Startups Are Trying to Bribe Tech Reporters With Equity

The dotcom bubble wasn't all piano-jumping and socket puppets. It also involved bribing tech journalists with startup equity. Fortune's Adam Lashinsky reports that it's happening again. In fact, he just got an offer himself, straight from the CEO of a startup he covered.

I was surprised but not completely flabbergasted by the phone call I received a few weeks ago. A representative of Arista Networks, a networking company I've written about recently, phoned to inform me that the company's chief executive wanted to offer me "friends and family" shares in Arista's upcoming initial public offering. The offer was explicit, down to the number of shares I'd have the opportunity to purchase at the IPO price. The caller specifically wanted me to understand this offer came directly from CEO Jayshree Ullal.

I declined. I briefly explained that it was impossible for me to accept the gift that was being offered. I also told the (clearly uncomfortable) Arista rep, with whom I've dealt for stories for Fortune, that it is a horrible idea to be making these shares available to me. That's because the company must be similarly propositioning other business partners who, like me, are neither a friend of the company nor family members of its employees.

It's not just corrupt equity exchanges, Lashinsky argues. For signs for the bubble, one need only look at the proliferation of tech media:

Silicon Valley is the hottest story going these days, and not just because The New Yorker, New York magazine, and the New York Times Magazine have discovered it. New digital publications devoted exclusively to covering technology have sprung up, including PandoDaily, The Information, Re/code, and Mashable. That, in turn, has provoked a frenzy of tech-coverage hiring at the likes of the Wall Street Journal and Bloomberg News. All of these reporters are now competing for what a wise editor at one of these publications calls "micro scoops," stories that are fresh, exclusive, newsy — and most likely irrelevant to all but a group of people you could count on your hands and feet.

I believe TechCrunch editor Alexia Tsotsis said it best in 2011:

The number of lines under a Techmeme story indicate the echo chamber has only gotten louder since then.

Startups Are Trying to Bribe Tech Reporters With Equity

But as we've said before, this booming, round-shaped thing we're in is different from the last. For instance, this time around Henry Blodget is the one pointing out the ethical pitfalls.

To contact the author of this post, please email nitasha@gawker.com.

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