Uber sleazy: Should VC firms invest in unethical startups?

Uber sleazy: Should VC firms invest in unethical startups?

Summary: Uber is trying to push its rival Lyft out of strategic markets using a clandestine army of agents recruited through an employment agency to cover its tracks...

TOPICS: Tech Industry

Casey Newton in The Verge has a great story about how Uber, the San Francisco ride app startup, is trying to sabotage its rival Lyft by hiring people to call and cancel thousands of rides.

So much for the top innovator wins in Silicon Valley. These are very unethical and sleazy tactics:

Using contractors it calls "brand ambassadors," Uber requests rides from Lyft and other competitors, recruits their drivers, and takes multiple precautions to avoid detection. The effort, which Uber appears to be rolling out nationally, has already resulted in thousands of canceled Lyft rides and made it more difficult for its rival to gain a foothold in new markets. Uber calls the program "SLOG," and it’s a previously unreported aspect of the company’s ruthless efforts to undermine its competitors.

This is Uber's playbook for sabotaging Lyft | The Verge

Uber's management claims to have never ordered ride cancellations but The Verge has several interviews and has seen internal documents that show that Uber is lying.

With Lyft’s arrival in New York imminent, Uber said it was creating a "street team" charged with gathering intelligence about Lyft’s launch plans and recruiting their drivers to Uber. Contractors were then handed two Uber-branded iPhones and a series of valid credit card numbers to be used for creating dummy Lyft accounts. Uber assumed every contractor would be caught by Lyft eventually; the second phone, according to a contractor interviewed by The Verge, was issued so "you would have a backup phone if and when that happened so you wouldn’t have to go back."

Uber's CEO and co-founder Travis Kalanick is 38 years old so he's not a twenty-something entrepreneur unsure of what's right or wrong in business.

Here's his bio: "Whether it’s founding the world’s first P2P search engine, or developing the premier enterprise content delivery system, Travis believes that every problem has a solution. You just have to be creative enough to find it."

Would companies want to partner with Uber knowing that the startup plays by different rules and will lie and cheat? It doesn't build trust in management and it won't build a corporate culture that's honest and truthful. 

Uber raised a D Series in June of $1.2 billion. Investors were Google Ventures, Kleiner Perkins Caufield & Byers, Menlo Ventures, Summit Partners, Fidelity Investments, BlackRock and Wellington Management. Do such august and respected investment firms want to be associated with such uber-unethical practices? 

VC firms should make sure that their portfolio companies agree to adhere to the same code of ethics that they themselves subscribe to. I assume they all have codes of ethics. 

Topic: Tech Industry

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  • If Uber is proven sleazy, so far is very likely

    As both divers and competition state so. No one should consider is services.

    A company needs money to thrive, no money no progress. Users and the public should firm their back on them and use competing services.
  • Lawsuit...

    Imagine if Walmart hired thousands of shoppers to buy stuff at Target then return the opened merchandise a few days later. I suspect Target might sue, and the Federal Trade Commission might get involved. If I were Lyft, right now, I'd be hiring me some fancy pants lawyers and getting ready to sue Uber for a rather princely sum. The judgment should provide Lyft with a nice fat paycheck and helpful startup capital.
  • The answer is no, but...

    ...the real question is whether investors generally should invest in sleazy companies or whether they should put their money where their consciences are (if you're investing other people's money, you can say so in the latter case; that's what a prospectus is for).

    If ethical standards are to mean anything, they have to apply everywhere and always; in one's public and professional life just as much as in one's private life.
    John L. Ries