VC funds launch non-discrimination requirements for startups

Tech investors are readying for the wave of legislation expected by the new government by uniting in making new investments contingent of clause preventing discrimination in portfolio companies.

Among the venture capital funds participating in the initiative are: Viola, Pitango, Lightspeed, Vintage, Vertex, Qumra, Dov Moran’s Grove, StageOne, TLV Partners, JVP 83, TPY Key 1, 10D, North, Susquehanna and Team8.

Under the clause “Non-discrimination policy,” Israeli and US funds will demand that entrepreneurs will commit to values of equality as expressed in Israel’s Declaration of Independence and abstain from any type of discrimination and will avoid dealings with suppliers that do have discrimination policies.

Some foreign venture capital funds like Susquehanna and Lightspeed will also require approval from US partners for the new venture, indicating that the initiative has become international.

Any discrimination is unacceptable

“Without deviating from the law that prohibits discrimination in various forms, any discrimination based on religion, gender, sexual orientation, color, race, national origin or ethnic background is unacceptable and is not consistent with the principle of equality stated in the Declaration of Independence of the State of Israel,” reads the new clause that will be added to new investments in new companies or those that exist in the funds’ portfolios.

“The company undertakes to refrain from discrimination in the hiring and firing of employees and in the selection of suppliers on the basis of religion, gender, sexual orientation, marital status, color, race, national origin or ethnic background, and it will make reasonable efforts that none of its employees, consultants and agents discriminate on such a basis. Alsoin selecting its vendors and suppliers, the company will make commercially reasonable efforts not to work with and receive services from vendors that discriminate against their employees, consultants, suppliers, customers, or any third party.”

Responsible investment

Already today some Israeli and US funds choose to condition an investment in a company on compliance with the rules of ethics as established in the “responsible investment” (ESG) category – an investment that complies with the rules of social responsibility, ethnic diversity, corporate governance, human rights and preservation of the environment and ecological diversity. This happens when funds set themselves the goal of investing exclusively in such companies, or at the very least when investing in non-democratic countries such as Singapore, China or Hong Kong, or in areas such as gaming or content.

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At the same time, there is usually no reference in standard responsible investment contracts to non-discrimination or to working with suppliers that implement a non-discrimination policy. This innovation came about because of the funds’ concern not only about the reform, but against the background of the intention in the coalition agreements to make a changes in the anti-discrimination law.

Published by Globes, Israel business news – en.globes.co.il – on January 26, 2023.

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