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What Silicon Valley needs is some old-fashioned HR know-how

Reid Hoffman, a partner at Greylock Partners, has called for people in his industry to adopt a "#DecencyPledge." (Scott Eells/Bloomberg News)

As new revelations tumbled out last week about sexual-harassment allegations against a venture capitalist in Silicon Valley, LinkedIn co-founder and Greylock Partners venture capitalist Reid Hoffman wrote a widely read post calling for people in his industry to adopt a “#DecencyPledge.” “This is entirely immoral and outrageous behavior,” he wrote in the piece. “And it falls to us to stand with you, to speak out, and to act.” The hashtag took off on Twitter, prompting applause from some corners and others who said the next step needed to be a promise to fund more ventures run by women.

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

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

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

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

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

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

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

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

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

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

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

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

He said that even if there were some kind of trade association or compact among venture capitalists to deal with complaints, having a structure to deal with them is only one piece of a broader shift. “It needs to be part of a general movement of changes and behavior,” he said.

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

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

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

Hoffman hinted at something similar in his post. “Any VC who agrees that this is a serious issue that deserves zero tolerance — and I certainly hope most do think this way — should stop doing business with VCs who engage in this behavior,” he wrote. “LPs should stop investing. Entrepreneurs of all genders should stop considering those VCs. This behavior occurs in our industry not just because some believe it's no big deal, but also because those who do find it unacceptable don't do enough to actively discourage it.”

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