Tech Incubator Faces Challenges Of Tackling Sexual Harassment Among Investors

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To an outsider, the actions might have looked swift and decisive: Within weeks of being accused of sexual harassment in the press, two high-profile venture capital investors issued public apologies and resigned.

But in Silicon Valley, female entrepreneurs were asking: What took so long? There were venture capitalists around Silicon Valley who knew these guys were "creeps" — or at least that's how one of the VCs who resigned described himself. But the industry turned a blind eye.

For a few years now, Y Combinator has been trying to face the problem of sexual harassment in the VC community head-on. The organization is one of Silicon Valley's most prestigious accelerators, which runs essentially bootcamps for entrepreneurs starting up tech companies. It also introduces entrepreneurs to VCs, or the money men who invest in startups. (And yes, they are mostly men.)

Every year, Y Combinator sends out a form to the startup founders it works with, encouraging them to report sexual harassment. But when news of the tactic got out recently, it stirred some controversy and illustrated the potential landmines of trying to keep VCs in check.

"It's a balancing act," explains Sam Altman, Y Combinator's president. He addressed the subject briefly on the sidelines of another interview.

Altman says they started sending out the questionnaire in 2014, when a startup founder reported that she had been sexually harassed. "And we just said, 'We don't want this, we have no tolerance for this. But we need people's help — we obviously don't see every interaction, so tell us,'" he says.

When Y Combinator receives a claim of sexual harassment, the organization evaluates its credibility, starting with interviews of both parties. If Y Combinator determines the claim to be credible, it keeps that information confidential but does not invite the accused VC back to its prestigious showcase event called Demo Day. This is where Y Combinator-backed companies present to a roomful of investors. Airbnb, Reddit and DropBox are three examples of Demo Day success stories.

Being in the room is "something most investors would like to have access to," Altman says.

Critics have argued that in addition to facing the usual issues of fairness and verification when investigating such sensitive claims, Y Combinator's blacklisting approach risks creating a climate where male VCs simply won't meet with women entrepreneurs. The argument is that investors will be afraid of being falsely accused.

"Burying your head in the sand by not asking is the worst possible thing investors could be doing," says Joelle Emerson, a former women's right's attorney who now runs Paradigm, a diversity consulting firm in San Francisco.

Emerson says Y Combinator is trying to hack a solution to a particularly challenging problem. Entrepreneurs and VCs have a significant power dynamic like that between managers and employees: Startups need money from VCs to succeed. But unlike the manager-employee relationship, the investor and the startup founder are not technically co-workers.

"If you're an employee (and) you're harassed at your workplace by a manager, there are very clear steps to follow," Emerson says. "To be clear HR doesn't always handle these things well but there's a clear system in place in most organizations." No such system exists for reports about VCs.

More importantly, Emerson says state and federal laws are pretty clear when it comes to addressing sexual harassment in the workplace, but "when you're outside the employer-employee context, it's a gray area from a legal standpoint because there are no laws directly governing the relationship."

Altman says it's this gray area that Y Combinator is trying to navigate.

"In the same way companies have HR departments and have a place to report inappropriate behavior," Altman says, "the people in our program need a place to report inappropriate behavior and I don't think that should be a controversial thing."