Friday, November 18, 2022

Ethics in Tech

I want to take a moment to talk about ethics. Today there are two big tech stories. The first is that an infamous entrepreneur was sentenced to over 11 years in prison, effectively for fraudulent behavior hurting investors, employees, and risking customers’ health. The second is about how fraud and theft evaporated billions of customers’ holdings in the cryptocurrency space.

One thing that I’ve learned as an entrepreneur/VC for the last 16 years is that this is an industry that runs on trust. Investing in a company is not like buying a house. A house is a zero-sum game. The reproducibility of selling a single family home is such that it can happen millions of times a year with standard legal docs. However, when VCs invest in a company, or when an entrepreneur chooses to partner with an investor, a long-term bond is formed. This exists for the next several years, where everybody is pulling for a successful outcome. We can pay lawyers all day long to try to paper every edge case and contingency, but the fact is, the startup community relies on relationships, reputations, and honest dealing to operate. Investors and entrepreneurs want to work with other investors and entrepreneurs that they know and trust. This is why trusted introductions are so important, and this is why it can be so difficult to break into the scene as an outsider - the very way that the community does business relies on this.

Having unimpeachable ethics and integrity is something I’ve always taken pride in. I have my parents to thank for that. It’s how I operated as an engineer. It’s how I operated as a founder. It’s how I operate now as a VC. I know that a number of my investors have specifically mentioned to me that my moral code was a key part of their decision to back me. I signed my first “code of ethics” oath when I became a Professional Engineer early in my career. Engineering is a demanding profession, and if shortcuts are taken, then people die. I’ve never forgotten those lessons. And now, as a VC, I recently posted my commitment to the code of ethics proposed by VC Lab. I make many gut-wrenching decisions a week, clouded in uncertainty - that’s how the startup game works - and I cannot imagine not having a strong moral compass as my guiding light.

I’m also proud to say that the importance of strong ethics applies to the entrepreneurs that I have worked with. Over my long career, I have worked with entrepreneurs with rock-solid integrity; and I have, unfortunately, worked with a few entrepreneurs (and VCs) whose lack of integrity was disgraceful. However, the latter have always been in the small minority, and do not shape my view of the community as a whole. When I invest in a company, I take an extremely active role, working closely with the founders to do everything I can to help out, as part of the company itself. I’m extremely proud to partner with those entrepreneurs who have to make tough decisions often, always considering what the right path is, to meet their duty of care to their employees, customers, and investors. There is no higher calling than service to others, and I have the utmost respect for entrepreneurs who recognize their responsibilities and take them seriously.

So, what does this have to do with today’s announcements? Too often, the media celebrates billionaire founders who have a complete lack of integrity. And, the sad truth is that you can abuse others, lie, cheat, steal, and make it to the three-comma club. But that’s not how I operate. And that’s not how most entrepreneurs I know operate. And that not how the vast majority of the venture/startup scene operates. There is no more powerful force, as a force of good, than the world-changing nature of startups, and we need to shun those who would act otherwise, because their actions don’t represent the majority, but instead, can hurt everyone. 


Roy Cullen said...

Aaron: Well done - refuting once again the theory that nice guys, orethical entrepreneurs, finish last. Keep up the good work. Roy

Doug Potentier said...

Excellent blog Aaron. Your comment “ higher calling than service to others”. Reminded me of Rotary’s motto “Service Above Self”. When I looked it up, there was one other official motto, (1911) “One Profits Most Who Serves Best”.