When startups step in it: Silicon Valley deals, reels with scandal

What happens in Silicon Valley doesn't stay in Silicon Valley.

That's a tough lesson tech startups can't seem to learn despite near-continual headlines spotlighting yet another company behaving badly.

Last week, it was a blog post from former Uber engineer Susan Fowler, who detailed instances of sexual harassment, Kafka-esque performance reviews, repeated complaints to HR and, strangely, a decision to save money by not ordering company leather jackets for the women on the team.

To top that, Uber CEO Travis Kalanick was caught in a video released Tuesday telling off a driver who complained of falling fares and low pay. His behavior brought intense criticism from drivers, riders and Uber employees, prompting the CEO to publicly apologize.

"It's clear this video is a reflection of me -- and the criticism we've received is a stark reminder that I must fundamentally change as a leader and grow up," Kalanick said. "This is the first time I've been willing to admit that I need leadership help and I intend to get it."

For Silicon Valley, however, these types of scandals are par for the course.

"I don't think there are any surprises here for anyone," said New York angel investor Joanne Wilson, speaking generally about startups' tendency to scandalize. Somehow, it's almost expected. And it kind of makes sense, given the high-charging, hypergrowth cultures inside companies often run by overconfident (some might say arrogant) inexperienced twenty-something guys.

There are times when it seems as though some of the industry's most visible companies can't help but step in it. The scandals vary: The 2014 lawsuit against Zillow that described "an adult frat house" where managers ranked female employees by breast size and demanded sexual favors. Theranos' now-discredited claims about its blood-testing technology. And a seemingly unending series of sexual harassment or discrimination lawsuits filed against Twitter, Facebook, Palantir and other well-known tech players.

Here are just a few of the bigger scandals to come out of Silicon Valley.

Airbnb

Being tone-deaf is a common criticism of Silicon Valley culture. And this was on full display in 2015 when Airbnb plastered ads across San Francisco suggesting ways the city could better spend the tax dollars it earned from Airbnb home rentals. (Up until October 2014, Airbnb declined to pay the 14 percent hotel tax on its services.)

"Dear Public Library System, We hope you use some of the $12 million in hotel taxes to keep the library open later. Love, Airbnb," read one ad. Others mentioned adding new bike lanes and feeding expired parking meters.

The ad campaign infuriated San Franciscans who pointed out that $12 million was a drop in the bucket compared to what it costs to run a city. San Francisco State University professor Martha Kenney did the math in response to the ads' cheeky suggestions for the cities' libraries. "I'm happy to hear that you paid your taxes this year. I did too! Isn't it awesome?" she wrote in a Facebook post. "However, I've crunched some numbers and I have some bad news for you. I doubt that your hotel tax can keep the libraries open more than a minute or two later."

The outrage prompted Airbnb to apologize and take down the ads. In an internal email to company employees, Airbnb's marketing chief, Jonathan Mildenhall, wrote, "We failed you, our community, our brand and our hometown."

GitHub

In 2014, GitHub employee Julie Ann Horvath went public with her account of how co-workers and even co-founder and then-CEO Tom Preston-Werner and his wife, who wasn't a GitHub employee, had harassed and discriminated against her.

The code repository platform launched an internal investigation and found no legal problems. Though Preston-Werner admitted no wrongdoing, he resigned and GitHub later hired Nicole Sanchez as vice president of social impact to help get past the reputation of being a hostile work environment, for women in particular. "It's been a really painful but important starting place for us to make some real changes, because the alternative is not something anyone ever wants to experience again," Sanchez said in October after Github announced its first-ever report on the state of diversity in the company. The numbers: 36 percent of Github's employees are women, 64 percent are men.

Magic Leap

Mixed-reality startup Magic Leap is pretty mysterious. But in February it too ran into a common problem. Tannen Campbell, a former executive, filed a lawsuit calling the work environment hostile toward women and saying the dysfunction resulted in missed deadlines. The suit describes how the Magic Leap website sends a message that women aren't welcome to apply for jobs, noting that among the "Wizards Wanted," most are typically male.

Campbell also said she expressed concerns over distributing false marketing materials -- videos that in actuality were created by special effects companies rather than using Magic Leap's virtual reality and augmented reality tech. She claims she was fired after asking Magic Leap's CEO to fix the company's gender imbalance. The company has also been ensnared in lawsuits regarding wrongful termination.

Tinder

Dating app Tinder swiped itself right into a lawsuit in June 2014. Former executive Whitney Wolfe filed a sexual harassment lawsuit against the company and accused then-Tinder chief marketing officer Justin Mateen of harassing her and making comments that listing her as a co-founder would make Tinder seem like a joke.

That September, Tinder settled without admitting wrongdoing and Wolfe went on to found Bumble, a swipe-based mobile dating app in which women make the first move -- they're the ones who initiate conversations. Tinder CEO Sean Rad was ousted but then reinstated a few months later.

Uber

The blowback from Fowler's blog post and the video of Kalanick arguing with the driver isn't the first time the ride-hailing company has stepped in it. One of the company's high-up execs, Emil Michael, was caught saying in 2014 he'd like to spend $1 million to "dig up dirt on its critics in the media." The comments provoked a PR storm that had the company backpedaling for weeks with promises to respect users' privacy.

Just last month, a #DeleteUber campaign went viral after riders derided the company for not speaking out enough against President Donald Trump's immigration ban. While other tech CEOs, including Facebook's Mark Zuckerberg and Google's Sundar Pichai, slammed the controversial ban, Uber CEO Travis Kalanick was seen as being not critical enough. Kalanick resigned from Trump's economic advisory council after telling the president how the ban affected the Uber "community."

Within a week's time, Uber reportedly lost 200,000 customers.

Zenefits

You'd assume people working in a human resources company would know how to behave. But back in February 2016, it came out that HR startup Zenefits had to issue a memo telling employees to stop drinking, smoking and having sex in the stairwells of the San Francisco office.

CEO David Sacks also banned alcohol in the office, the Wall Street Journal reported. He took the reins from Parker Conrad in early 2016 -- before the stairwell situation came to light -- and after a flap over licensing procedures. Zenefits, once valued at $4.5 billion, admitted it created software that allowed sales representatives to finish online training to get an insurance license faster than legally required. In a blog post, Sacks wrote, "Our culture and tone have been inappropriate for a highly regulated company."

In early February, Zenefits announced it had cut 430 workers, or about 45 percent of its staff.

First published March 1 at 6:36 a.m. PT.
Update, 11:10 a.m.: Adds information on video of Kalanick arguing with driver and on Kalanick's apology. 12:21 p.m.: Adds info on Airbnb paying hotel taxes.

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