There’s an old adage that’s often repeated by venture capitalists, that they invest in people, not ideas. We hear it at nearly every PandoMonthly. And certainly the character, work ethic, and vague entrepreneurial je ne sais quoi of a founder can make the difference between a failed business and the next billion dollar company.
But sometimes a cigar is a just a cigar and sometimes a popular idea is just a popular idea. So it is with a rash of startups that, despite founders that run the gamut of sexism, arrogance, and all-purpose irresponsibility, are nevertheless attracting users in droves and raising massive venture rounds.
Rap Genius, the text annotation site which just announced a $40 million funding round led by Cleveland Cavaliers owner Dan Gilbert (whose week keeps getting better), is one such company. The three freewheeling founders, Tom Lehman, Ilan Zechory, and Mahbod Moghadam, spent the early years of their startup building up what might be most charitably described as a brash mystique.
Moghadam has been the most controversial, once posting a photo of Nas and Mark Zuckerberg to Instagram after the Facebook founder specifically told him not to. (Moghadam eventually took it down but later said, “Zuck can suck my dick.”) At Techcrunch Disrupt, he boasted of the trio’s Adderall habits and said, “If you got a woman pregnant while on Adderall, the baby would be smarter.” And then there was the time Rap Genius was caught participating in shady SEO tactics, a campaign unsurprisingly led by Moghadam. Google responded to the clear violation of its policies by obliterating Rap Genius’ search rankings, effectively destroying its traffic.
But the most egregious and insane piece of irresponsible behavior from the Rap Genius crew came in the wake of Elliot Rodger’s killing spree outside Santa Barbara. Somebody uploaded Rodger’s violently sexist manifesto to Rap Genius, and lacking any degree of empathy or common sense, Moghadam annotated it with bizarre comments like “beautifully written” and speculated that the killer’s sister might be “smokin’ hot.” Having outdone himself in insensitivity, Moghadam was finally fired, but it should not have gone on that long.
As for Rap Genius, it still looks to be in the running for its happy ending, an outcome only enhanced by Friday’s $40 million round. The company also rolled out a feature that allows any website to embed the company’s annotations and announced a big rebranding as the more multi-dimensional “Genius.” The company wants to be known for annotating everything in the history of the written word, not just rap lyrics, living up to investor Ben Horowitz’s comment that Rap Genius is the Internet’s “Talmud,” the collection of Rabbinic teachings that helped explain and clarify the Hebrew Bible.
Indeed, Lehman and Zechory say they’ve grown up since the site’s early days when, they say, “we were trying to do anything possible to get attention, just anything.” The unfortunate thing is, the strategy worked. Rap Genius appears to have joined Facebook, Snapchat, and now Tinder as a clear example of a product too beloved to be killed by early irresponsible behavior by founders or execs:
- According to David Kirkpatrick’s book, “The Facebook Effect,” the social network’s founding president Sean Parker was arrested for felony cocaine possession at an alcohol-fueled beach party with friends, one of whom was a female Facebook employee who was not yet twenty-one.
- After hackers scooped up millions of usernames and phone numbers belonging to Snapchat users, CEO Evan Spiegel refused to apologize. (There’s also the matter of Spiegel’s college emails to fraternity brothers, filled with references to Jello shots, cocaine, and peeing on a girl, but that was before he started the company — and at least he apologized for those.)
- Just two weeks ago, it was revealed that Tinder CMO Justin Mateen stands accused of sexual harassment by co-founder Whitney Wolfe. The suit is still ongoing, but text messages included in the court documents offer evidence that Mateen has the capacity to be a pretty terrible dude. Mateen’s co-founder and Tinder’s CEO Sean Rad is accused of letting the behavior continue unchecked.
Maybe Mateen and Spiegel will eventually go the way of Moghadam and Parker, asked to leave so their company can scale with less controversial leaders. Or maybe they will stay and be given a chance to mature. But whatever happens, the companies appear destined to survive. That may be what Michael Carney recently called “an uncomfortable truth,” but it’s the nature of business inside and outside Silicon Valley. I mean, do you really think American Apparel CEO Dov Charney, who for years has faced allegations and accusations of sexual misconduct, would have been fired if the company wasn’t in big trouble financially? “All along [board members] were thinking that anything goes in Charneyville,” business ethics professor Thomas White told Bloomberg Business Week. “They only started to worry when they looked up and saw financial disaster.” Former Abercrombie and Fitch CEO Mike Jeffries found a similar fate once the company’s early-2000s growth finally slowed.
So it seems like America has a clear message for founders and executives: You can brag about urinating on college girls, call your co-founder “slutty,” and slam beers and cocaine with under-twenty-one employees — but just make sure business is still booming and history says you’ll be fine. At worst, you might have to leave the company like Parker, fading into the background with your ownership stake still intact, and multi-billion dollar payday still forthcoming.