There is a new bill in the Massachusetts legislature that would prohibit investors from sexually harassing founders of companies they fund or consider funding, and prohibit investors from discriminating against women and minorities in their investment decisions.
The issue of sexual harassment in the venture industry has come to light over the past few years, with stories of prominent investors harassing female founders. More than 20 percent of women in a recent survey reported having been harassed by investors.
Meanwhile, the statistics on investment in women and minority led startups are still pretty grim.
Venture capitalists put $2.3 billion last year into Massachusetts firms with at least one female founder, according to the data firm PitchBook . Though that was an increase over previous years, it represented less than a fifth of the $11.7 billion in venture capital invested here overall. The amount of investment in firms founded only by women were even more dismal: $141 million, or 1.2 percent.
The situation for many minority founders is also grim. One national survey released this year found that 1 percent of venture-supported founders were black, while 1.8 percent were Latino.
The industry’s trade association, the New England Venture Capital Association, has now come out publicly in favor of the sexual harassment provision of the bill, but against the extending of anti-discrimination laws to the industry.
I haven’t read the bill, but the argument by the VC industry that extending anti-discrimination laws to the investment community will lead to fewer investments in women and minority led companies rings hollow to me.
This form of legal protection already applies to companies across the state with respect to the hiring and firing of employees, and in the way businesses must serve their customers. If the law is written properly, it should provide some level of legal recourse in the most egregious cases of discrimination.
Having said that, I don’t think this legislation is going to move the needle much in terms of shifting more investment dollars to minority and women led companies.
The only way to change the situation is to have more women and minority investment partners at these firms who have the power to make decisions on which companies to fund. In an industry that continues to be dominated by white men, it’s no surprise that most of the investment goes to white men.
Legislation along won’t solve that problem.