Buying back your own product isn't hustling, it's bad business.
There’s no confusion over what to make of the news coming out of mayonnaise startup Hampton Creek this week. It’s really, really bad. Bloomberg reports the company dispatched undercover teams of contractors to buy up its product in stores to create the impression of booming sales and strong demand.
Even in the era of Zenefits and Theranos, this is shocking behavior. If true (and Bloomberg presents ample evidence that it is), Hampton Creek deceived investors and its retail partners. (Hampton Creek CEO Josh Tetrick has responded that the buybacks were part of quality assurance testing, and also to”build momentum.”)
How does this keep happening? Well, the startup world has a way of promoting creation myths and glory stories of its most successful founders doing similar things. We hear about the times that Successful Founder X that conned her way into conference or Founder Y bent rules he didn’t fully understand to get his product to market. For inexperienced leaders, the line between innocent “hustling” and possibly fraudulent behavior can be hard to grasp.
The more frequently things like this happen, the more I imagine investors must be questioning that whole “founder first” ethos they’ve been peddling for the last decade. Maybe not all founders can grow into impressive, responsible leaders like Facebook CEO Mark Zuckerberg did. Maybe not all of them deserve to be put on a pedestal and protected with board control. I know this is blasphemy in the Valley, but maybe there’s something to be said for bringing in the adult supervision. Hampton Creek’s buybacks are an especially egregious example of a startup founder mistaking “growth hacking” and “hustling” for unethical, and possibly illegal, activity.
And while I’m out on this limb, maybe this is a sign that CPG companies shouldn’t be funded with the same growth expectations as tech startups.