $125 million for Binary Capital’s first fund, including a personal investment from Lightspeed partner Ravi Mhatre. Binary made several investments over the next two years. In the meantime, several female entrepreneurs discovered, by talking among themselves, that they weren’t the only ones Caldbeck had sexually harassed.
Caldbeck had walked on to the Duke University basketball team, got an MBA from Harvard, worked at McKinsey, Bain Capital Ventures, and then Lightspeed. He was once described to me as a “Walking LinkedIn,” an investor who can make an introduction to anyone and everyone. “He is an aggressive personality,” one female entrepreneur told me. “He gets deals done and gets to the right people. He is just a hustler.” Turns out Caldbeck didn’t just hustle deals.
In 2010, former Googler Niniane Wang started a co-working space for elite entrepreneurs called Sunfire. Sequoia, Benchmark, and other VC firms backed Sunfire in exchange for the opportunity to visit the office and interact with high-potential founders. Bain Capital Ventures, where Caldbeck then worked, was also a sponsor, and sent him as the firm’s representative. Every Thursday, Sunfire held drinks at a nearby bar from 6:00 to 7:00 p.m. One day, Caldbeck told Wang he wanted her opinion on a fashion start-up and asked if they could discuss it in person after the weekly drinks, saying he had a meeting beforehand. By the time he arrived, everyone had left but Wang. When she started to talk about the start-up, Caldbeck stopped her. “Let’s not talk about work,” he said. He went on to grill her about her dating history and comment about outfits she had worn that he thought she looked good in. “He asked to move to a booth,” Wang told me. “He sat so his body was touching my body. At one point, I agreed to let him embrace me.” When Caldbeck drove her home, he kept pressuring her to let him spend the night. Finally, she says, she managed to persuade him to drop her off and leave her alone.
Wang said she felt ambushed. “I had no mental preparation that this could or would happen, so I had not at all emotionally prepared for what to do. It’s a serious issue to terminate a relationship with a financial backer. I felt trapped. In a personal situation, I could say no more forcefully, but I was worried that it would have financial consequences for other people,” including the other entrepreneurs who shared space at Sunfire.
After that night, Wang said, Caldbeck pursued her relentlessly, texting and calling at odd hours and suggesting they could have a secret relationship. “I just kept saying no, and then eventually he switched to sending me lots of work messages at inappropriate times.” Caldbeck continued to visit the work space, which made Wang even more uncomfortable. She never reported Caldbeck’s behavior to Bain Capital, but later decided not to renew Bain’s sponsorship. “I always worried that if I said anything, it would cause damage to others, not just to myself, but to others I cared about, and that always gave me a lot of pause,” Wang says.
Eventually, Wang confided in a fellow female entrepreneur and discovered that the other woman had also had an uncomfortable experience with Caldbeck. “Oh, he’s harassing me too,” she said. A few years later, Wang heard about yet another woman with a Caldbeck story. “I continued to hear rumors about other women,” she said, but Caldbeck was getting away with it. “There seemed to be no consequence,” she told me. “His fund continued to get bigger and bigger. I knew that Justin was continuing to harass more women, and he seemed to be getting more and more bold.” Seven years after her first encounter with Caldbeck, she said, “I felt that I had to stop him.” Wang told her story to Reed Albergotti, a reporter at The Information, and spent hours persuading other women to speak to him as well. In all, six women came forward alleging bad experiences with Caldbeck, but none of them would allow Albergotti to use their names. Wang says the editors at The Information decided they needed at least some of the women to speak on the record. “The only way to get this article published was to use my real name,” Wang said. “I had nothing to gain and a lot to lose.” Still, Wang concluded that her harassment by Caldbeck had already been so painful that she was willing to suffer a little bit more to expose him, plus she was at a strong place in her career, having been a star at Google, the chief technology officer of the online design marketplace Minted, and more recently founded a company called Evertoon.
Wang decided she would go on the record and persuaded two other entrepreneurs to do so as well: Susan Ho and Leiti Hsu, the co-founders of the travel start-up Journy, both of whom said they had been sexually harassed by Caldbeck. After a fund-raising meeting, Ho says Caldbeck sent her a text message at 1:00 a.m. asking to meet up. She hesitated to meet with him again but decided she had no choice. “We were in a place with our business that was make or break,” Ho told me. Assuming safety in numbers, Ho asked Hsu to accompany her. Midway through the meeting, Caldbeck grabbed Hsu’s thigh under the table. “Like out of nowhere,” Hsu later recalled, explaining to me, “It was just like, wow, the trope of the wealthy, powerful Silicon Valley investor is real—the one that grabs your thigh.” Hsu says she casually shook his hand off.
When The Information published the allegations against Caldbeck, naming Wang, Ho, and Hsu, the statements from Caldbeck and Binary Capital were surprisingly confident. Caldbeck said, “I strongly deny The Information’s attacks on my character. The fact is, I have always enjoyed respectful relationships with female founders, business partners, and investors.” Binary Capital said the allegations were “false” and that while The Information had “found a few examples which show that Justin has in the past occasionally dated or flirted with women he met in a professional capacity, let’s be clear: there is no evidence that Justin did anything illegal and there is no evidence that any of his investing decisions were affected by his social interests.”
In the hours after the article went live, the Silicon Valley Twittersphere, which is normally quick to pile on, was quiet. Wang’s worst fear—that she would convince other women to risk their careers and no one would care—seemed to be coming true. Some women did immediately back her. Sarah Lacy of PandoDaily wrote a post begging, “Where’s the outrage?” Ellen Pao sent Wang a message applauding her bravery. When a few VCs tweeted condemnation of Caldbeck’s behavior, Pao retweeted them, adding, “We drive women out of tech if we don’t speak up.”
The following day, Reid Hoffman spoke up in a big way with a lengthy blog post titled “The Human Rights of Women Entrepreneurs.” Hoffman wrote, “This is entirely immoral and outrageous behavior,” so why the lack of outrage? “Folks may think: well, that’s bad behavior but not my problem. If you think that, and work here in venture, think again,” Hoffman continued. “We all need to solve this problem. If you stay silent, if you don’t act, then you allow this problem to perpetuate.” In his post, Hoffman proposed something other women in tech had suggested to me, building “an industry-wide HR function” that would presumably govern interactions between investors and entrepreneurs and keep individual companies from burying allegations. He also asked that investors who stand against this behavior speak up online and include this hashtag: #DecencyPledge.
Several investors responded, including Roelof Botha of Sequoia, who tweeted, “At Sequoia we support the #DecencyPledge.” Hoffman’s call to action sent a strong message to female founders that they mattered and led to the airing of some of Greylock’s own dirty laundry. Internally, it emerged that Greylock’s COO, Tom Frangione, had an inappropriate relationship with a female employee. Within three days, Greylock investigated, and Frangione was asked to resign. The firm called it a “significant lapse of judgment” that was “inconsistent” with its values. “If you’re going to talk the talk, you have to walk the walk, and we all moved very quickly on it,” Hoffman told me of the Frangione incident. He also says the partners held a meeting in which they told staff that if anyone knew of any more untoward behavior, they should feel comfortable enough to report it immediately.
In the days that followed, the story of sexism in venture capital that I had been following for more than a year became a moving target. Several of the women who came forward were women of color. “It’s fucked up and a bit dark,” one female entrepreneur told me. “They’re taking advantage of those who are the most vulnerable.” Things everyone had whispered came out into the open. Investors whom I had been tipped off about as being “bad guys” were exposed. I had spent months trying to persuade women who had confided in me to go on the record. Most felt too ashamed, intimidated, or downright petrified to talk publicly. But after Caldbeck’s public takedown, my in-box was suddenly full of emails from women wanting to openly tell their stories about the investors who had invited them back to their hotel room, tried to kiss them, or even just made a creepy comment about their lipstick. They felt emboldened, empowered, and, to be frank, fed up.
And slowly the real story emerged: that most women who have tried to raise money in Silicon Valley have not just one or two stories to tell about how someone made them feel uncomfortable but too many stories to count. “Whether it be a snide comment or just a hug that’s a little too grabby,” Hsu says, “this is just stuff that happens all the time.”
A week after the Caldbeck revelations, Katie Benner at the New York Times published a story in which two dozen women came forward about several different prominent investors. Susan Wu, a longtime entrepreneur, told the Times that she had a bad experience not only with Caldbeck but also with the billionaire venture capitalist Chris Sacca, who she said had once touched her face at a party in a way that made her feel uncomfortable. Sacca preempted the article with a lengthy post that he published hours before the Times story broke that included the phrase “I am sorry” five times. He later disputed Wu’s particular account but admitted that he had played a role in the industry’s larger problem with sexism. “There is no doubt I said and did things that made some women feel awkward, unwelcome, insecure, and/or discouraged,” Sacca wrote.
Another entrepreneur, Sarah Kunst, told the Times that Dave McClure, a co-founder of the early-stage venture fund 500 Startups, had also made unwelcome advances toward her. After talking to her about a potential job at 500 Startups, McClure sent Kunst a text message, saying, “I was getting confused figuring out whether to hire you or hit on you.” McClure also responded to the allegations with a long-winded apology; his was titled “I’m a Creep. I’m Sorry.” He said he had already been removed as CEO of 500 Startups, due to the allegations, but that he would remain at the company to focus on fiduciary obligations to investors. For the female CEO Cheryl Yeoh, that apology fell short. She published her own account of how McClure, who was an investor in her company, got her drunk at a gathering of tech folk at her apartment.
Of that night, Yeoh wrote, “Dave kept pouring scotch into my glass . . . suddenly, everyone except Dave decided to order a cab . . . I quickly asked if Dave wanted to leave like the rest of them but he said no. Perplexed, I offered him to crash on the couch or the guest room and proceeded to show him the guest room. Then I went into my own bedroom but Dave followed me there, and that’s when he first propositioned to sleep with me. I said no . . . At this point, I led him to the door and told him he needs to leave. On the way out, he pushed himself onto me to the point where I was backed into a corner, made contact to kiss me, and said something along the lines of ‘Just one night, please just this one time.’ Then he told me how he really likes strong and smart women like me. Disgusted and outraged, I said no firmly again, pushed him away, and made sure he was out my door.” As Yeoh’s post went live, a female partner resigned from 500 Startups, alleging the firm had tried to cover up the allegations against McClure. That same day, McClure left the firm for good. It was becoming clear that bad behavior in the industry had long been tolerated, ignored, or not taken seriously. And everyone wondered how many investors had yet to be exposed, how many never would be, and how many women would remain silent.
“Usually, the accused knows so many more stories than what has been reported because the people who come forward are the people who did not give in, did not have sex,” Wang says. “The VCs put out these heartfelt apologies . . . and people fall for it. You hear people say, ‘Well, he groped her, but it’s not that bad.’ Well, it is that bad.”
Toward the end of the summer of 2017, the venture capital firm DFJ (originally named Draper Fisher Jurvetson) launched an independent investigation into alleged misconduct by one of its co-founders, Steve Jurvetson, a longtime friend of Elon Musk, and a Tesla and SpaceX investor. Then, in October, female entrepreneur Keri Krukal publicly posted on Facebook: “Women approached by a founding partner of Draper Fisher Jurvetson should be careful. Predatory behavior is rampant.” Shortly thereafter, Jurvetson left the firm and took a leave of absence from the boards of Tesla and SpaceX. In a Facebook post, he said he had departed due to “interpersonal dynamics” with his partners and implied that the allegations involved personal, rather than professional, relationships. “It is excruciating to learn just how quickly, in one news cycle, people conclude that because I have left DFJ there must be some credence to vicious and wholly false allegations about sexual predation and workplace harassment. Let me be perfectly clear: no such allegations are true,” Jurvetson said. Whatever happened, men in technology were finally being held accountable.
Just a few weeks later, I published a Bloomberg article in which multiple women claimed they were sexually assaulted or harassed by yet another prominent investor, Shervin Pishevar. In December 2014, Pishevar, an early Uber backer, attended the company’s “Roaring 20s”–themed holiday party with a pony, wearing a Santa hat, on a leash. But that wasn’t the only stunt he allegedly pulled. Pishevar, then forty years old, also approached Uber employee Austin Geidt (then thirty), put his hand on her leg, and moved it up her dress, according to current and former colleagues. Geidt squirmed away, the colleagues say.
Pishevar, a major Democratic party donor who raised money for President Obama and hosted a fundraiser with George Clooney for presidential candidate Hillary Clinton, was one of Uber’s most influential backers; he maintained an especially close relationship to co-founder Travis Kalanick. Geidt, who joined Uber as its fourth employee and its first woman, was in charge of launching the ride-sharing company in new cities at the time. A person with firsthand knowledge of Pishevar’s behavior toward Geidt confirmed the holiday party account. Though Geidt declined to comment when the story broke, it’s clear Pishevar was in a position of power. He had recently co-founded his own venture fund, Sherpa Capital, and the futuristic tube transportation company Hyperloop One. Pishevar, through his lawyer, denied the allegation and told Bloomberg that he and Geidt always maintained a “friendly, professional relationship.” His representatives also directed us to speak with someone else who had attended the party, and asked not to be named, who claimed that Pishevar couldn’t have touched anyone that night because he had a drink in one hand and the pony leash in the other. The “pony defense” was widely mocked on social media.
Five other women also told me that Pishevar used his influence to pursue unwanted sexual encounters with them, but declined to reveal their names, citing fears that he could retaliate and destroy their careers. One of the women, an entrepreneur, told me that Pishevar started hitting on her at a dinner meeting to discuss investing in her company, then forcibly kissed and groped her later in the evening. Another woman who works in the tech industry said she met Pishevar for dinner in 2013 to discuss career opportunities. He invited her back to his home, where, she said, “He basically jumped on me, tried to put his tongue down my throat, and I stopped it.” Also that year, a third woman, who Pishevar had hired to work for him, says he repeatedly tried to pressure her into having sex with him. Though she told him she was not interested in a romantic relationship in a Facebook message shared with me, he booked one hotel room for the two of them on a trip. That’s where she says he tried to perform oral sex on her until she convinced him to stop. “It felt really wrong, and it was really confusing at the time,” she told me. “I just remember his big body on top of me. I was young enough to be his daughter.” At the Web Summit conference in November 2013, where Pishevar spoke onstage with Tesla CEO Elon Musk, a fourth woman says she went to an afterparty that Pishevar had organized at a hotel. There, she said, she found herself alone on the couch with Pishevar and another man. Pishevar, she said, was holding a phone—it’s unclear who it belonged to—and was smiling as he was showing her photos of genitalia of women they claimed to have slept with. A fifth woman says Pishevar hired her company to work for him in 2015. He invited her to a party in Los Angeles where, she said, he force-kissed her, then, in the weeks that followed, tried to bully her into dating him.
In response to these allegations, Pishevar’s representatives said, “We are confident that these anecdotes will be shown to be untrue.” At the time, he was already in the midst of fighting press coverage of his arrest in London in May 2017 after a woman accused him of rape. London police say he was “released under investigation” but not charged. His lawyer confirmed that Pishevar was “detained briefly” but “categorically denied” the sexual assault allegation, saying, “He fully cooperated with the police investigation which was exhaustive and detailed. In July he was informed that no further action would be taken against him and he was ‘de-arrested’ [a British legal term].” Pishevar also sued a so-called Republican opposition research firm that he accused of spreading false information about him in a smear campaign. The firm said it never conducted work on Pishevar and called his claims “delusional.” Within days of my original story, another female entrepreneur, Laura Fitton, alleged on the record that Pishevar had sexually assaulted and harassed her. Pishevar continued to deny these “untruthful attacks” but resigned from Sherpa Capital. It was by far one of the most dramatic tales yet of misbehavior by powerful men in Silicon Valley.
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JUSTIN CALDBECK RESIGNED FROM Binary Capital three days after The Information article was published and updated his initial statement. “Obviously, I am deeply disturbed by these allegations. While significant context is missing from the incidents reported by The Information, I deeply regret ever causing anyone to feel uncomfortable . . . There’s no denying this is an issue in the venture community, and I hate that my behavior has contributed to it.” Binary Capital’s fund-raising was halted, and the firm effectively started to shut down, and Caldbeck’s partner, Jonathan Teo, who had initially supported him, also offered to resign.
At the height of the scandal, Ann Lai, a former employee of Binary Capital, filed a lawsuit against the firm for post-resignation harassment. Lai said she left the firm because of a sexist environment that involved inappropriate conduct with other female staff members and routine comments about her attractiveness and that of female founders looking for funding. After her departure, she alleges in her lawsuit, the harassment began, and she presented to the court detailed messages in which Caldbeck threatened to make sure “she would never work again” if she spoke poorly about the firm. She claimed that Binary also threatened to withhold her share of the profits from its investments. The suit also claims that Binary falsely told Lai’s potential new employers that she had been fired for poor performance and that Lai—who had three Harvard degrees, including a PhD in engineering—had trouble finding a job as a result.
One doesn’t have to look too closely at how Binary operated to figure out how the fund was run. Caldbeck and Teo spent big to transform a former brewery into their new office, which featured a long marble bar. “They wanted their office to look like a high-end club or residence. They didn’t want it to feel like a traditional work space,” designer Ariel Ashe told Architectural Digest in a feature about the new location. “There is a focus on entertaining as they wanted to be able to throw parties in the space.” Caldbeck and Teo were well known among entrepreneurs and investors as the “party VCs” who made frequent trips to Las Vegas. In fact, the pair met in Vegas while Caldbeck was dancing with Teo’s executive assistant from Benchmark Capital, where Teo worked at the time. It was a match made in Sin City heaven.
Someone close to the firm told me the partners had an informal rule that Caldbeck wasn’t allowed to meet female entrepreneurs at a bar after 5:30 p.m., because he simply couldn’t be trusted not to cross the line (Caldbeck denies this). The same person said that when Caldbeck was confronted about coming on too strong to certain women, he would mutter things like he had “only asked her to dinner” and “chicks are so dumb.” I’ve seen multiple sexually explicit text messages sent by Caldbeck to a woman he has harassed in which he employs obscene language to describe pleasuring himself while thinking about her.
As the Caldbeck saga unfolded, Recode added Katrina Lake’s name to the list of women he had made uncomfortable. Lightspeed, his employer at the time, tweeted, “In light of what we have learned since, we regret we did not take stronger action.” Lightspeed partner Ravi Mahtre immediately forfeited his original investment in Binary.
Three months after his resignation, I met Caldbeck with my colleague Mark Milian to ask about these charges. Caldbeck was somber and contrite, and admitted that he had repeatedly screwed up, referring to his former self as “unselfaware me.” He said he was writing letters of apology to all of the women who came forward (though he had yet to send them). He would not comment on the record about specific allegations, including any interactions with Katrina Lake.
A few days later he followed up with a statement promising to become a “beacon of accountability,” and help “ignite honest self-reflection and positive change.” His new mission would involve speaking to college students. “Through intense therapy and lots of research on sexual harassment, I had a realization that behavior that is defined as sexual harassment in the workplace is common behavior amongst many college men . . . This behavior is often referred to as bro-culture. My focus moving forward is to help eradicate the bro culture and create a positive change for women by elevating consciousness in men.”
I’d find such a mea culpa much more compelling if it had come before the public shaming. Was “lots of research” really necessary for such basic insights? His statement alone reveals just how cloistered and cut off certain powerful men in Silicon Valley can become.
While Lake also won’t comment on her experience with Caldbeck, she raises a good point: that there are zero guidelines governing the relationship between venture capitalists and entrepreneurs. Typically, venture capital firms are too small to have a human resources department, and there’s no industry code of conduct. VCs maintain that they are under pressure to behave appropriately because their entire careers rest on their reputations. If they do anything stupid, entrepreneurs will tell other entrepreneurs, who won’t want to take their money. The argument is that’s enough to prevent bad behavior. But there’s enough documented bad behavior to suggest that given the tremendous power differential between venture capitalists and the founders who desperately need their money, this disincentive has little effect. There is only one group of people in Silicon Valley who have more power than the VCs, enough power to punish them for bad behavior toward women, and that is the limited partners (LPs), the individuals and groups who provide the money that VCs dole out to everyone else.
“The only thing that VCs are measured on, their success, is 100 percent measured on returns,” Lake told me. “There is nobody who is holding them accountable to conduct business in a good way . . . They just need to make a lot of money for the LPs. How they do it matters less to the LPs.”
To explain: LPs fund VCs, and VCs fund entrepreneurs. (Sometimes VCs invest a small portion of their own money into their portfolio companies depending on the firm’s policies.) Either way, the money that LPs provide to VC funds is critical. This capital comes from pension funds, school and family endowments, high net-worth individuals, hedge funds, and the like. Just as start-ups raise money from venture capitalists in exchange for equity, general partners (GPs) at VC firms raise money from limited partners in exchange for the promise of big returns over a certain period of time, usually ten years or so.
Whether Binary’s LPs knew of Justin Caldbeck’s reputation is an open question. One LP faulted Lightspeed for not sharing the full story of his departure, but that person admitted the firm re-upped an investment in Binary even after hearing rumors about his falling-out with Lake. Several LPs said they had approached Caldbeck about the rumors; when he denied them, they took him at his word. Another LP told my colleague Sarah McBride that over three dozen reference calls were made about Caldbeck and Teo, and “we have never had reference checks that were so enthusiastic.” Some find this a little hard to believe. When I started writing this book, a full year before Wang stepped forward to The Information, Caldbeck’s behavior was already an open secret.
I sat down with Kirsten Green of Forerunner Ventures in 2016, long before the allegations against Caldbeck were published. She told me simply, “We don’t do business with them.” And she said she had told many LPs the same thing. “When they raised that fund so fast, it was like, what? They’re fun guys. Do fun guys help you raise a fund? In an environment where there’s plenty of people to put your money with, I’m not sure why you need to put your money there.” Canvas Ventures partner Rebecca Lynn told me, “I don’t think all LPs knew but I think some of them knew. They thought it was great he was in the party crowd. All these guys were known for a long time and no one cared. You could have made a couple phone calls and you would have known.”
Part of the problem is that LPs themselves are competing to get their money into the best VC funds. From 2014 to 2017, venture investors in the United States raised $130 billion from LPs to deploy into start-ups. One LP told me, “I just want the best GPs. I don’t care who they are; I just want the best returns. Some of the best GPs aren’t the best people, but they drive the best returns.”
When I started researching where the money comes from, I expected to learn that most Silicon Valley LPs were also white and male. I was surprised to find far more women sitting around the tables of limited partnerships than at venture capital firms. For example, the chief investment officers of many of the institutions with the most prestigious endowments are women, from the Smithsonian to the Metropolitan Museum of Art. And they’re not interested in policing the industry’s bad boys.
“There are a lot of women in the LP community, but all of us would say the same thing,” says Joelle Kayden, founder of Accolade Partners, a limited partnership that invests in a variety of different venture firms including Accel and Andreessen Horowitz (two firms that had no female investment partners as of 2017). “We’d like to see more women [at venture capital firms], but if you stuck a gun to our heads, we’d invest based on returns.” Kayden’s job, after all, is to deliver returns to her own investors.
When Kayden and I spoke, Sequoia had just hired its first female partner and Benchmark had yet to do so. It was in that context that Kayden told me, “Part of the problem is [those two firms] have the best returns in the entire industry. What are you going to do, not invest in them? I’d die to be in those funds; I wouldn’t turn them down because they don’t have a woman. I will do whatever it takes to have great numbers.”
So, if the people funding the VC industry won’t force change, the industry won’t change unless it changes from within. These days, more women investors are taking matters into their own hands. When Aileen Lee worked at Kleiner, she was assigned due diligence on the firm’s investment in the high-tech motorized scooter the Segway, which, in retrospect, was greatly overhyped. She took herself for a spin and quickly realized the scooter had several drawbacks (it was expensive and required training to use, and there was nowhere to hang your purse, briefcase, or groceries). “I had instincts leading me to believe the product wouldn’t be a hit. I wish I’d voiced these concerns more effectively, but I was working with such legends, and I thought they knew better.”
Every investor has a list of woulda, shoulda, coulda’s, to be fair, but had Lee spoken up, she might have saved Kleiner a lot of money—that is, if the legends had listened. A few years later, Lee suggested the firm make a seed investment in a quickly growing ride-hailing company called Uber. At that time, however, Kleiner didn’t typically invest at such an early stage. Later, she encouraged the partners to meet with Uber’s then-CEO Travis Kalanick as he was raising the Series B, but there was little interest. Given the juggernaut that Uber became—despite its cultural issues—clearly this was a missed opportunity. (Again, Kleiner later invested in Uber at a much higher valuation.) Lee started to believe she might have more success by striking out on her own.
With the blessing of Kleiner, Lee started raising money in 2012 for her own seed fund, Cowboy Ventures. Seed investing was a new, risky category, but Lee was optimistic she’d get enough money, because she had built relationships with other investors who introduced her to the right LPs. Still, it wasn’t easy. At one meeting, an LP asked whether she had kids. She replied that she had three. “He was like, ‘Whoa, how is this going to work? Are you going to run the fund and have the kids?’ I’m like, ‘No, I’m going to get rid of them,’” Lee joked.
That particular fund ended up investing in Cowboy Ventures anyway. “I was kind of torn. Should I take their money? They clearly have a weirdness about me being a working mom,” Lee recalls. But she thought, “I’m going to kick ass, and maybe all their weirdnesses will go away.”
Lee’s firm is in its early days, but she has been quietly building a well-respected brand; she even coined the now widely used term “unicorn” to refer to start-ups with billion-dollar exits. In 2016, she added her first unicorn to the Cowboy portfolio, when the razor-subscription start-up Dollar Shave Club (which Lee had invested in initially at Kleiner and again at Cowboy) sold to Unilever for $1 billion. How did Lee manage to see the potential in a service that was mostly for men? “You don’t need men for razor deals and women for tampon deals,” she points out.
Still, while women like Lee are blazing new trails in venture capital, barriers remain to busting into one of the most exclusive boys’ clubs in the business world. In 2014, a journalist got wind of a secret all-male club of venture capitalists called VC 21, consisting of male partners from a variety of firms, including Kleiner, Accel, and Greylock. Once club members realized the press was on the scent, they invited a few female investors to join, and the bad PR was averted. VC 21 was later rebranded as the Venture Social Club.
An email to club members in March 2017 touted an all-expenses-paid stay at the Rosewood hotel in Menlo Park and an “over the top” long weekend at the Montage on Maui, “complete with sunset cruises, ocean fun and private dinner experiences.” Members have also told me of similar trips, involving stays at spectacular mansions, sporting events such as heli-skiing, ridiculous amounts of drinking, and elaborate dinners accompanied by $200 bottles of wine. All of this luxury is sponsored by various banks, law firms, and limited partners, all of whom want access to top deals. “They’ve been sponsoring people for years, and they’re paying for everything, right down to the massages,” says one member.
These sponsors are footing the bill because a lot of business is getting done. The offhand gossip over drinks, the ten minutes on a ski lift—all can have billion-dollar consequences. Chance encounters and opportunities unavailable to all the women who weren’t invited into the club.
On the club email chain, members discuss deal flow and congratulate one another on big exits. These messages involve a fair amount of backslapping, including bro-ish comments such as “You’re the fucking man, drinks on you!” and “You’re awesome! Baller!” one member explains. It’s an atmosphere in which many women would feel uncomfortable; still, it’s great that some female VCs are now members. It’s not so great that they have missed out on these networking opportunities for most of the last ten years.
When I asked female investors what they thought of the Venture Social Club, most just rolled their eyes. “What it seems like from the outside is you have a country club that only invites certain members,” one female VC said. “I kind of say, ‘Fuck them.’” Then she reconsidered. “Tell me what it’s about and tell me that it’s not discriminatory and I’ll think about it.” All VCs know if they want to get ahead, they have to play the game that’s on the field.
Then again, maybe the game is starting to change. Kirsten Green of Forerunner was named VC of the Year by TechCrunch in 2017 (she also invested in Dollar Shave Club and Jet.com, which was acquired by Walmart for $3 billion), and she doesn’t fret too much that she’ll miss opportunities because she’s not hanging out with the guys. “I don’t want to be left out of deals because I’m not going on the guys’ trip to wherever, but at the end of the day, I don’t want to go on the guys’ trip,” Green says. “Maybe we [female VCs] just need to have some of our own stuff.” To that end, Green recently bought a bunch of box seats to see the comedian Amy Schumer and invited other industry women. “I think there are some really cool women in this business that I like a lot and want to do business with,” she says.
As for Aileen Lee, she now hosts an annual gathering of powerful women at her home, where the husbands and partners of the guests don suits and pass out the drinks. At the most recent event, Chamath Palihapitiya kindly served me some sparkling water.
In case her intentions weren’t already clear, Lee dubbed the event Ladyfest.