Six women complained investor Justin Caldbeck sexually harassed them. Less than a week later, his entire firm was on the brink of collapse. Here’s a look at how it happened, and what’s…
Binary Capital is struggling to survive after co-founder Justin Caldbeck resigned in the midst of a sexual harassment scandal and the firm’s other two partners followed closely behind.
An advisory committee of Binary investors — called an LPAC — is now in charge, according to a person with knowledge of the situation who isn’ t authorized to comment. The LPAC is working with lawyers to find a replacement general partner to manage the fund, and is taking into consideration recent pressure to choose a woman, the person said.
Binary raised $125 million in 2014 and used that money to back startups including San Francisco-based automated messaging company Assist. The firm’s investors include WeatherGage, Legacy Venture and the University of North Carolina.
“We’ re kind of in a holding pattern for the next 30 days until they figure out what to do with the fund, ” said Assist co-founder and CEO Shane Mac.
Binary reportedly canceled plans for a $75 million fund it was raising when the scandal broke, and suspended last year’s $175 million fund, of which little capital had been invested.
It has yet to be determined whether Caldbeck will continue to reap profits from the investments he made while at Binary, the person familiar with the matter said.
Here’s a look at how events unfolded:
June 22 — Tech news source The Information publishes an article in which six women accuse Caldbeck of sexual harassment. Caldbeck denies the “attacks on my character.” His firm issues a statement saying that Caldbeck has “occasionally dated or flirted with women he met in a professional capacity, ” but there’s no evidence he did anything illegal. Later Caldbeck adds that while “significant context” is missing from the allegations, he regrets making anyone feel uncomfortable.
June 23 — Caldbeck takes an indefinite leave of absence from Binary Capital. He tweets “I’ m incredibly sorry” and links to a statement apologizing for his behavior.
June 25 — Caldbeck resigns. His co-founder, Jonathan Teo, announces the departure in a Sunday evening email to investors, calling the behavior Caldbeck is accused of “predatory” and “deplorable.” A second Binary partner, Matt Mazzeo, also resigns. A person close to him says Mazzeo left because he felt he could no longer be associated with the firm.
June 27 — Bloomberg reports Teo, the last remaining partner at Binary Capital, has offered to resign. A week later, it was still unclear whether Binary’s investors had formally accepted his resignation, a person with knowledge of the matter told this news organization.
Meanwhile, San Francisco-based automated messaging company Assist, a Binary portfolio company, moves to sever its ties with the VC firm. The company put up $3.6 million to buy back Binary’s 2015 investment, CEO and co-founder Mac said. Assist gives Binary one alternative — it says the company will stay if Binary hires a female investor to take over.
Other portfolio companies, including Dia&Co and Havenly, also condemn Caldbeck’s actions and kick Binary off their boards.
Meanwhile, tech blog Recode reports that years ago Stitch Fix CEO Katrina Lake complained about Caldbeck’s behavior to Lightspeed Venture Partners, his prior employer. Lightspeed tweets that it removed Caldbeck from a portfolio company’s board after a complaint, but it should have done more.
June 28 — Ann Lai, a former principal at Binary Capital, sues the firm for defamation. Lai claims that she quit over the firm’s sexist atmosphere. After she left, she says, Caldbeck threatened her, using the non-disparagement agreement she signed in an attempt to prevent her from talking about sexism she experienced.
