Sexual Misconduct at VC Firm Binary Capital Was Pervasive, Lawsuit Says

(Bloomberg) -- The problems at Binary Capital, a venture firm felled by allegations of sexual misconduct, went much deeper than previously known, a lawsuit against the firm alleges.

Ann Lai, who was a principal at the San Francisco-based firm until May 2016, claims further incidents of bad behavior by Binary Capital’s founders, Justin Caldbeck and Jonathan Teo, in a new filing Tuesday. As part of her ongoing lawsuit, she alleges that the two men demanded headshots of female job applicants to evaluate their attractiveness. They discussed holding a no-clothes retreat for employees, she said. They eventually held a poolside event at a Napa hotel, where attendees wore bathing suits, and an underage intern was given alcohol, according to the complaint.

Lai originally filed her suit in June as the #MeToo movement was gaining steam. Many of the new claims concern the work environment at Binary Capital, which had not been a big focus in the original complaint. In the new complaint, she expands on allegations of inappropriate conduct with female staff at company outings, a woman-specific dress code, and comments about the attractiveness of Lai and other women the investors did business with. Caldbeck declined to comment, and Teo didn’t respond to a request for comment.

Caldbeck resigned last year from the firm he started after the Information, a technology news website, reported on his sexual advances toward women looking to raise money. The Binary Capital situation was among the first in a string of allegations against male venture capitalists and technology executives, leading to resignations from DFJ, 500 Startups, Sherpa Capital and other firms. Teo tried to hang on to his venture capital firm during the turmoil, but ultimately, investors turned over management of Binary Capital’s holdings to Lerer Hippeau, a New York VC firm.

Lai, who earned three degrees from Harvard University before spending about a year at Binary Capital, said she left because of its “sexist and sexual environment,” according to the suit. When Lai voiced concerns, Caldbeck and Teo gave her the nickname “HR,” she claims.

In a November court filing, Teo and Caldbeck said Lai was a subpar employee who misled them about the progress of a project and resigned before she could be fired. The next month, a judge ordered them to try to resolve a contract dispute in arbitration. Binary Capital didn’t pay the $1,900 owed in arbitration fees, which Lai’s attorney described as a breach of the agreement. “Hi all. Binary Capital is insolvent and being forced to shut down,” Teo emailed arbitrators in February, according to the suit. “What's the best path forward?”

The arbitration group asked Lai if she was willing to pay the full cost. She declined and focused on expanding her lawsuit instead.

To contact the author of this story: Sarah McBride in San Francisco at

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