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This Founder Found Out Her Investor Allegedly Sexually Harassed Women and Gave Back $500,000 in Funding A moral crisis blindsided Unbound CEO Polly Rodriguez and put her brand's values to the test.

By Lydia Belanger

Opinions expressed by Entrepreneur contributors are their own.

Unbound

In the Women Entrepreneur Series My Worst Moment, female founders look back on the most difficult, gut-wrenching, almost-made-them-give-up experience they've had while building their business—and how they recovered.

It took Polly Rodriguez more than two years and 200 rejections to raise seed venture funding for her startup, Unbound, which makes vibrators, lubricants and other sex products. Sexual health companies are a hard sell for investors, and advertising platforms, such as Facebook and Google, have policies against ads in this category.

The company eventually closed a round with Binary Capital. Then two weeks later, Rodriguez learned that Justin Caldbeck, Binary's co-founder and managing partner, was accused of sexually harassing several women, including making unwanted sexual advances. In one instance, Caldbeck allegedly grabbed the thigh of a woman with whom he had a business relationship.

Related: These Two Sexual Health Companies Have Responded Differently to the #MeToo Movement

What follows is a firsthand account of this person's experience. This interview has been edited for length and clarity.

"I was in the middle of a meeting when one of my investors told me the story was going to break. The reporter Reed Albergotti, who wrote the original article, reached out to me to confirm and told me how damaging the accusations really were.

After I hung up the phone, I was just angry. Angry that I didn't know this was Justin's reputation, angry that he would [allegedly] do this to women and angry that now I was going to have to clean up this mess. Ultimately, I had to make the decision whether we were going to keep the $500,000 investment, which we needed desperately.

I called my mom that night, crying. I had worked so hard to raise that round and now was faced with the decision to give back the money. She encouraged me to the do the right thing and give it back. From there, I talked to a trusted circle of advisors. The best support I found was in the conviction of other female founders.

I confronted Justin about the accusations, and he denied everything via phone. (Binary is based out of SF, while we are in NYC. I have never met him in person.) Also, I took it upon myself to reach out to the victims and talk with them directly to understand what happened. After I heard their stories, I just knew there was no way we were keeping that money.

The other managing partner at the fund, Jonathan Teo, told me to my face that I was doing the right thing, only to turn around and write an email to his portfolio of founders that anyone who would give back funding had no integrity. He left me off the email, but other investors forwarded it to me, which felt like garbage.

It was a total emotional drain for two months, which is how long it took to get them to sign the paperwork to take back the money. Still, I thought that maybe I had made the wrong decision. I had some investors who questioned it. 'Money is green,' they said, 'who cares who it comes from?' I also was responsible for a team of 10 other individuals who would be affected by the decision.

Related: 6 Disadvantages Confronting Female Entrepreneurs Seeking Venture Capital

Eventually, Barbara Donoghue at Manzanita Capital stepped up and took Binary's allocation, and my existing investors also put in more cash. I wasn't expecting that as an outcome, but I think investors ultimately value a founder who sticks by their guns and does the hard thing.

I learned that integrity doesn't really have a price -- and if you don't have your values and your brand, you don't have much of anything. You can always raise more money -- but you gotta stand for something. I stand for women."

Editor's note: A previous version of this story incorrectly referred to the accusations against Justin Caldbeck as sexual assault.

Lydia Belanger is a former associate editor at Entrepreneur. Follow her on Twitter: @LydiaBelanger.

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