The ongoing fallout around allegations of sexual harassment and other mistreatment of women by some venture capitalists is jeopardizing one venture fund before it even gets off the ground.
A new $100 million fund being raised by Fred Destin, formerly of Accel in London and Atlas Venture in Boston, is receiving extra scrutiny from potential investors due to questions about his time in Boston.
An incident, which Destin described in a recent blog post, occurred during a 2013 technology conference in Nantucket, Massachusetts, when he was a partner at Atlas, an active backer of early-stage startups in the Boston area. Conference goers gathered at late-night parties that featured karaoke, beer pong and dancing.
Destin and a young female startup founder, both interviewed by Bloomberg News, have different accounts of what occurred at parties one evening.
The woman said she was in fundraising mode and had pitched him on her startup. At one party early in the evening, she said Destin suggested she present to Atlas partners. They danced intimately and later saw each other at another party. At one point, she said she physically removed his hands from her body, looked him in the eyes and said no. She said she left the party, and got a message soon after from Destin with only his hotel address. She ended up leaving the conference early because she still felt uncomfortable, she said. The woman asked to remain anonymous because she fears repercussions to her career if she is identified.
Destin declined to comment to Bloomberg News on specific details of the woman’s account. In his June 26 blog post, he said he wasn’t working with the woman or looking to fund her startup. He thought they were interacting in a non-business situation, but wrote that, with hindsight, it was clear she thought differently. "She got concerned about whether her standing in the market would be impacted. I lacked the awareness, I thought I was just being playful," he wrote.
He told Bloomberg in a recent interview that he became aware only months later through another venture capitalist that the incident had upset the woman. Both he and the woman said he apologized to her.
"I have never knowingly been disrespectful to a woman and have always stayed within the zone of consent," Destin said in a statement. “I clearly offended someone while dancing at a party back in 2013 and I am genuinely sorry. But I can clearly say I have never used my position as a VC in an inappropriate way; to say otherwise is simply wrong.”
The episode is another test for a VC industry that publicly promotes gender equality and opportunity for all, but has privately sought to cover up bad behavior among its upper ranks in situations that blend the personal and business realms.
Destin is trying to move on, and he’s in the midst of raising money for a new fund that is unaffiliated with Accel and Atlas. One major investment firm said it was reconsidering investing in Destin’s new vehicle, given the outrage over recent allegations of mistreatment of women in the tech and venture industries. That firm is continuing to do due diligence. A second investment firm said it would likely follow the lead of the first investor in deciding whether to back Destin. Neither firm agreed to be identified due to the sensitivity of the topic.
"We need to explain what has happened clearly and transparently to investors to reassure them," Destin said. "We will work hard to do that because we believe in what are doing and are passionate about our mission: to help build companies."
Accel, a top VC firm that’s backed Facebook Inc., Slack Technologies Inc. and Dropbox Inc., said it was unaware of any questions concerning Destin’s conduct when it hired him in 2014. It said it’s investigating now, after a reporter asked about the Nantucket incident.
“Prior to and throughout Fred’s employment at Accel, we had no knowledge of any misconduct on his part, nor did we ever receive any allegation of misconduct,” Accel said. “We remain extremely concerned about the allegation, as Accel does not tolerate any kind of inappropriate behavior towards women.”
Binary Capital co-founder Justin Caldbeck resigned in June after women founders described predatory, harassing behavior, and investors pulled the plug on Binary’s second fund. 500 Startups co-founder Dave McClure and Ignition Partners’ Frank Artale also resigned from their firms this month amid allegations of past misconduct toward women.