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In era of ethical crisis, time for a venture capital Hippocratic oath?

Fake news, pizza apps take heat at MIT conference.

By Brian Eastwood  |  February 13, 2017

Kat Manalac

Y Combinator partner Kat Manalac at the Feb. 10 MIT Venture Capital and Innovation Conference

The world has enough apps for ordering pizza. That’s the opinion of Tiossan founder and CEO Magatte Wade, who would prefer to see more apps addressing the “billions [who] are suffering” in her native Senegal and other parts of the developing world.

“So much innovation is one more app, one more game,” said Wade, whose skin care product company puts 50 percent of its profit toward entrepreneurial education in Senegal. “I want to see more VC and more technology focus on solving human issues,” such as the bureaucratic hurdles that make it nearly impossible for entrepreneurs to register a new business and set up operations in sub-Saharan Africa.

Wade spoke Feb. 10 at the MIT Venture Capital and Innovation Conference, which focused on ways venture capital firms and startups can better bring services to those in need amid global economic uncertainty and a rising tide of populism in the Western world.

“Keep the focus on the hope”
Macroeconomic instability over the last decade and a half has exposed inequalities in opportunity and income in the developed world, said Roberto Rigobon, professor of applied economics at MIT Sloan. This growing socioeconomic divide, and perceptions of what caused it, fueled the populist movements led by Nigel Farage, Marine Le Pen, and Donald Trump — and that in turn has fueled protests and resistance movements, especially in the United States.

The political climate presents those who are either funding or running startups with a chance to make a difference, said Jennifer Hanley, managing director of startup advisory firm Tusk Ventures and the former press secretary for Sen. Hillary Clinton. Civil liberties have garnered a lot of attention, she said, but the Trump administration’s policy announcements regarding education, the environment, trade, immigration, and science, among other areas, are likely to provide “limitless opportunities to focus on.”

Hanley cautioned entrepreneurs and investors against trying to take on everything at once and instead suggested focusing on a single issue. She also encouraged attendees to tap into growing public activism and engagement.

“For all the turmoil, keep the focus on the hope that exists in the little whirlwind we are in,” she said.

A Hippocratic oath for venture capital
Firms striving to make a difference must also make money, but they must resist the urge to put growth and profits above all else, said Kat Manalac, director of outreach for early-stage startup incubator Y Combinator. She pointed to investments in controversial, but profitable “fake news” websites as one example of an ethical lapse. Other examples could include Theranos and Zenefits, startups that fell from grace after reportedly engaging in questionable practices to meet lofty promises.

To encourage integrity, Manalac proposed a sort of Hippocratic oath to guide venture capital firms, as well as founders, in their decision-making. Throughout the process, both sides must emphasize a respect for autonomy, beneficence, non-maleficence, and justice, she said.

Taken together, Manalac said, these four principles can address issues such as rapid growth, user privacy, the lack of female founders, and the disruptive impact of new technology. Artificial intelligence and self-driving cars are poised to transform the transportation industry — but what will happen to everyone who drives trucks, buses, or cabs for a living today and is threatened by the socioeconomic divide of tomorrow?

“Maybe it’s our responsibility to make projections and guide others to the problems that most other people aren’t even considering yet,” Manalac said. This feedback, she added, will help the industries being disrupted figure out what’s next before the consequences of disruption grow larger and more negative.

In addressing these problems, Wade, of Tiossan, told conference attendees to “start with a new canvas” instead of trying to make incremental improvements to services that already exist — like pizza apps.

“Too often we try to fix solutions within a box of accepted facts,” she said.