Now we've seen Secret's ugly soul, will investors act?

By Sarah Lacy , written on August 3, 2014

From The News Desk

When I wrote a post last week calling out otherwise good people for investing in Secret, I expected some strong reactions. What I didn’t expect was what happened over the past four days.

Four days ago, I had no particular view of the founders of Secret.  I was merely concerned about an app that I personally considered morally bankrupt, and amazed that otherwise ethical investors (some of which we share) would want to be part of it. Based on my reporting, I knew that the company’s founders weren’t doing enough about the very real risks (and realities) of bullying. Honestly, though, I assumed they were just naive.

Over the past few days it’s become clear that founder David Byttow isn’t naive at all: He just doesn’t care.

Byttow showed the world his soul when he responded to my somewhat measured story with a Tweet saying he wasn’t troubled by my concern over the potential for teen suicides simply because my post hadn’t driven much traffic. As Paul Carr wrote on Friday, his position appeared to be that he doesn’t care if teenagers are cyberbullied to death, so long as it doesn’t become a PR headache. Further evidence of that emerged today when Byttow was accused of being “too busy raising money” to respond to the concerns of a teen suicide expert whose own sister had killed herself.

Looking back, maybe I should have expected this. As I wrote on Thursday, people have been hesitant to call Secret out publicly for fear of-- duh-- getting harassed on Secret. If I had a dollar for every Valley founder, VC, and CEO who has written to me in the last four days and said “keep my name out of this but…” before giving us more details of horrific things they’ve heard the Secret team do, I could take my team out for -- at least-- a round of much deserved drinks. And journalists (except Paul) tend to drink a lot.

The message from those concerned sources was clear: Secret’s founders aren’t naive. They are willfully ignoring the issue.

But I gave them the benefit of the doubt and didn’t put any of that in the original story. That was my mistake.

Speaking of mistakes: More damning than Byttow’s Tweet was that of his PR head, Sarah Jane Sacchetti, who showed zero empathy for users when she hit back at us for writing “horrible things” about Secret without talking to her first. Perhaps Sacchetti can’t see the irony of a senior staffer at an app that’s all about writing horrible things without accountability complaining about that exact same thing. More likely, she considers herself to be deserving of different treatment than the countless teens attacked on her app every day.

There’s plenty more to say about all of this -- and we’re going to continue following the story where it leads.

For now, though, I want to go back to where this story started: The investors. Secret’s investors have to be absolutely shitting themselves at this point.

It’s about time we named them, by they way: According to Crunchbase they include SV Angel, Alexis Ohanian, Kleiner Perkins, Google Ventures, David Sacks, Ashton Kutcher, Pete Cashmore, MG Siegler, Megan Quinn, Bing Gordon, Matrix Parnters, Redpoint, Index Ventures and… uh… Joe Montana. The full list is here. (Disclosure: Saul Klein-- a partner of Index -- is an investor in Pando, as are Redpoint and SV Angel. MG Siegler was a partner at CrunchFund when it invested in Pando. He was also, very briefly, a Pando contributor.)

It’s difficult to put aside the potential human toll of Secret’s app, but let’s try at least for a few minutes and focus just on the serious business risks at Secret right now.

- A bizarre and almost sociopathic lack of empathy: With any consumer Web app-- particularly those that have a huge potential for harm as Secret does-- we largely have to trust the founders. It’s absolutely horrifying that the reaction to a story about bullying and potential suicides wasn’t a statement laying out what they’re doing to combat this. Or even a boilerplate statement that they take this seriously. Or even pure silence. No, it was flippant snark.

Hard as it is to do, since we are looking at this from a business point of view, we should arguably forgive Byttow for at least the PR blunder. PR isn’t his job. Founders sound off all the time on Twitter unadvised and regret it. If someone should be fired over that -- and immediately -- it’s the company’s head of PR, for telling users her pain is far more important than theirs. I don’t say this lightly. But avoiding fall-out like this is precisely her job, and she absolutely failed-- spectacularly-- when it mattered most.

Particularly given Sarah Jane Sacchetti came from Formspring-- a place where sadly the topic of suicide wasn’t a hypothetical. This was ostensibly exactly why she was hired. The fact that she went through that, joined a site that even more explicitly enables bullying and had no sense of the heaviness of that reality is… well, just shocking. Investors should be calling for her head, at a minimum.

Because of my next point…

- Everyone-- every single person who invested in this company-- knew this scandal was coming. Only, they actually feared worse. They feared way worse than a hypothetical Pando story about suicides and bullying: They feared a Secret-driven suicide actually happening. I know in at least two firms that invested in Secret there was a divisive partner debate about investing for this exact reason.

When MySpace was hit by its pedophilia scandal, that was something few people could have seen coming. I remember speaking to Mark Zuckerberg days before the News Feed was launched and bringing up privacy concerns and he actually looked confused-- as if it hadn’t occurred to him that could be an issue. “But people have already shared this stuff publicly,” he said. To him, the concern didn’t actually compute.

But with Secret everyone knew this was the risk in investing. The only reason more firms didn’t throw even higher valuations at the surging app. There was no mystery here.

Here’s the thing: What turned this into a huge story was the reaction, not my words. A reaction that should have long ago been scripted by damage control professionals.

Think about that for a moment, from an investor point of view. How bad is Byttow at his job?

What would have happened if -- God forbid-- this story hadn’t been about hypotheticals? How were the founders not more prepared to address it? “When they say this, you say this.” It’s one of two things: Absolute insane ineptitude or a total lack of understanding of the harm that their app can easily inflict. Either should terrify investors. Particularly, the investors who were already worried about this happening.

- Because of Byttow’s ineptitude, this is how thousands of mainstream people have gotten introduced to Secret. That’s hard to recover from. Our story went from something only the “echo chamber” was reading to a story that was on the front page of the Huffington Post for something like 26 hours. Our own traffic shows: A staggering number of people were deeply concerned about this story. We’ve seen dozens of Tweets from parents saying that this was the first time they’d heard about Secret, and now they’ll be talking to their teens to ensure they’re not using it.

Conservatively, thousands of people have heard from Secret for the first time in this context. Conservatively, dozens of them are making sure Secret isn’t on their kids’ phones. Even if the story dies today, that’s hard to recover from. Again, none of this was created by our original story. It was driven solely by the founder’s immature and flippant response to a serious topic. Totally avoidable. What horrified people wasn’t our posts, it was David Byttow’s soul.

- There is no way aggressive, ambitious Attorneys General aren’t circling. Again, remember MySpace. It was blindsided by the pedophilia scandal and responded poorly, and attorneys general had a field day. MySpace executives later told me their view of the difference between Facebook and MySpace was that Chris Kelley of Facebook took these concerns very seriously and aggressively worked with Attorneys General on any and all concerns.

Secret hasn’t come close to showing that maturity and clearly doesn’t have anyone on staff capable of it. If they do, they don’t have the power to reign Sacchetti and Byttow in. God forbid anything tragic actually happens, those Tweets displaying a callous, flippant attitude towards the potential for something like this will absolutely be used as evidence of the founders’ complicity. The parents will sue Byttow for the $6 million he and the founders pocketed… and then some.  And given what Byttow and Sacchetti felt OK Tweeting publicly, I’d guess the discovery could turn up far, far worse.

It’s an all-too-real nightmare scenario.

- Even if you don’t feel it, for God’s sake have the decency to fake it. Not all founders are nice guys who genuinely care about bettering their fellow man. Just take a look at the Techtopus wage collusion suit for evidence that success and basic human decency don’t always go hand in hand. But most good CEOs are at least self-interested enough to fake it.

Remember on the eve of the Facebook movie when Mark Zuckerberg donated some $100 million to New Jersey schools via a visit to the Oprah couch? Plenty of cynics said it was a preemptive move to soften his image before the wildly fictionalized film depicting him as a villain debuted in theatres.

I knew Zuckerberg pretty well in the early Facebook days, and always thought that theory was unfair. But let’s assume cynics are right: At least he was smart enough to know he needed to do something and at least New Jersey schools got $100 million as a result.

The fact that investors were already spooked about these concerns with Secret, plus the fact that app store comments were already calling Secret a dream app for bullies and plus the fact that at least one person affected by suicide reached out to Secret about her concerns and was blown off…. I mean, come on, Byttow! Make a single move that at least telegraphs to the world-- true or not -- that you are a human being who cares that your app not be used to bully and harass people. Do it for your bank account and employees if no other reason. It’s simply not that hard. Even Travis Kalanick  handed out bagels to disgruntled drivers.

Investors have to take this seriously. This isn’t a situation like Rap Genius where a rogue co-founder wrote offensive things and was arrogant enough to get the company banned from Google, putting its future in peril. (Although we argued then investors probably should have taken action.)

This isn’t Fab-- where the worst case scenario is people don’t get their lithograph of Dolly Parton on time.

This is an app whose sole reason to exist is to allow people to anonymously post unsubstantied information about other people with no fear of retribution and almost no protections. Again, this fear of bullying -- or worse-- is the reason anyone passed on funding the hot app, and at least a few who did had very serious reservations.

If Byttow isn’t up to the job, it’ll potentially lead to a human tragedy. And if that’s still not enough to give investors pause, they should ask Sacchetti how Formspring turned out.

This story is already far worse than I thought it was four days ago. And I have a horrible feeling we’re just scratching the surface.


A final thought on what happens next. If I had to predict how this plays out I’d bet Byttow stays at the company but some sort of “adult supervision” is brought in, whether that person is called the CEO or not. (I hate the phrase “adult supervision” and usually only use it derisively to mock investors who hire in someone more “adult”, but in this case, it’s sadly fitting.) The cult of the founder is so strong right now in the Valley that most VCs would rather write an investment off rather than get blood on their hands by ousting a founder. In this case, though, that may not be the only blood they have to worry about.