The firm behind companies like HQ Trivia doesn’t have a perfect record on diversity issues. Does their new policy have enough teeth?
There have been internal investigations, Medium mea culpas and Decency Pledges — all part of how Silicon Valley venture capital firms have reckoned with a year of invigorated conversation about sexual harassment and diversity.
Now, here’s a new attempt to fix the problem: The side letter.
Lightspeed Venture Partners is asking its portfolio company CEOs to sign a letter affirming their commitment to consider women and other underrepresented groups for senior jobs and new spots on their board of directors.
The venture firm behind hits like Snap is requesting that its companies voluntarily sign the document at around the same time that Lightspeed wires money to their bank account, part of an attempt by Lightspeed to hold their own CEOs accountable.
It is a tactic that brings to mind the famous “Rooney Rule” that started in the NFL but has since spread to other industries, which required that teams interview at least one person of color for head coaching and other senior jobs. The thinking here is that merely interviewing a female candidate makes companies more likely to hire them — though this particular policy does indeed lack some of the teeth that is seen in the NFL, which has fined teams that disobey it.
“The question we’ve asked ourselves is how can we do something more than write blog posts about it and wring our hands,” Jeremy Liew, a managing partner at Lightspeed, said in an interview.
The one-page letter on Lightspeed letterhead asks its company CEOs to sign their name, acknowledging and affirming that the firm expects that “at least one candidate from an underrepresented background be considered for every open leadership and independent Board member position in the company,” according to the letter shared with Recode. Lightspeed is also asking that the company set goals and hire more women and other underrepresented employees than the industry average.
Lightspeed says 17 of its existing company CEOs have already signed the side letter — including CEOs from well-known companies like The Honest Company, Affirm and HQ Trivia, the white-hot quiz show app that had some difficulty raising money after investors unearthed questionable behavior toward women by one of its co-founders, Colin Kroll. Lightspeed is the main financial backer of HQ, and it is notable that Kroll, also the co-founder of Vine, is in the first batch of signatories of the letter.
Lightspeed is asking each of its new portfolio companies to sign the side letter — but it is not mandatory. Some portfolio companies also said weeks elapsed in between signing the term sheet and the actual letter. There are still more than 300 portfolio companies that not have yet signed it, though Lightspeed is approaching each CEO and asking them to do so.
Nothing about the letter is binding or punative. Lightspeed acknowledges that the document has no enforcement mechanism and effectively relies on company CEOs to honor their commitment. Furthermore, Liew said he and his partners have not yet decided whether a CEO’s reluctance to sign the side letter would mean that they would back away from a new deal entirely.
“Most entrepreneurs think of themselves as men and women of their word,” said Liew, who said that Lightspeed would be willing to have “reminder conversations” with CEOs who seem to be wavering on the understandings that they affirmed in the letter.
If the firm instituted something stricter — requiring the selection of women for certain roles, for instance, or vowing that CEOs would see personal consequences if they reneged on the agreement — Liew said they would be letting the perfect be the enemy of the good.
“If we did that with a prospective entrepreneur, it wouldn’t get signed at all,” he said. “We’re thought partners. We’re not their mom or dad. We’re not the police.”
Lightspeed’s own record on these issues is not perfect. The firm said last year that it “should have done more” after reports emerged that Justin Caldbeck, a former venture capitalist at Lightspeed, was accused of making unwanted advances toward women both when he worked at the firm and after his departure.
This side letter does not directly deal with harassment.
Some Lightspeed-backed CEOs who signed the document told Recode that they saw the document as a minor ask, and not one that required much deliberation. That raises the possibility that the letter could merely formalize what founders already intend to do, and not change behavior.
Max Levchin, the founder of the highly valued Affirm, which has been in Lightspeed’s portfolio for four years, said in an interview that it was a “no-brainer” to sign the sheet. Levchin said his company already had internal guidelines that asked for women and other underrepresented people to be considered for senior-level positions, so the Lightspeed instructions wouldn’t materially change how the company operates. He does like that leaders are being asked to commit, though.
Affirm is also planning to add up to four independent directors to its board later this year, Levchin said, and the recruiting firm that Affirm has hired to find candidates, Russell Reynolds, already had presented him with a majority-female list of candidates for him to choose from.
The guidelines on those interviewed for board positions only applies to independent directors — Lightspeed will not, for instance, be trying to influence who other venture firms name to their board seats.
Newer portfolio companies are being asked to sign the document as they prepare to accept funding (though, since it is not always being signed simultaneously with the term sheet, the funding is not contingent).
Sophia Amoruso, whose women-focused media company Girlboss announced it received $3.1 million in a seed round led by Lightspeed in December, said that the document “doesn’t impact my thinking” because she already planned to have a heavily female leadership team.
“It wasn’t a big conversation,” she said of Lightspeed’s ask, a couple of months after signing the term sheet, to also sign the side letter. “The agreement is not something that’s going to govern how I behave. My ethics will govern how I behave.”
Here’s the full text of the letter — this one sent to Levchin, for instance:
We are delighted to partner with Affirm to build a world-class company.
As you know, numerous groups that would contribute significantly to the success of a business have historically been underrepresented in technology companies, including women, disabled individuals, military veterans, and individuals from a number of underrepresented ethnic groups, including those that identify as African-American, Hispanic or Native American.
Lightspeed believes that the most successful companies benefit from employees, executives and Board members with diverse backgrounds and experiences. This diversity brings with it a broader set of viewpoints and ideas and a more informed decision-making capability, leading in our experience to the creation of stronger businesses.
In furtherance of our partnership, Lightspeed welcomes your commitment to build teams at every level of your organization that reflect the full diversity of all of the stakeholders in your business. Lightspeed requests that at least one candidate from an underrepresented background be considered for every open leadership and independent Board member position in the company. Lightspeed encourages the company to set specific goals regarding overall hiring rates of women and other underrepresented groups that are published internally and to which the company holds itself accountable. These goals should exceed the relevant industry average in a meaningful way, and progress against these goals should be actively measured.
Lightspeed looks forward to working with you on a regular basis regarding the company’s efforts in achieving a diverse and inclusive workforce.
ACKNOWLEDGED AND AFFIRMED:
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