Thanks to startups, we can share our news with loved ones then hop on a free internet call to discuss further. We can even summon a car with the push of the button or seamlessly search for flights if we decide to finish the conversation in person.

But while the magic of startups has made the world easier, more connected, and more fun (and made a handful of people a whole lot of money), all this entrepreneurial striving does have a dark side. The mania to build the next great company can lead not only to psychological stress, but also occasionally to rule-bending and outright unethical behavior. A fact, Penny Kim found out to her great misfortune.

Not a startup, but a scam

An online marketer originally based in Dallas, Kim packed up her entire life a few months ago and relocated to Silicon Valley for the promise of a six-figure gig at a funded early-stage startup led by a pair of well credentialed entrepreneurs. (Since I wrote this yesterday, the startup in question has been identified as WrkRiot, and the New York Times has reported on how sadly common some of the things that went on there are in the Valley.)

When Kim got there, despite deception after deception by the founders, she slowly discovered the company was about to run out of money and that she and her colleagues (some of whom has moved from as far away as China) were probably never going to see the compensation they'd been promised for their hard work and belief.

Kim recently opened up about the whole horrendous tale of hubris and deceit in a Medium post, kicking off a storm of self-examination in the Valley. The full story is worth reading if you're involved in startups, both to remind yourself of the dark side of the business and to protect yourself against ever falling prey to a similar scam. But if you're looking for a quick and dirty summary of Kim's lessons learned and the hard knocks that taught her them, here are a few:

1. Getting hired in a heartbeat should make you worry.

Hire slow, fire fast is a Silicon Valley mantra for a reason. Kim's case was the complete opposite -- the founders hired her in under two weeks with little vetting for what seemed like a sweet deal. In hindsight, she says, that appears not decisive, but reckless. "If it is too good to be true, it probably is," cautions Kim.

2. Beware those who hire friends.

When Kim arrived, the company had recently hired three new employees for business development roles. "One of them befriended me quickly... and eventually told me that he and the other two were poached from another startup across the hallway by our CEO who wanted a group of friends. Essentially, they were hired bros with ambiguous titles," Kim relates.

Cultural fit is a popular (if not uncontested) concept in Startupland, but the idea is to further winnow competent candidates by focusing on how potential employees will get along with the rest of the team, not to hire solely based on who you'd like to grab a drink with. If your boss seems to be onboarding people based more on personal relationships than the needs of the company, Kim's experience (and common sense) suggest you should worry.

3. A great resume is no substitute for a compelling product.

The resumes of this startup's co-founders were impressive, and this was one of the most important factors that convinced Kim that the company was legit. But Kim quickly realized their backstory was pretty much all they had to go on. When investors and others asked about the product, they quickly pivoted to touting their pedigrees. This despite the fact that the product, which no one could succinctly describe in a compelling way, was set to launch in just three months.

If you think this startup smells a bit fishy so far, you haven't heard anything yet. Check out the complete post for more unbelievably terrible details, including outright fraud and retaliation. That way you'll know what to look out for if you're ever considering joining a startup yourself.

How common do you think this sort of bad behavior is in Silicon Valley? And do you think Kim should have known better?

Published on: Aug 31, 2016
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