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The Ugly Unethical Underside of Silicon Valley

Source | Fortune : By Erin Griffith

As the list of startup scandals grows, it’s time to ask whether entrepreneurs are taking “fake it till you make it” too far.

Vinod Khosla did not show up at TechCrunch Disrupt to be harangued by some smartass, know-nothing journalist. The venture capitalist came to talk about disruption and revolutions to an audience of 1,000 potential disrupters and revolutionaries, laptop glow illuminating their faces in a San Francisco warehouse.

But of course the journalist had to bring up Hampton Creek, the vegan-food company that had fashioned itself—and more important, valued itself—like a tech company. Khosla, a legend in Silicon Valley, was a Hampton Creek investor, alongside Peter Thiel’s Founders Fund and Salesforce crm CEO Marc Benioff. Despite media reports of shoddy science at the company on things like shelf-life testing, and an FDA battle over misleading labeling, Khosla declared Hampton Creek was “doing awesome.”

“Debatable,” the journalist, TechCrunch’s Jonathan Shieber, needled before beginning his next question.

Khosla cut him off with a “talk to the hand” motion and turned to the audience with a wide, this guy amirite? grin. “Here’s a journalist,” he said, “who doesn’t know what’s going on, has an opinion, just like he does, to make interesting stories.” He turned back to Shieber: “I know a lot more about how they’re doing, excuse me, than you do.”

This was in September 2015. And what Khosla didn’t know was that Hampton Creek’s employees and contractors had been covertly buying its jars of eggless mayo from grocery stores for more than a year, allegedly as a way to make the product appear more popular to its retail partners. It would be another year before Bloomberg Businessweek revealed the scheme, in an article featuring an animated GIF of founder Josh Tetrick’s face covered in squirts of mayonnaise. (Hampton Creek has denied wrongdoing, describing the buybacks as quality-control testing. Khosla declined to comment.)

RULE BREAKER: Parker Conrad’s startup Zenefits admitted violating state insurance rules. He’s now starting a new, similar company.Photo: Jim Willson—The New York Times/Redux

The startup community has a set response to this kind of news, and it sounds a lot like Khosla’s sniping. Blindly defend; it’s us against them. After the Wall Street Journal first exposed problems at blood-testing startup Theranos in 2015, for example, venture investors like Greylock’s Josh Elman and Y Combinator’s Sam Altman tweeted defenses against the one-sided “slam piece.”

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