Does Silicon Valley Need a Code of Ethics?

Imagine you’re a grad student who’s poured your heart and soul into an idea that could help change the world. You do the hard work of convincing your colleagues to work on it with you and to form a company.

You hear about this great incubator who will help you get your idea to market with the promise of mentorship and a little bit of capital. All they ask is that you submit a pitch deck and fill out an application so they can see if you fit into their portfolio.

You work hard to get the materials together and press, SUBMIT…

Now you wait.

On the back end, the incubator is reviewing your material and they see a great idea. This would be perfect for one of their current portfolio company who’s been struggling to get their own technology off the ground.

Now there are a few paths the incubator could take:

• Good: Bring you in and help nurture your startup so that they can potentially realize a solid ROI five to ten years from now.
• Good: Help broker a partnership deal with their current portfolio company so your team can get some early cash infusion and land your first client, thus helping their struggling portfolio company.
• Bad: Share your pitch deck with the struggling portfolio company and tell you that your idea is crap, discredit your business model, and take the wind out of your sails.

You get a phone call from the head of the incubator. He says he doesn’t believe your idea is feasible based on your business plan.

You’re shocked! You’ve run this by other smart people at Stanford and they all said you should push through. You don’t know whom to believe.

Ultimately you need to get paid so you decide to take a regular job because you have a new baby on the way. You’re crushed, but you ultimately believe the head of the incubator because he must be smart since he’s running it.

A few months go by and all of a sudden, you buddy hits you up with the news that one of the incubator’s portfolio companies pivoted and is now doing your idea!

How could this be?

Someone was being unethical. Unfortunately, you don’t have much recourse to fight it.

If this story infuriates you, you’re not alone. This actually happened to a group out of Stanford back in 2014. It’s sad to know that this isn’t a one-off incident. It’s actually happened to some of my friends, but when pressed on why they don’t bring it up in public, they tend to believe that their ship has sailed and that it’s hopeless for them to try to fight.

What a disgrace for all those who just want to build great things and share them with the world.

That’s why I believe founders need protection when entering into the world of incubators and accelerators. That’s why I’m calling for a Universal Code of Ethics created by the tech community and publicly signed by all founders and institutions in the space.

Why Bother?

For every startup that makes it, there are thousands that fail. I used to believe that this was caused by free-market forces necessary to separate the wheat from the chaff as early as possible.

However, after seeing how the sausage is actually made in the Valley, it’s not that black and white.

For a young founder, it’s important to stay alive long enough to understand the process of building a company, establishing a network of high-integrity individuals to learn from, and raise just enough cash to start making your own money based on the merits of your hard work (not just raising money and calling yourself a business).

Incubators help you do just that.

That’s why back in 2013 when I got into a digital health incubator, I was stoked. Who wouldn’t be excited to have access to resources to increase my probability of success and give back a multiple on their investment in the process?

I was pretty naive to think that.

At the end of the day, we’re all just people with our own personal incentives. Investors want a huge multiple on their investment and based on the Power Law, only one will make them smile.

As much as incubators want to help every company, there aren’t enough resources to do that. They have to focus on their “winner” in the portfolio to give the incubator the highest probability of a moonshot ROI.

But as humans, this often leads to unethical practices. Here are a few I’ve seen and heard that happened to some of my founder friends:

• Sharing pitch decks from applicants to portfolio companies.
• Demanding startups to divulge clients and deal terms because investors wanted to know, but in reality, used as reconnaissance for other portfolio companies or to leverage new partnership deals with enterprises.
• Redirecting introduction calls away from a portfolio startup in favor of pushing a deal for the “winner” startup.
• Helping the “winner” company pitch other portfolio company’s ideas and methods to capture deal flow.
• The list goes on…

I’d say these actions are pretty unethical.

What bothers me more are the laundry list of failed companies with founders I know who had the best intentions to help society but lost that opportunity due to cutthroat people who stole their deal flow by pitching technology they didn’t have.

Look at the filthy stench Theranos left on digital health (and Silicon Valley as a whole). Or how about the way Facebook handled their Cambridge Analytica debacle. I get the sense that we’re not looked at in high regard by the rest of the world right now…

How about we use this time to set the tone going forward by expelling the bad habits and replace them with our new ethical principles.

That’s why I’m in favor of a community-generated Universal Code of Ethics for Silicon Valley. This code should be public and signed by all who want to play the Silicon Valley game. We should also institute a third party Ombudsman-type program that can sort out wrongs that have been committed and keep the system flowing with the best-intentioned people and technology rising to the top (preferably made up of diverse, highly experienced founders…The OGs).

Forming Our Code of Ethics

I don’t remember hearing or seeing anything about ethics back in my incubator days. I tried my best to follow my own internal compass set by my parents and grandparents: follow the Golden Rule and don’t be a dick.

But relying on our own upbringing isn’t a robust ethical training strategy. I’ve been to MBA schools and have sat in on their ethics class…all 15-minutes out of a two-year program taught by a teacher who doesn’t want to be teaching it. Other disciples aren’t any better.

Ethics isn’t a sexy topic to discuss.

When I went searching for an established Code of Ethics for incubators, I went to arguably the top three in the space: Y Combinator, TechStars, and 500 Startups.

Here’s what I found when searching for “Code of Ethics,” “Code of Conduct”, and “Principles in Google for each of three incubators.

Each one of them has their own approach, but why not standardize this across the board and set the precedent for all the other incubators playing in this space?

For example, I like how Y Combinator focuses on the Founder. It helps set the tone for what each person coming in must abide by. In their founding Principles, they outline why they started and what they’ll strive to achieve and it’s publicly committed by the founding team.

TechStars ups-the-ante even more with clear top-level principles followed up with granular statements to drive the points home. They also have each person in their community publically sign it for social proof and include a place to reach out if violations have taken place.

Lastly, 500 Startups goes for the light option, which leaves more to the imagination, but at least they have a place to submit a violation.

Are there first order ethical principles we can suss out and make a standard we can all publically agree on? With all of the “bad press” due to unethical technology companies, maybe this is the time we make a stand and as a community come together and outline what our new ethics should be.

Hell, look at Wells Fargo’s new campaign. They seriously blundered with their fake accounts scandal, but instead of hiding it they are “re-establishing” themselves. Maybe that’s something we should do too.

I envision one document broken into four subdivisions:

1. Founder ethics: Change happens at the individual level.
2. Incubator ethics: Guidelines to increase fairness, transparency, and accountability to give a fair shot to all founders with great ideas and technology.
3. Humanity promise: A promise to improve human Healthspan (increased longevity and function).
4. Earth’s promise: A promise to improve Earthspan (increased resource longevity and support the carrying capacity of diverse species).

Starting Point — Hopefully You Can Help Make It Awesome!

Founder’s Ethics

Integrity

• You are your reputation. Silicon Valley is a small place, what goes around comes around.
• Honor your word. NDAs are just an extension of your word. People should trust you without having to sign one.
• Be honest with yourself first. No amount of success will fill a void inside yourself. Don’t hurt others in that process.

Empathy

• You are 1 of 7.3 billion. There are a lot more people out there than you. Think about your actions because you affect each one of them.
• Be humble. You’re lucky to be here, make the most of it, but remember it can vanish.
• When someone gives you money, they are forfeiting everything that money can be used for. Imagine that’s their last dollar to feed their hungry kid. Work hard to give it back in multiples.

Trust

• You’re the easiest one to fool. Trust that you’ll be tempted to do questionable things, have your own principles to help you choose the right path.

Incubator Ethics

TechStars truly nailed it out of the park with their Code of Conduct for incubators. I couldn’t find much to improve, so I copy pasted it here so you can check it out. Props to you TechStars!

The original can be found here.

We give first.

1. We help others whenever possible. We are all busy, but when the ask is sincere and realistic, we respond and help. We are respectful of each other’s time and are clear and focused in our requests.

2. We deliberately create a virtuous cycle. We proactively work to give back to the ecosystem by giving first to others in our community with no specific expectations of return.

3. We appreciate the help of others. No one goes it alone — startups are a team activity. We express our appreciation for the help of our customers, mentors, and others that make our success possible.

We act with integrity.

4. We are honest and transparent. If we say something either publicly or privately, then we believe that it is true. We do not intentionally omit important and relevant factual information in an effort to deceive others. We strive to be clear and transparent in our communications.

5. We protect sensitive information. When we are entrusted with sensitive, confidential or personal information we use appropriate measures to secure it. We respect requests for privacy and confidentiality.

6. We communicate with our investors. We will send an update on our business at least every six months and be responsive to their inquiries.

7. If we fail, we fail well. If we are going out of business, we will notify our customers and make their data available to them for at least 60 days. We will advise every one of our investors and provide the chance to discuss what went wrong in a live conversation. If we know the company is going to fail, we attempt to return as much capital to investors as possible.

8. We disclose known conflicts of interest early. We err on the side of too much disclosure.

9. We do not steal assets or content. We encourage and respect independent, innovating thinking.

10. We don’t operate under the influence. Distributing, using or being under the influence of illegal drugs (defined by U.S. federal law) is not permitted while participating or engaging in any Techstars program or event. While alcohol may be provided at various Techstars social events, underage drinking is prohibited and we expect everyone to drink responsibly and in moderation.

We treat others with respect.

11. We commit to non-hostile, open, and welcoming workplaces. We commit that employees, partners, customers, and visitors feel accepted and free to express their opinions, concerns, and needs with an expectation that they will be heard and respected. We communicate professionally and appropriately at all times.

12. We don’t tolerate illegal discrimination or harassment in any form. We will quickly fire employees who do this, and train our employees to recognize and address bad behavior. We will ban or fire mentors, investors, employees, contractors and others who discriminate or harass others.

13. We encourage diversity. We commit to seeking diverse perspectives and building inclusive work environments, which we believe leads to better companies.

14. We stand up for others. We appropriately intervene in situations when we witness violations of this Code and report violations.

15. We are reachable and responsive. We will enable standard forms of communication so that anyone doing business with us can have a reasonable expectation of receiving a response in a timely fashion.

16. We participate in both offline and online forums with respect. We don’t cause or participate in flame wars online. We participate in respectful discourse in all forums. We do not comment anonymously or with false identities.

17. We respect our legal agreements. We do not attempt to circumvent their intentions.

18. We keep our promises. If we commit to do something, we do our best to do it. If we can’t keep our promises for some reason then we strive to make it right in any way possible.

19. We do right by our customers. We strive to deliver products that delight our customers and seek to exceed their expectations.

20. We do not attack others electronically. We don’t maliciously attack others using scripts, robots, or similar techniques.

21. We are not spammers. We do not send bulk unsolicited email nor do we scrape contact lists and abuse them. We don’t harass prospective customers who have clearly said no to us and opted out of communications.

22. We work for the benefit of our companies. We always work for the benefit of our company, not for our own personal benefit.

23. We encourage professional development. As founders, we do everything we can to ensure the happiness and professional growth of our employees.

24. We avoid gossip. We don’t share disparaging comments and rumors about others. We are constructive in our feedback and always provide it directly to the individual or company to which it pertains.

Human Promise

• I promise to create technologies and services that improve the Healthspan of our species over the sole quest for shareholder and personal profits.

Earth’s Promise

• My actions have consequences. I promise that I will be resourceful on my journey and do everything in my power to leave the world in better shape than I left it; not just for the next generation, but for at least seven generations to come.

Put It On the Blockchain

From Aristotle to our Silicon Valley podcast friend Sam Harris, ethics have been and will always be discussed. I by no means have the intent to force you to live a certain way, but rather, I just want to start a discussion.

Hopefully, we can turn this into a movement to help the current and future set of founders have the best shot of realizing their dreams and how those dreams will affect society and the planet.

If you’re on board with this, it’d be great if someone threw this up on github so people can start inputting their thoughts and desires. Maybe even Y Combinator, TechStars, 500 Startups, or another incubator could take the lead and help make this more than just an idea.

Hopefully, we can create a lightweight Universal Code of Ethics that will be signed by each founder and used by each incubator. Heck, maybe different incubators will add their own special herbs and spices based on their needs.

The sky’s the limit.

And since ethics aren’t sexy, just throw it in the blockchain and make it immutable.

Ethics just became sexy :)