Two years after the Minneapolis-based startup Soona drafted a legal requirement for potential investors to disclose any prior allegations of discrimination or sexual harassment, 60 other companies have adopted the practice, too.
Liz Giorgi and Hayley Anderson are the co-founders of Soona, which makes photo and video content for e-commerce companies. They created the legal requirement, dubbed the “candor clause,” in 2019 in an attempt to vet investors before entering into a long-term business relationship with them.
“If I’m going to have a relationship with this person, work with this person, share information and have conversations with this person, I want to know that I’m not going to have to constantly be wondering, ‘Are we going to have issues around your perception of me? Are you going to discriminate against me?’” Giorgi said.
The clause asks venture firms whether any of their members have received a written or verbal complaint regarding discrimination or harassment based on race, ethnicity, religion, sex, disability, gender identity or gender expression.
Giorgi said she views the clause as a method to take back power as a startup founder, especially as a woman in the industry seeking investments from mostly male firms. According to All Raise, which advocates for women in business, almost two-thirds of venture capital firms have no female partners.
While venture firms perform due diligence to inspect startup founders before investing, the firms aren’t typically given the same level of scrutiny.
Soona shared its candor clause publicly on its website in order to allow other companies to adopt the language. So far, 60 companies have implemented it, Giorgi said.
Most of the companies are women-led, but Giorgi has heard from a couple of male founders who also decided to adopt it – a move that gives her “a shred of hope,” she said. Giorgi called on more male founders to do the same.
“The more that we look at these issues of inclusion and discrimination in the tech space as a communal problem – a problem that we all have to solve instead of just a problem that female founders have to solve or that non-white founders have to solve – the more quickly we'll make change,” Giorgi said.
In addition to the startups adopting the clause, two venture firms began using it in the documents for all their investments, and dozens of deals have so far been made with the legal requirement in place.
Giorgi has heard from some startup founders who are worried the requirement to disclose discrimination and harassment would put an end to potential investments. In her experience with the clause, Giorgi said there was one instance in which she decided to not pursue a deal because of a firm’s reaction to signing the clause.
She argues that someone who is unwilling to sign wouldn’t be a good business partner.
“I sleep better at night knowing that I’ve said no to certain people,” Giorgi said. “If you can't talk about the fact that you won't tolerate discrimination inside of your organization, I don't really know what we're going to talk about.”
Soona has raised more than $50 million in funding to date, including a $35 million Series B funding round in January. In addition to its hubs in Minneapolis, Denver and Austin, the company recently opened a location in Seattle and recently opened new site in Los Angeles.
