A Reminder To Investors

And just as technically it has been unacceptable in practice that won't change anything.

That's not to say I disagree with you on your overall point. I just found that argument to be a little too dismissive of the reason one might be dating within their company or pool of possible investments.

One of the big problems with unwanted romantic advances is that they can come unexpectedly: you're there to do a deal, and the other person is trying to find a way of getting in your pants; you give out your number for business, other person calls you with non-business propositions. It's stressful and annoying, especially with the power imbalance one sees with investment.

So, let's go ahead and start a firm (we'll tongue-in-cheek refer to it as SugarVC) whose deal to founders is straight up "We will fund you if you date us and/or return sexual favors". Let's assume all the contractual niceties are tied up clearly (hah) and in good faith (hah hah). What might we see from this?

First, sexual harassment changes somewhat, because if you're dealing with SugarVC you know what you're getting into...you're not going to give out phone numbers, for example, that you can't shut off.

Second, other investors know that a deal that didn't pan out or was passed over by SugarVC probably was because they didn't get a hookup out of it--not because of some inherent flaw in the business or numbers. In some ways, that's preferable to fixing the power imbalance because it could help limit reputational damage: failing to get funding at such a firm probably doesn't have the same network effects.

Third, you probably see that the people getting funded are more attractive than usual, not selected for business viability but for being a better catch/trophy (deplorable, but bear with me). That being the case, we see that pretty people get more/safer funding guarantees. The possible effect of that is you end up with CEOs who are more presentable in public (simply because they're more attractive) and hence have a marketing/networking advantage--the actual business stuff being handled by a firm appointee or suggested hire, if they're serious about their investment as well. Arguably, this is actually not a terrible deal, if you believe that sales/marketing/networking beats out product.

There are some other interesting ramifications of such a firm--so, let's not dismiss it out of hand.

Sam Altman recently wrote[1], "Yes, it’s awful to hear the horror stories of wildly inappropriate behavior from investors to the entrepreneurs pitching them. (Unfortunately, stories like these are not super rare, but because there’s a big cost to going public with them, most never get told. My hope is that YC has enough leverage at this point to make it clear that this is unacceptable and we will not continue to work with investors who do it.)"

Today, Jessica Livingston writes, "Nearly all the investors we know are completely upstanding and professional, but even one inappropriate incident is too many."

Sam's statement implies that this behavior is more common than most folks would like to believe, and that Y Combinator is prepared to punish investors who engage in it. Jessica's statement subtly suggests that this behavior is less common, and that the vast majority of the investors Y Combinator works with are above engaging in it.

Which one is it?

[1] http://blog.ycombinator.com/diversity-and-startups