This story is still evolving. Original report up top; update below.
Earlier this week, following the resignations of Binary Capital co-founder Justin Caldbeck and a more recent addition to the team, Matt Mazzeo, Binary co-founder Jonathan Teo offered to resign his position, as well.
Late yesterday, the firm’s limited partners — including 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 coming up with a new brand for the entity and to finding a new general partner to assume control of the stakes in Binary’s $125 million debut fund.
Binary had closed a second fund last year with $175 million, but it had yet to call down the vast majority of that capital. 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 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 preyed upon numerous female founders who’d met with Caldbeck in a professional capacity over the years.
When revelations about Caldbeck 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 Teo’s 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 co-founders.
Update: Roughly one week after this post was published, Jonathan Teo wrote two distraught emails to Binary’s portfolio companies and to its LPs. In one of those notes, he said that LPs have not yet accepted his resignation. According to our original sources, who we pressed on this, Binary’s LPs had told them they were still planning to move forward with plans to find a new general partner to manage out the firm’s investments, but these sources had been told the process could take longer than expected, up to 90 days from 30, as originally explained to them. Another source familiar with the fund planning now says the LPs have not made a final decision and that, in the meantime, they want to keep Teo in place for the sake of Binary’s employees and portfolio companies that are relying on the firm to continue functioning. Further, one CEO of a Binary-backed company reached out to us to let us know he is fighting to keep Teo on as the firm’s managing director.