Can Founders Lie?

Hey y’all — in between the political mayhem this week, you may have seen a dispute between some startup-world giants on X.

Paul Graham (legendary founder of YC and essay writer) and David Sacks (PayPal mafia member and All In podcast “bestie”) aired dirty laundry about the infamous Zenefits collapse.

I’ll briefly explain the backstory from both sides below, but the TLDR is that the company’s founder had lied about some things that got him in trouble with the SEC.

And it brought me back to thinking about one of the more controversial topics in the startup world:

Can founders lie?

You might read that and think “of course not!” and obviously there are some things where the ethics are clear (don’t lie that your company’s blood test devices work, for example).

But there are many situations that put founders in a grey area where inconsequential lies are not often punished, and even encouraged.

So… where’s the line?

Can Founders Lie?

What Happened with Zenefits?

Zenefits was one of YC’s early success stories, and became a massive unicorn within a few years with Parker Conrad as the founder/CEO and Sacks as an early investor.

The company faced attacks from the press for it’s perceived techbro culture and, critically, allegations of cutting corners when having their employees get licensed as insurance brokers.

If memory serves, the primary issue was that Parker had created a browser extension that would simulate movement of the mouse during exceedingly long training videos and courses.

That may sound pretty innocuous, but it ended up causing an SEC investigation and led to Parker’s eventual resignation. Sacks jumped in as CEO to, in his words, “right the ship.”

The story is fascinating and much more detailed. I’ve included links to podcasts where both Parker and David talk about what happened:

• From Parker’s perspective

• From David’s perspective

Why Would a Founder Need to Lie?

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