Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

After Zenefits, Will VCs Rein in Their Unicorns?

bloomberg.com

Post reply on HN
Print view View original

41–50 of 128 posts

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#41

Post by draw_down »

rhino369 wrote: post #37
JonFish85 wrote: post #18

Considering Airbnb and Uber, two of the largest and considered most-successful startups are carefully dodging the law, the upside is worth the risk. I disagree with it, but I think VCs don't care much about following legal frameworks until it's too late.

Dodging the law is risky but can have upsides. Maybe you get Aereo'd or maybe you can pull an Uber. Both airbnb and Uber exploited holes in current regulation. Just breaking the law is stupid.

In Portland, Uber acted directly in defiance of city hall. City hall told them not to operate their service in Portland, and they did. I'm not so sure they're as different as you say. Differences in degree, sure.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#42

Post by geofft »

easong wrote: post #35
geofft wrote: post #23

Earlier quoted context omitted.

It is ethically and morally wrong for private companies to privately decide that regulations are stupid, without any checks or balances by the people. Today, they might decide that laws that are in fact objectively stupid are stupid. Tomorrow they may decide that laws that are very important to the protection of your rights are stupid. Or, at most, I will concede that it is not ethically and morally wrong if we conce…

We have a dysfunctional government that's clearly beholden to various powers, including ones whose business model relies on stupid laws not changing. (I'm not personally sure I would even call our government a plutocracy, since that implies some level of control or organization.) At this point the only way we are ever going to get change is if large numbers of people decide that stupid laws are stupid and ignore them…

Sure, but there's still a difference between large numbers of people in semi-public, and a single company in private. If Zenefits asked even their own customers if they agreed that these federal regulations were stupid, I doubt they'd get many yes answers (partly because, at least in theory, the intent of the regulation is to protect those customers).

I am pretty okay with even large numbers of companies, with different motivations and financial incentives, all deciding that the same law is stupid. (One case seems to be the export regulations on non-open-source crypto-using software, for instance.) Even if they're all companies, that is much more defensible on democracy and not plutocracy.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#43

Post by rhino369 »

jsprogrammer wrote: post #27
pbreit wrote: post #19

Earlier quoted context omitted.

Fastest growing SaaS business ever? The non-compliant activity was not crucial for success and easily rectified. The service offered is core to pretty much every business on the planet and touches every single employee in the business.

Easily rectified? The top shareholder/exec got dumped; the entire business is under multiple states' investigations; employees may have purjured themselves at the behest of the business; and clients may have purchased critical business infrastructure from unlicensed agents (which may affect their coverage). Clearly someone bought in to the pitch, but what strategy would they believe would easily rectify this situatio…

A non start up would pay a law firm to do more investigation and then settle with the government for a pound of flesh but nothing crazy. In the scheme of things skipping a video won't kill a company.

But start ups are all about momentum and PR.

Plus they'll need money for investigations and settlements. VC capital is expensive.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#44

Post by saalweachter »

easong wrote: post #35
geofft wrote: post #23

Earlier quoted context omitted.

It is ethically and morally wrong for private companies to privately decide that regulations are stupid, without any checks or balances by the people. Today, they might decide that laws that are in fact objectively stupid are stupid. Tomorrow they may decide that laws that are very important to the protection of your rights are stupid. Or, at most, I will concede that it is not ethically and morally wrong if we conce…

We have a dysfunctional government that's clearly beholden to various powers, including ones whose business model relies on stupid laws not changing. (I'm not personally sure I would even call our government a plutocracy, since that implies some level of control or organization.) At this point the only way we are ever going to get change is if large numbers of people decide that stupid laws are stupid and ignore them…

> See, for instance, the multi-decade long campaign to decriminalize marijuana.

You're confounding tyranny of the majority with corruption; the reason marijuana is still criminalized in most places is because a large enough percentage of the population thinks it should be, for whatever reason.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#45

Post by Zigurd »

mrshoe wrote: post #30

This story starts out reporting on a board ousting a CEO after a public scandal involving non-compliance with various laws, which incited multiple government investigations. It then takes an abrupt turn and starts repeating everyone's favorite Silicon Valley trope du jour: the unicorn bubble is bursting, the fundraising environment is tightening up, and the halcyon days of multi-billion dollar valuations for everyone…

Correct. What went wrong at Zenefits and other places was failure to correctly execute the kind of submarine approach to compliance exemplified by PayPal. Lots of startups skate near the edge and sometimes get dinged by regulators. The question is whether you do it to excess and/or make yourself a target. Failure to navigate this can make you an ex-unicorn, but it says nothing about unicorns in general.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#46

Post by easong »

geofft wrote: post #42
easong wrote: post #35

Earlier quoted context omitted.

We have a dysfunctional government that's clearly beholden to various powers, including ones whose business model relies on stupid laws not changing. (I'm not personally sure I would even call our government a plutocracy, since that implies some level of control or organization.) At this point the only way we are ever going to get change is if large numbers of people decide that stupid laws are stupid and ignore them…

Sure, but there's still a difference between large numbers of people in semi-public, and a single company in private. If Zenefits asked even their own customers if they agreed that these federal regulations were stupid, I doubt they'd get many yes answers (partly because, at least in theory, the intent of the regulation is to protect those customers). I am pretty okay with even large numbers of companies, with differ…

Some company has to be first.

Imagine you're an entrepreneur, and you've identified a heavily regulated industry full of sclerotic companies with connections to the regulators that serve large numbers of customers extremely poorly. You believe that you can't break into the market without violating some regulations that have a strongly negative effect on product quality.

What should you do? Go to VCs and ask them to fund a decade-long lobbying campaign with a very high probability of failure in which you pour your heart and soul into getting some obscure regulation in some obscure area that nobody cares about changed, and then afterwards start a company to better serve the customer (along with everyone else who is rushing in to benefit from the lightened regulatory load)? Or try to start a company, show everyone that they regulations are dumb, make customers happy, and then force the regulators to change out of sheer embarrassment?

If we don't occasionally reward people who took the second option (and were right!), I don't think we would get safer, more ethical change, we would just get less and everyone would be worse for it. I'm obviously fine with people who break regulations and end up hurting others being punished to the full extent that the law allows, but there needs to be an escape valve for when the government has it wrong.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#47

Post by rhino369 »

draw_down wrote: post #41
rhino369 wrote: post #37

Earlier quoted context omitted.

Dodging the law is risky but can have upsides. Maybe you get Aereo'd or maybe you can pull an Uber. Both airbnb and Uber exploited holes in current regulation. Just breaking the law is stupid.

In Portland, Uber acted directly in defiance of city hall. City hall told them not to operate their service in Portland, and they did. I'm not so sure they're as different as you say. Differences in degree, sure.

I have no idea of the Portland specifics, but a lot of law, especially administrative law in an hoc process. City hall could say "we think you are operating a cab service in violation of our regulation don't operate." But the reality is nobody is sure whether Uber is actually violating the law. You either let city hall sue/make an admin finding or you preemptively sue them and wait for a court to decide.

Plus sometimes you know how bad the worst case legal scenario is and it's the best option. With stuff like taxi regulations the fines probably aren't too bad.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#48

Post by [deleted] »

draw_down wrote: post #11
rokhayakebe wrote: post #3

I don't buy this. I have no issues with Zenefits and I am actually happy they were able to see phenomenal growth. However I must say this whole situation of the CEO stepping down feels staged to me. It is as if everyone was in on it and this move was calculated by all of them a long time ago. Like when we ready and my stocks are safe and sound blame it on me.

Oh, you have no issues with Zenefits so the whole thing must be staged! Of course! As if it's so hard to believe a CEO would engage in unethical behavior. Sheesh.

[deleted]

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#49

Post by easong »

saalweachter wrote: post #44
easong wrote: post #35

Earlier quoted context omitted.

We have a dysfunctional government that's clearly beholden to various powers, including ones whose business model relies on stupid laws not changing. (I'm not personally sure I would even call our government a plutocracy, since that implies some level of control or organization.) At this point the only way we are ever going to get change is if large numbers of people decide that stupid laws are stupid and ignore them…

> See, for instance, the multi-decade long campaign to decriminalize marijuana. You're confounding tyranny of the majority with corruption; the reason marijuana is still criminalized in most places is because a large enough percentage of the population thinks it should be, for whatever reason.

No, the point I'm trying to make is that seemingly one of the only ways to get stupid laws changed is for them to be broken, and for people to see that the law is pointless (or not pointless!). Why exactly the law is or was in place doesn't matter too much.

Another example would be the woman who has the gall to braid hair without a license - if she hadn't broken the law, nobody would talk about it, there would never be any chance for reform, and we would all be incrementally poorer for it.

I'm not taking a position on specific laws, just that it's important that some laws occasionally be broken so that as a society we can test whether or not it matters if someone breaks them. If breaking a law doesn't result in negative outcomes, it shouldn't be a law.

Re: After Zenefits, Will VCs Rein in Their Unicorns?

#50

Post by patio11 »

phibit wrote: post #26
JonFish85 wrote: post #18

Considering Airbnb and Uber, two of the largest and considered most-successful startups are carefully dodging the law, the upside is worth the risk. I disagree with it, but I think VCs don't care much about following legal frameworks until it's too late.

Does anyone have any more information about the "52 hour online training program" that "the Macro" allowed them to skip? If that training program is any bit as useless as "online driving school", I can sort of understand how the Macro came to be...

California requires 20 hours of training to get a license for health and accident insurance, 20 hours to get a license for life insurance, and an additional 12 hours on ethics training for people wanting to pass the exam for either. These are tick-box requirements that allow you to take the exam you need to pass to get the relevant license. Several providers have online courses you can take for $50 Here's the regulator's description of half of the requirements:

http://www.insurance.ca.gov/0200-industry/0050-renew-license...

There exist many tick-box requirements in the vast, vast field that is compliance in regulated industries. There is a political valence to this observation.

My personal favorite one is the time where I had to threaten to fire myself if I ever misused patient information. I threatened to fire myself if I ever misused patient information. I then documented the fact that I had threatened to fire myself if I ever misused patient information. If I am ever investigated on suspicion of failing to have threatened to fire myself if I ever misused patient information (a crime which is separate from misusing patient information), I will be able to produce adequate documentation attesting to the fact that I threatened to fire myself if I ever misused patient information.

Post reply on HN