Jun 28, 2017 · 12 minutes

[Update: Shortly after this story was published, Bloomberg reports that Jonathan Teo has offered to resign from Binary Capital.]

The Binary Capital story took another weird turn on Monday when sole remaining partner, Jonathan Teo, posted a note on Facebook.

In the note, Teo reversed his stance on The Information’s original story and his partner’s predatory treatment of women… for a third time. What were once false allegations made against his pal who had "in the past occasionally dated or flirted with women he met in a professional capacity" were now shocking truths that had rocked him to the core.

He was getting married that summer and I had full belief that he was turning over a new leaf. I got to know his family. They are wonderful. And he promised me that he had changed. I saw it in his eyes and I believed it. I spoke to entrepreneurs and I had not heard one single first-hand account of his bad behavior. I held him to that commitment to me. I saw in his eyes he had that intention. I believe in seeing the best in people. I love that there is something I can learn from everyone, and I always look for that.

Yes, Teo admitted, he had been aware that he was working with an admitted sexual predator, but he truly, honestly believed that such behaviour was all in the past. He was just as shocked as the rest of us to learn that his sexual predator partner was now preying on women at his firm.

I believe in seeing the best in people! So sue me!

Of course, you can still believe the best in people without choosing as a partner in your $125m fund someone who was kicked out of his previous firm for preying on women. You can even be a good pal to an admitted sexual predator without trying to discredit reporters who come to you with clear evidence that he’s up to his old tricks again.

No part of "seeing the best in people" involves protecting your multi-million dollar payday by trying to silence and discredit women who have made claims of sexual harrassment at your firm by someone you know to be a serial harrasser of women.

The Facebook post trying to recast Teo the Enabler as Teo the Victim was bad enough. Worse, according to one source who shared a screenshot with Pando, is that Teo then urged female friends to “like” his post and to post other messages on social media attesting to his good character.

We can’t know if any of Teo’s friends agreed to his request, or if all the declarations of love and respect for Teo that followed were spontanious and heartfelt. What we do know is that Teo’s Facebook post was followed almost immediately with a barrage of messages, including several aimed directly at us, complaining at how badly “great guy” Teo had been treated. Many of those messages came from young women.

Behind the scenes, though, women in Teo’s orbit have been telling a somewhat different story, describing Teo as someone who knew all about his partner’s character and who was an active and enthusiastic participant in the famous “party culture” that surrounded Binary. They also describe a man who used social invitations (and the threat of withdrawing them) to bring young women into his orbit, promising them access to powerful and influential friends.

For reasons that will be apparent, all of the women we spoke to for this story asked that we not name them. We have, however, confirmed from separate sources that each of the women was a member of Teo’s friendship circle. We contacted Teo for comment through a Binary spokesperson who confirmed receipt of our request but has not yet offered a response.

To be absolutely clear, in four days of phone conversations with sources about Jonathan Teo, I certainly didn't hear any stories of the same kind of breathtakingly clumsy sexual harassment that Justin Caldbeck was involved in. Rather, what I heard time and time again is that Teo used parties and social events to play a more sophisticated game of “access” with young women who were keen to break into Silicon Valley's inner circles. 

Sources have told me how Teo would dangle invitations to exclusive parties - packed with investors and other influential people - in front of would-be founders, then subtly place expectations on them if they wanted to stay in the group. Who they talk to, who they don’t, how they act, that kind of thing.

(As TechCrunch reported, Teo has been busy deleting photographs from his Instagram feed, including many showing him at parties.)

“You have to be the party girl to be surrounded by them,” said one former member of the group, on the condition of anonymity. “They​ ​invite​ ​tons​ ​of​ ​people,​ ​and​ ​then​ ​rules​ ​start​ ​coming​ ​out.​.. They don’t want you to be too much of a career girl, because they aren’t fun to hang out with.”  

Another woman, who had spent years attending these parties, had a theory for the behavior: “These men use power to manipulate women who feel vulnerable… If you fell on bad terms, you will be actively blacklisted.”

“[Teo and Caldbeck] are major connectors,” the woman added. “Your worst fear is [Teo] won’t call you back… My friends screaming his praises [on social media] are afraid they’ll be blacklisted.”

On at least one occasion, women were told they couldn’t bring any male “+1s” to a party anymore, only more girls.

Again, none of this shows that Teo’s “manipulative” party behavior, or his no-dudes-allowed party policy directly affected his work at Binary. Likewise there might be a perfectly innocent explanation for the ad Teo put on Facebook a year ago for a “stylish” administrative assistant who also does yoga.

Except in rare cases, it is illegal under California law to advertise that a job is only available to men or women -- and the wording of Teo’s ad is careful not to specify gender. But given what we now know about the harassment and objectification of women at Binary, it’s hard not to cringe at dog whistle phrases like: “Stylish… love for quality aesthetics”... “Yoga/Meditation/Pilates practitioner preferred”. Not qualifications you  usually expect to see in an advertisement for an admin at a serious venture firm.

One former member of Teo’s inner circle, who attended parties with him for years, told me that seeing so many women defending Teo after the Caldbeck scandal “added more insult to injury.” She characterised the charm campaign as an attempt to show Binary’s LPs that Teo is still beloved/trustworthy. “Show me all this support for [the benefit of] my LPs. Let’s see how much clout and power I still have.”

On that front, Teo needs all the help he can get: His future at Binary is on a knife edge. One LP who had been in due diligence with Binary on the fund extension just days before the  Information story hit told me it was a no brainer to dissolve the fund: $175 million was too much for one partner to manage. Add that to Teo’s shifting story to the press, his enablement of Justin Calbeck’s behavior, and several companies coming forward to demand Binary get out of their board rooms or divest their stakes altogether. The firm had simply lost too much credibility, the LP told me.

Teo and his friends certainly gave it a valiant effort. But we’ve confirmed with sources what Bloomberg reported yesterday: Fund two is dead. Those same sources tell us Teo may not even be allowed to manage out fund one. It’s being debated as we speak.

To understand why that’s even a debate, let’s look again at pre-scandal press around Binary.

From the New York Times back when Binary raised its second fund:

As they did in their previous roles, Mr. Teo and Mr. Caldbeck will take what they call a “scrappy” approach to finding companies with real potential. “The deals we want to do aren’t already in play,” said Mr. Teo, who was an early investor in Snapchat. “We want to make them happen.”

And from TechCrunch:

“The fresh perspective sees Binary bet on founders that don’t match what Teo calls ‘outdated’ patterns — white investors fundings founders in their network that look just like them.”

Binary pitched LPs on the idea that they were sourcing deals in “fresh,” “scrappy” and “youthful” ways. Some women involved in this orbit have a darker take on what those adjectives meant.

One of Caldbeck victims I spoke with was harassed for years, and a meeting he got her with a major Silicon Valley venture firm made her feel he was too powerful to cut out of her life. Other women tell me that they’ve known people to get suddenly blacklisted from Teo’s network with no real warning, over a minor slight or because they were deemed “too much drama.” Several women who were or used to be in the group say they lived in fear of that happening to them.

Again, to be clear, I have not heard stories of Teo propositioning women in a professional setting the way Caldbeck did. But I have heard many stories of this different kind of social intimidation: Expecting the women to behave in a certain way in order to remain in his “orbit.”

“I think he’s a good guy whose ego got ahead of him,” said one long time member of Teo’s party circle. “[When Teo heard the allegations against Caldbeck] why didn’t [Teo] stop and make this a priority? It just shows you don’t care.”

My point is less to put the final nail in Binary Capital’s coffin here. Rather, it's important to underscore the problem with funding a firm whose founders boast of a “party culture” that often blurs the lines between personal and professional. As we reported on Monday, we’ve heard at least two accounts of LPs who were warned about this culture as part of their due diligence. Not only were they not put off by it, they reportedly saw it as a bonus. The idea was this is how deal flow is generated in young, bro-y San Francisco.

After speaking to more than a half dozen people who attended parties organized (or co-hosted) by Teo or Caldbeck, it was clear that parties were used as a means of the firm getting deals, building a prestige around the firm, creating an orbit you wanted to be part of.

At least some of those women believed the party culture was used as a way of exerting control over them, of taking advantage of a power asymmetry between powerful men in the industry and women who wanted to be part of it but didn’t have a lot of paths to making that happen.

It is reminiscent of the problem we’ve seen with sexual assault occurring overwhelmingly at fraternity parties. According to Michele Dauber of Stanford Law School, by just attending one fraternity party a month, a woman’s odds of experiencing sexual assault go up by more than 30%. And at Stanford, sororities aren’t allowed to have parties where alcohol is served, but fraternities are. So women have to go to the spot of the most danger in order to have a party with alcohol, Dauber says.

Something similar happens when that fratty college party ethos is accepted-- or implicitly funded and encouraged-- in the professional world. Women already face an imbalance of power in the ecosystem, and if they have to enter a party scene in order to gain access, they are inherently put in a more dangerous situation.

Hopefully LPs will take their cue from Eric Holder’s report on Uber and urge the firms they work with to put an end to late night “networking” parties.  

The second point is to expose just how insufficient the existing ways of doing due diligence are. As has finally come out, Justin Caldbeck was forced to leave the board of Stitch Fix because of this behavior towards founder Katrina Lake. It cost the firm money when it had to sell off some of its ownership, and he parted Lightspeed in less than favorable terms.

And yet, Lightspeed didn’t share any of this with LPs being pitched to invest in Binary, I’m told. What’s more: They implicitly dangled future funding over Lake’s head in order to silence her. According to Axios: “Lake also knew that it could effectively block the Benchmark investment. Lake was asked to sign a non-disparagement agreement against Lightspeed and its partners, which she did on August 13, 2013.” (Fortune’s Erin Griffith has argued Lightspeed should release Lake from the non-disparagement agreement now and allow her to speak. I agree.)

ThirdLove co-founder Dave Spector put it best on Twitter:

As I learned more about the mind games played on women to stay in Teo or Caldbeck’s “orbit”, I started to understand why some LPs said they never heard any of this in due diligence, even when calling female founders. It’s the same reason my inbox is filled with people telling me as many horrific things about their interactions with Binary and its partners as there are “cool girls” defending them online. When the power disparity is so great in venture capital between the gate keepers and the hopefuls, and social pressure is used so effectively to exploit it, women too often have to chose between professional survival and speaking out.