Will the Dispo Disaster Change How VCs Operate?

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Will the Dispo Disaster Change How VCs Operate?

Twenty-four-year-old David Dobrik rose to internet fame with a vlog crew known for comedy videos and then quickly used his cache to launch a buzzy camera app that pulled in more than $20 million from investors.

All that good will evaporated in days after allegations of sexual assault by a member of the Vlog Squad came to light. The situation has raised flags about how well investors vetted the startup's founders — and whether VC firms or brands should prepare for these situations when working with young influencers, who are increasingly creating their own brands and companies.

"This is a very different kind of response than what we used to see just a few years ago from VCs," said Pam Kostka, the CEO of All Raise, a nonprofit created by female venture capitalists to promote equity in a male-dominated industry.

Kostka, a Silicon Valley veteran, called the move a clear signal that swift decisions following sexual misconduct or harassment have become "the new tablestakes."

HelloFresh, General Mills, Honey, DoorDash and other brands and partners of the young YouTuber quickly fled once the report came out.

"This horrific misconduct is incongruous with DoorDash's values and does not represent the communities we strive to create," a spokesperson said by email, confirming that the company stopped sponsoring Dobrik's podcast, Views.

Two early backers of Dispo — the company Dobrik co-founded in 2019 — released statements acknowledging the allegations. Dobrik, a woman told Business Insider, had been present the day of the alleged assault. He filmed pieces of the night and stitched them together in a video he later took down. No charges have been filed.

Both investors said they would donate profits from from the early investment round of $4 million to organizations working with survivors of sexual assault.

Vetting the Vloggers

Spark Capital, who took the lead in Dispo's Series A round last month that pulled in $16 million according to filings, said it will "sever all ties" with the company. The firm didn't say whether that transition has financial implications and has not responded to a request for comment.

"Venture capital investments are generally illiquid, meaning that it isn't easy to get the money out just because Spark has decided to sever ties," said Scott Lenet, USC Marshall School of Business professor who specializes in entrepreneurship and venture capital.

But Silicon Valley and the venture world have had to grapple with their own sexual harassment claims. Last year, Women Who Tech released a report that found 40% of female founders or tech employees experienced harassment from a boss or an investor. That followed the start of the MeToo movement and Silicon Valley's own harassment scandal that exposed how the power imbalance allowed for predatory behavior.

Still, Lenet said most venture capital term sheets don't include a morality clause that could be used as protection in these situations, especially as social media amplifies and fuels anger over individual behavior.

But, he said, firms could introduce language that "sets expectations for the behavior of startup executives," much like they have created new clauses to ensure diversity and inclusion.

It's unclear whether a similar clause was written in Dispo's deals. In this case, one may not have helped, as the funding rounds closed before last week's investigation.

Brands that sponsored him should have been on the lookout, especially as his vlogs often veered racy.

"As an influencer, you have a heightened responsibility to act in a certain way when you're now representing a company and not just your own brand," said Darren Litt, the co-founder and chairman of L.A.-based talent marketplace MarketerHire.

Companies like DoorDash and General Mills are increasingly relying on young influencers. As the line between personal and professional blurs for many influencers, the risk for marketers has grown.

"It's understandable and expected that when there's controversy, these companies want to distance themselves," said Litt.

The responsibility also falls to the brand or investor, he said. It becomes their job to dig into the content and reputation that made these creators famous to begin with. Still, many of these venture deals are done at breakneck speed as investors try to get in on a hot deal ahead of their competitors.

"On the investor side, do your due diligence," Litt said. "Make sure you understand what the influencer represents and any skeletons that might be in their closet."

Dobrik entered the YouTube world after making a name for himself on the defunct video app Vine. He then joined the Vlog Squad, a now-famous crew of friends known for short comedy videos that are part reality show, part comedy skit. They're branded with clickbait titles like "HE SHOULD NOT HAVE DONE THIS!! (BAD IDEA!) and "SURPRISING VLOG SQUAD WITH MY NEW BODY!!"

The group was on shaky ground even before Insider's investigation. In February, before the latest round of funding, Buzzfeed published an article recounting YouTuber Seth Francois' experience as a member of Vlog Squad. Francois, then the only Black member, said he was sexually assaulted during a video and sometimes made the punchline of racist jokes.

"I was completely disconnected from the fact that when people were invited to film videos with us, especially videos that relied on shock for views, that I was creating an unfair power dynamic," said Dobrik in a second YouTube apology video.

In his first apology last week, Dobrik said he "missed the mark" when it came to the situation with Francois — a comment he called "cowardly" in Monday's three-minute video.

"I fully believe the woman who came out against Dom," he says.

Dobrik also references previous allegations against Dom Zeglaitis, beginning in 2018. Dobrik said he did not believe the women and even joked about sexual assault at the time.

The YouTuber said he'll be taking a break from social media.

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