Venture Capital Code of Conduct and Ethical Framework for Impact PE and VC Funds

Preamble

This code of conduct outlines the core principles and ethical guidelines that Venture Capital (VC) firms and their professionals commit to uphold in their investment activities. These principles aim to foster a transparent, responsible, and sustainable venture capital ecosystem, driving positive impact alongside financial returns.

Core Principles

Ethical Conduct

VC firms will operate with the highest ethical standards, promoting integrity and fairness in all interactions with founders, investors, and stakeholders. This includes avoiding conflicts of interest and acting in the best interests, which fiduciary and otherwise, of the fund, its portfolio companies, and its investors. 

Transparency

VC firms will strive for transparency in their operations, including investment criteria, decision-making processes, and fees. Clear communication with founders and investors builds trust and fosters a healthy ecosystem.

Collaboration and Cooperation

VC firms will, when appropriate, collaborate with other experienced firms to deepen the knowledge pool, broaden future growth, impart answers, and create an equitable market.

Impact alongside Returns

While financial returns are important, VC firms will consider the broader societal and environmental impact of their investments. Aligning investments with Sustainable Development Goals (SDGs) is encouraged.

Independent Oversight

VC firms will establish mechanisms for independent oversight and governance. This includes robust compliance functions to monitor adherence to this code and promote a culture of ethical behavior, potentially setting up a council with representatives from VC firms.

Respectful Engagement

VC firms will treat all stakeholders, including founders, investors, employees and others with respect. This means fostering a collaborative environment based on open communication, safety, empathy, and constructive feedback.

Long-Term Investment Horizon

VC firms will prioritize the long-term success of their portfolio companies over short-term gains. This involves supporting the development of founders and their teams alongside the growth of the business, especially during challenging times.

Additional Considerations

Founders' Well-Being

VC firms should avoid practices that exploit or infantilize founders. Supporting founders' personal development contributes to the overall success of the venture.

Mental Health of Staff

VC firms should actively support the mental health of their staff, ensuring a healthy work environment. There should be available to all staff constructive mental health support resources. 

Sustainable Practices

VC firms should encourage and support sustainable practices within their portfolio companies. This includes environmental, social, and governance (ESG) considerations.

Fairness for Investors

VC firms should be transparent with investors regarding fees and terms. Avoiding highly dilutive structures protects investor interests.

Impact Measurement

VC firms are encouraged to develop frameworks for measuring the social and environmental impact of their investments along with financial returns. VC firms should consider using a standard protocol across peer groups, sectors, etc. to ensure unifying of data and outcomes.

Conclusion

By adhering to this code of conduct, VC firms can play a vital role in building a more ethical, sustainable, equitable, and impactful venture capital ecosystem. This code serves as a foundation for responsible investment practices that contribute to a better future for all.

Note

This code of conduct incorporates the valuable insights from Angelica Lips da Cruz, Martha J. Sirolli, and others who contributed to the discussion. It acknowledges the need for a shift towards a more holistic approach to VC that prioritizes positive impact alongside financial returns. While some may argue that the primary focus of VC is ROI, this code strives to establish a framework for achieving strong financial returns while also considering the broader societal and environmental implications of investment decisions.

 

Ethical Framework for Impact PE and VC Funds

Executive Summary

A robust code of ethics is paramount in the rapidly evolving landscape of Impact Private Equity (PE) and Venture Capital (VC) funds. It will increase shareholder value, reduce risk, and be genuine, honest, and easier to live with, improving the public perception of the industry. This white paper outlines a comprehensive ethical framework that encompasses transparency, fair treatment, long-term value creation, diversity and inclusion, conflicts of interest management, due diligence, responsible exits, ESG practices, intellectual property respect, continuous learning, legal compliance, community engagement, empathy, relationship building, mentorship, stakeholder inclusivity, conflict resolution, cultural competence, responsible influence, community involvement, impact measurement, transparent decision-making, practical communication skills, adaptive leadership, and integrity in networking. It aims to create an ecosystem founded on transparency, trust, integrity, openness, and a shared mission.

TBLI seeks to leverage our community’s capacity by establishing and maintaining a performance platform of Impact PE and VC Funds based on user validation.

Introduction

In an era where ethical considerations are pivotal to sustainable and responsible investing, Impact PE and VC funds must adopt and adhere to a Code of Ethics that goes beyond regulatory requirements if they want to stand out in an increasingly cynical environment. This document provides a robust foundation to guide ethical behavior and foster a culture of responsibility within the industry.

Ethical Principles

Transparency and Open Communication

  • Maintain open and honest communication with founders and stakeholders.
  • Communicate investment terms, conditions, and expectations clearly and simply.

Fair Treatment of Founders

  • Treat founders with respect, acknowledging their contributions and potential.
  • Avoid taking advantage of information imbalances or exerting undue pressure.
  • Respond promptly (up to 2 weeks) to investment requests.
  • Provide support during challenges, including financial and relational.

Long-Term Value Creation

  • Focus on sustainable, long-term value creation over short-term gains.
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  • Consider broader ecosystem impacts in investment decisions, aiming 20 years out and envisioning 4-5 iterations of the tech sector during that period.

Diversity and Inclusion

  • Promote diversity in both investment decisions and portfolio companies.
  • Avoid discriminatory practices, ensuring fair opportunities for all.

Conflicts of Interest

  • Disclose and manage conflicts appropriately.
  • Ensure personal interests do not compromise fair treatment in investment decision-making.

Due Diligence

  • Conduct thorough due diligence with integrity and confidentiality.
  • Avoid spreading unfounded rumors or engaging in harmful practices.

Responsible Exits

  • Handle exits responsibly, considering impacts on employees, customers, the community, and the economy.
  • Seek mutually beneficial outcomes aligned with ethical standards.

ESG Practices

  • Integrate ESG considerations into investment decisions from the outset.
  • Encourage sustainable practices within portfolio companies.

Respect for Intellectual Property and Innovation

  • Respect intellectual property rights and foster innovation.
  • Avoid unethical practices harming the innovation ecosystem.

Continuous Learning and Improvement

  • Commit to ongoing education on ethical practices.
  • Embrace feedback and continuously improve ethical standards.

Compliance with Laws and Regulations

  • Operate in compliance with applicable laws.
  • Uphold high ethical standards even when regulations are silent.

Community Engagement

  • Encourage and participate in community engagement and philanthropy.
  • Contribute positively to communities where investments are made.

Additional Ethical Considerations

This framework introduces an alternative approach emphasizing empathy, relationship building, mentorship, stakeholder inclusivity, conflict resolution, cultural competence, responsible influence, community involvement, social impact measurement, transparent decision-making, communication skills, adaptive leadership, and integrity in networking.

Conclusion

Adopting a comprehensive Code of Ethics is a regulatory and fundamental human necessity and a commitment to shaping a sustainable and socially responsible future. By incorporating these ethical principles, Impact PE and VC funds can foster positive change, contribute to societal well-being, protect and regenerate the environment, and create lasting value for all stakeholders.

 

Introducing the TBLI VC & PE Review: Navigating Ethical Investments

Overview

In our ongoing commitment to ethical investment practices and transparency within the Venture Capital (VC) and Private Equity (PE) sectors, we are thrilled to introduce the TBLI VC & PE Review—a cutting-edge platform designed to empower founders and stakeholders in assessing the ethical conduct of VC and PE firms.

TBLI VC & PE Review

The TBLI VC & PE Review is a vital resource for founders to share their experiences and evaluate the ethical practices of VC and PE funds. Our primary goal is to offer invaluable insights to the entrepreneurial community, fostering a culture of responsible investment and moral conduct.

Key Features

  • Protected & Anonymous: Founders can confidently contribute to the review platform with the assurance of protection and anonymity.
  • Exclusive Community Access: The review platform is accessible through invitation only, ensuring the credibility and reliability of the shared reviews.
  • Constructive Feedback Encouraged: We emphasize the importance of constructive and informative reviews, discouraging unfounded disparagement.
  • Comprehensive Review Criteria: Founders are guided through open-text questions, encouraging detailed and context-rich assessments.

Review Criteria

    • Honest Review: "Please leave an honest review of your experience with this VC/PE firm. Share anecdotes and provide contextual information to make your review as helpful as possible for other founders."
  • Optional Questions:
      • "How Well Acquainted Are You with This Firm?"
      • "Have You Received Funding from This Firm?"
      • "Does the Investor Have Authority to Write Checks within the Firm?"
  • Sliding Scale Statements:
    • "Respectful, Responsive & Decisive": Responsive and respectful conduct, avoiding ghosting. Prompt and decisive decision-making.
    • "Adds Value (Hiring, Fundraising, Selling)": Overall contribution to founders with services like customer introductions, hiring assistance, and fundraising support.
    • "Trustworthy (Understands Market & Delivers)": Demonstrated trustworthiness, market understanding, and consistent delivery of promises.
    • "Would You Recommend This Firm?": Recommendation on a scale from 1-10.

With the TBLI VC & PE Review, we aspire to be a catalyst for ethical investing, contributing to a sustainable and responsible future for ventures dedicated to making a positive impact.

 

TBLI Guide Community Guidelines: Navigating Ethical Conduct

Overview

The TBLI Guide Community Guidelines are crafted to offer clarity on:

The Unique Principles of the TBLI Guide

  • Understand the principles that make TBLI Guide a distinctive community.

Expectations for TBLI Guide Users

  • Recognize the rules and standards expected from TBLI Guide users.

Addressing Inappropriate Behavior

  • Know the steps to take if encountering inappropriate conduct.

Special Rules for TBLI Guide

Be Honest