Tricia Fratto and Juliette Gust came across many misconduct reporting platforms over their careers as a lawyer and an anti-fraud investigator. But none of them were quite right.
So, they created their own platform, one that’s anonymous and customizable for employees to report fraud, misconduct and unethical behavior. The company, called Ethics Suite, also offers training on how to build a whistleblowing program and reviews of current misconduct policies.
The two women met when they were working at the former Starwood Hotels — Fratto oversaw the anti-corruption investigation team and Gust oversaw anti-fraud investigations. When Marriott bought Starwood, the two broke off to build Ethics Suite, which they launched in 2017. Now, Ethics Suite has more than 50 customers across many industries, including nonprofit, lodging, food, software, legal, healthcare, logistics, staffing, media and construction. Companies with fewer than 100 employees pay less than $1,000 per year, Gust said.
The Texas Sommelier Conference employed the system after several women came forward with their experience of sexual harassment from wine masters to the New York Times. The Conference’s co-owner Drew Hendricks was named in the article. London-based Institute of Masters of Wine, which has set a standard for wine mastery worldwide, also hired Ethics Suite following the investigation to create a system to report harassment.
A lawyer friend put them in touch, Fratto said. This is how they’ve reached a majority of their customers, they said.
Fratto and Gust built the Scottsdale, Arizona-based company without outside funding. Their backgrounds equipped them with the knowledge to imagine an effective platform, but to create it they needed a software developer. Lucky for them, Gust’s husband is exactly that and developed the platform. “He’s kind of the silent partner,” she said.
They say the key to their interface is its simplicity and adaptability. Different industries require different levels of reporting, Fratto told me in February. For instance, a university has different needs than a restaurant. But the platform is able to adapt to each level of reporting a company or organization needs.
“Most people using these platforms aren’t seasoned professionals in the compliance space, using this type of information, and knowing how that information can be used for them, and possibly against them,” Gust said. “So we wanted to make it really easy for anyone, even a novice, to come on and understand the things that were important to document.”
A few years ago, an existing connection to Mohammad Awwad, a fraud auditor, allowed the women to expand to the Middle East through ES Middle East, offering their back-office in Arabic. Their partners in the region include Talat Awwad, who has worked in external fraud auditing for 40 years, and Awwad.
“We worked with our partner Mohammad Awwad in the past and knew him to be an exceptional compliance professional who would bring his deep experience to our prospective clients in the Middle East,” Gust said over email this week. “We also had our own experience in the region and knew that a ‘speak up’ culture was valued and encouraged.”
The team there is working to expand Ethics Suite to 18 countries in the region.
Q&A: Funding BIPOC Requires Breaking the Silicon Valley Mold
People who are investing well into women of color aren’t coming from well-established funds, said Gayle Jennings-O’Byrne, a longtime investor and entrepreneur in the tech space and co-founder of New York City-based venture firm WOCstars.
WOCstars invests in diverse founders developing consumption tech, such as reducing plastic waste, content or commerce. Its investors include Jill Karp, the co-founder of the Karp Foundation, Jacki Zehner, co-founder of Women Moving Millions and Dalila Wilson-Scott, EVP, Chief Diversity Officer and President, Comcast NBCUniversal Foundation, Jennings-O’Byrne said. To date, it’s invested in nine tech companies, each with investments $200,000 or higher.
Jennings-O’Byrne responded to questions over email on Sept. 9. Responses have been edited for clarity and conciseness.
What are some of the barriers for women of color?
At the leadership levels of corporations, organizations, and even investment funds there is a commitment to communities of color and businesses by BIPOC owners. This reached its height of $50 Billion in commitments by companies after the murder of George Floyd. However we haven’t reached a level of true “buy-in” and action throughout the organizations and with decision-makers like loan officers, investment committee members, venture
partners at large funds, hiring managers, purchasing managers, etc. The mandate has come from leadership but it is slowly being realized amongst the ranks. The sense of urgency, accountability, and willingness to adapt to new market realities is complicated.
The good news is the data and success stories of companies exist to help make the case for why we should all be advancing and investing in a diverse inclusive manner. For instance, research shows that investing in diversity and women is smart business and smart investing.
(Some VC funds, such as First Round Capital, have done information analysis that shows that female-founded firms perform better. This could be correlation rather than causation — First Round’s analysis doesn’t separate the two. Other data is mixed, showing that women founders are getting more investment, but that their valuations are declining as companies grow compared with men — Ed.).
What needs to happen to get more funding into the hands of women of color? What works and what doesn’t work?
At the risk of sounding flippant, we just need to stop talking about it, stop asking if there is a pipeline of companies to invest in, and start writing checks. We need investors to fund BIPOC-led fund managers, especially Funds 1 and Funds 2, like WOCstar Fund, and peers such as The 22 Fund, Supply Change Capital and 2045 Ventures. This is an exciting group of new fund managers who are the most connected to the communities and the entrepreneurs we are all saying we want to fund.
We need to get comfortable with the knowledge that the folks who’ll invest well into this demographic may not be the well-established, big billion dollar funds. We need to stop trying to make them fit into the same mold that historically worked for the “bros” in Silicon Valley and invest in those who may look different than we thought but are making the changes we need to guarantee our future.
REPORT: Entrepreneurship in the U.S. is Declining, But There’s Nothing To Fear?
The decline in entrepreneurship over the last 40 years is connected to advanced technology, which has changed the incentives of people to start a business, argues Sergio Salgado, a finance professor at the University of Pennsylvania’s Wharton School of Business, in a recent report called “Technical Change and Entrepreneurship.”
“Entrepreneurship in the U.S. has declined in recent decades because high-skilled college graduates have found that they can earn more in well-paying jobs than starting their own business,” said a university release on the report. “Cheaper capital and lower prices of capital goods also helped businesses become more profitable and therefore increased their ability to hire high-skilled workers who would otherwise have become entrepreneurs.”
Salgado found that entrepreneurship declined by half between 1985 and 2014, and that decline is most concentrated in college graduates, based on the Panel Study of Income Dynamics. The entry rate into entrepreneurship has also declined, he notes
Meanwhile, the skill set of people becoming entrepreneurs increased during that same time period, according to the report. That suggests that the “best,” or most productive entrepreneurs are still choosing to start their own businesses.
There were limitations in the data set, such as the data’s frequency and reach, which “hurt its robustness,” according to a university release on the report. “We are trying to solve a puzzle with our hands tied because we have bad data to try and understand these patterns,” Salgado said in the release.
He suggests one approach to restoring dynacism in the U.S. economy is to lower the cost of borrowing for entrepreneurs, so that existing entrepreneurs become more productive.
Know the Dangers and Downsides of VC
Venture capital is not right for every entrepreneur. In fact, in the wake of Black Lives Matter, some funds are springing up that may not offer fair or even advantageous terms for entrepreneurs. Kansas City-based Venture Noire offers tips for established founders who need to navigate the shoals of scaling. The organization will host a networking event in Kansas City, Missouri Friday, September 24 10:30 a.m. to noon at Kauffman Foundation Conference Center. Free tickets are available on its website.
Disclosure: The Kauffman Foundation is a founding sponsor of Times of E.