Elizabeth Giorgi was used to pitching her company to all-male teams of venture capitalists. Her Denver, Colo.-based company, Soona, specializes in shooting photographs and video, and delivering the results the same day. She recently landed funding from a male VC. Giorgi said she shared her dreams and vision for making meaningful change in the world.
Just over 2% of all venture capital goes to companies founded solely by women, according to The F Project.
Giorgi was overjoyed to have secured funding — until later that evening when he texted her naked selfies. She replied to say it was not appropriate and she was not interested in continuing the conversation. “When you’re looking for funding, you have to go out and meet a huge volume of people,” she told MarketWatch. “You are required to share your vision for the world. Of course, it’s very exciting.”
Embarking on a business relationship can create a shared mission and a deep bond, Giorgi said. In fact, some of her existing investors are among the most important people in her life, she added. “But it’s not an invitation for crossing a line,” she said. “Did I see it coming? Absolutely not. There was nothing about the conversation that was inappropriate.”
Giorgi said there is an notable gender imbalance in the VC community, which she hopes to help address. “When a founder and investor are in the process of developing a relationship, it’s natural to feel close because of this exchange,” she added. “Who wouldn’t feel close to someone when discussing your vision for the future and all the incredible people you are doing it with?”
Just over 2% of all venture capital in the U.S. goes to companies founded solely by women, and companies with an all-male team of founders secure funding after their first round approximately 35% of the time, according to The F Project, a network of more than 150 women-owned businesses. Once again, that figure is only 2% for all-female founders.
In response to her shocking experience, Giorgi introduced a “candor clause” that requires investors to disclose any prior allegations of sexual harassment and discrimination. She has since landed $1.5 million in funding from investors, including Techstars Ventures, Matchstick Ventures and 2048 Ventures. All of these companies agreed to sign her “candor clause,” she said.
The clause is designed to provide legal protection and raise the expectations each party has of each other. “The disclosure requires all parties to disclose if any of the investors, members of their fund or their representatives have ever been accused of sexual assault, sexual harassment or sexually-inappropriate behavior,” she wrote in a blog post on the site to introduce the clause.
“With this disclosure requirement, we are able to have open, candid dialogue as founders and investors about how we want to do business at the very earliest stage of the relationship,” she added. “In introducing the clause to our lead investors, we were able to share very clearly what we value as founders and our shared expectations about diversity, equality and general fairness.”
Giorgi’s ‘candor clause’ asks investors to disclose any prior allegations of sexual harassment and discrimination.
Venture capitalists decide to give most of their money to white men, a 2019 study by RateMyInvestor and Diversity VC, which analyzed all publicly available venture-backed deals from seed funding to Series D investments over the past five years, concluded.
Those results could also speak to demographic factors in the VC community. More men than women may have been seeking funding, a factor that does not address why there are fewer women founders. Researchers looked at the biggest 135 U.S. firms by the number of companies they invested in, so the size of the firms and their investments may also have helped to skew the results.
Not everyone agrees with research that suggests gender bias is common among VCs. Will Gornall, a professor at the University of British Columbia’s Sauder School of Business and Ilya Strebulaev, a business professor at Stanford University, emailed 80,000 investment pitches to 28,000 VCs and “business angels,” half of them from fictional female entrepreneurs and half from fictional men.
Investment pitches from names like “Mary,” “Meghan” and “Melanie” received 8% more expressions of interest than those from the likes of “Michael,” “Matthew” or “Mark,” they found. “We were definitely surprised by the gender results,” Gornall told MarketWatch last year. There was important caveat: Expressions of interest do not equate to those same investors delivering on the funding.
She did not allow one bad actor to color her view of the VC world — or the opposite sex. “I refuse to believe all men are bad,” she said. “We have to solve these problems together and learn from each other. A powerful woman being vulnerable is not an advance. It’s not the opening of a door. Capitalism and building a business can be a force for good when we ask more of ourselves.”
Giorgi has made the “candor clause” available for any founder to download here.