Brotopia

by Emily Chang

  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.

  • • •

  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.

  THE FOLKS WHO COULD FORCE THE VCS TO CHANGE

  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 e
nthusiastic.” 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.”

  WOMEN GOING THEIR OWN WAY

  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.

  6

  SEX AND THE VALLEY: MEN PLAY, WOMEN PAY

  ABOUT ONCE A MONTH, on a Friday or Saturday night, a select group of the Silicon Valley Technorati gather for a drug-heavy, sex-heavy party. Sometimes the venue is an epic mansion in San Francisco’s Pacific Heights; sometimes it’s a lavish home in the foothills of Atherton or Hillsborough. On special occasions, the guests will travel north to someone’s château in Napa Valley or to a private beachfront property in Malibu or to a boat off the coast of Ibiza, and the bacchanal will last an entire weekend or longer. The places change, but many of the players and the purpose remain the same.