Earlier this week, following the resignations of Binary Capital cofounder Justin Caldbeck and a more recent addition to the team, Matt Mazzeo, Binary cofounder Jonathan Teo offered to resign his position as well.
Late yesterday, the firm’s limited partners — include WeatherGage, Legacy Venture, UNC, and UCLA — accepted Teo’s resignation.
According to sources, the firm’s portfolio companies will now report directly to these limited partners with any questions or concerns. In the meantime, these institutional investors have committed to renaming the fund and to finding a new general partner to assume control of the stakes in Binary’s $125 million debut fund.
Binary, which had closed its second fund last year with $175 million, had yet to call down the vast majority of those capital commitments. The companies in that portfolio will also be managed by the incoming general partner.
Binary’s investors were torn over whether or not to allow Teo to continue managing out the firm’s investments, according to one source close to the situation. Not all were in agreement that he was culpable for the failings of Caldbeck, who was revealed in an explosive report last week to have harassed or prayed upon numerous female founders who’d met with Caldbeck in a professional capacity over the years.
When revelations about Calbeck were initially made public last week by The Information, Caldbeck and Teo initially denied any wrongdoing, calling the allegations a “few examples which show that Justin has in the past occasionally dated or flirted with women he met in a professional capacity.”
On Sunday, after Caldbeck was pressured to step down from his post, Teo issued a statement calling the “predatory behavior” of Caldbeck “deplorable” and insisting that “there will be zero tolerance at our firm of any conduct that is demeaning to women.”
The company’s portfolio CEOs evidently didn’t buy it, banding together and telling Binary’s LPs that it was either their way or the highway. Specifically, we’re told, nearly all of the CEOs presented or obtained legal documents with which to buy back their shares from Binary unless the LPs agreed to accept his resignation, too.
At least one portfolio CEO, Shane Mac of Assist, had written on Medium this week that Assist wanted to buy back its shares from Binary. Specifically, wrote Mac, Assist was requesting to”buy back 100% of Binary’s investment in Assist and dissolve our working relationship with their firm completely. This also includes termination of board observer rights, voting rights, and buying any shares of Assist in the future.”
He’d added in his public pronouncement that “[I]f the Limited Partners were to hire a women-led venture capitalist to manage the current investments, we would reconsider our request and work directly with the LPs in this situation.
We reached out to Mac this morning and will update this post if and when we reach him.
In the meantime, Binary’s investors have until August to find a new manager.
We’re told the founders would strongly prefer a female VC and that some are actively recruiting a manager on behalf of their fellow cofounders already.
Featured Image: Binary Capital