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Famous Poachings

“You know you have made it when the biggest players on Earth steal your executives” – GM Boss

Scott is a technologist and start-up guy in California.

Bill Gates, personally poached a CEO Scott had hired in order to CEO Gates’ new spin-off company. Scott said: “Mad? Heck No! I took that one as a compliment and gave him my blessing”.

Microsoft, the company, took Scott’s lead technical writer later on, but they also bought some of his patents, so he did not complain too much on that loss either.

Match.com founder/VC Gary Kreman took Scott’s CFO in order to launch the largest specialty content site on Earth.

Scott is no stranger to the Poach Culture.

The Class-action lawsuit, now known as the “Silicon Valley No Poaching Case”, nailed some of the largest tech companies in the world for rigging and poaching. The case even uncovered the emails of the head of Google coordinating poach plans. Since then, the repercussions of poaching have increased.

While imitation is the sincerest form of flattery, it is also the biggest loss of income for technologists.

The biggest danger with the Silicon Valley “poaching culture” is intellectual property theft. Technologists must beware of this constant risk and follow Steve Jobs’ concept of keeping all executives and hot shots on a need-to-know basis relative to key ideas. With Steve Jobs and others in Silicon Valley, this sometimes includes disinformation leaks to steer potential moles into other directions.

Probably the most extreme tactic (and one not recommended) was reported in ValleyWag Magazine: one night Elon Musk stayed up all night to write a different email to each employee. VallyWag claims that he added a different secret word to each email as a trap to try and catch a spy he suspected was an employee. He thought that when he found a leaked email in a Wall Street Journal article, the secret word would tell him who leaked it. We don’t know if he caught his suspected spy/mole but his employees caught HIM spying on them and ratted him out to ValleyWag. Sometimes the best laid plans can backfire.

In Silicon Valley, hundreds of “special operators” sell their services as industrial spies and short term intelligence gathering moles. They are placed in companies to see what they are up to. Big technology is sometimes a dirty business.

Technology

This Won’t Protect Your Startup


 

Last Christmas Eve, a man broke into Adara Networks’ San Jose headquarters, using copies of both physical and electronic keys. He seemed to know exactly what he was looking for. The thief left rows of desks untouched as he cruised toward the lab holding the source code for Adara’s proprietary data-center networking software. Fortunately for Adara, he triggered an alarm on the lab door and fled.

“Snatch and grab” crimes, in which crooks enter an office and carts off a few loose laptops, happen occasionally in Silicon Valley. Chief Executive Officer Eric Johnson sensed that his case was more serious, though. Adara’s next-generation networking technology could be attractive to nations hoping to capture more of the global telecommunications market. So Johnson brought in contractors to sweep the offices for bugs, in case a foreign government was listening. Adara executives sent an e-mail to staff that detailed the break-in and urged vigilance: Everyone at the company was ordered to be on lockdown, say several current and former employees who wouldn’t speak on the record for fear of upsetting the CEO. Through intermediaries, Johnson declined to comment.

Silicon Valley has a long history of thievery and espionage. A year before the Adara break-in, a burglar cracked open the door at networking-software company Nicira, an Adara rival, in a matter of seconds. That thief went straight to a top engineer’s desk and stole a computer carrying the source code for some of the most promising software in Silicon Valley. (Nicira was later acquired by software maker VMware (VMW) for $1.2 billion.) Given the target company and the skill of the crime, federal investigators suspected that Russia or China was behind the attack.

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In decades past, KGB spies lurked at bars such as Walker’s Wagon Wheel in Mountain View, Calif., where semiconductor engineers hung out and talked shop. From 1994 to 1998, the FBI maintained a team codenamed Valley Bear, whose mission was to protect computing innovations deemed critical to America’s future, according to Terry Turchie, a former FBI counterintelligence agent. During that time, he says, Russia, China, India, Israel, and others had spies working in the Valley. The 12 counterintelligence specialists who now staff the FBI’s Palo Alto office mostly focus on China, says a person familiar with its operations who wasn’t authorized to discuss them.

The other big change since the days of Valley Bear, says FBI Supervisory Special Agent Kevin Phelan, who heads the Palo Alto unit, is that foreign spies are focusing as much on small startups as on established computing companies. They’ve even set up venture capital firms to scout prospects. Once they identify intellectual property worth stealing, the actual operation is often easy, given that the typical startup faces budget limitations and prioritizes Nerf guns, food deliveries, and all-hours access to the office over robust security.

To make it harder for the thieves, some companies are paying for “penetration testing,” hiring security consultants to probe their defenses. Tests include walking through company premises without a visitor’s badge, leaving malware-laden USB sticks in the parking lot for unsuspecting employees to pop into their computers, even delivering a giant fake FedEx box that contains a person equipped with breathing apparatus and a periscope. (That last one is risky; in one case, the box got locked up in the target’s overheated mailroom.) “We’ve had 12-person companies, right on up to the largest out there, ask for this type of work,” says Steve Stasiukonis, an executive at Secure Network Technologies, a consultancy. “It’s usually the companies with the really good intellectual property that care the most.”

Story: Balancing Security and Liberty in the Age of Big Data

After the Adara break-in, the building’s cleaning crew was fired and replaced, while the security detail was doubled and asked to carry guns, say the Adara staffers. CEO Johnson hired private investigators to pore over video surveillance footage and talk to neighbors. At a loading dock across the street, workers had told the driver of a suspicious car to move along that night, after taking a photo of its license plate, says Lieutenant Michael Sterner of the Rapid Enforcement Allied Computer Team, a state task force that investigates tech-related crimes. Sterner says the license plate helped tie his suspect to the crime.

Police have charged Andrew Madrid, Silicon Valley’s version of a cat burglar, in connection with the Adara break-in. Madrid, a former IT consultant, served two years in prison starting in 2009 for a string of high-tech burglaries in which he hacked corporate computers and stole personal data such as credit card numbers. He proved adept at defeating the security of the Valley’s small corporate office complexes, says Sterner. From August 2012 to April 2013, Madrid broke into more than three dozen businesses throughout the Valley, including Adara, state prosecutors allege. “Everyone needs a hobby. He’s found one he enjoys,” says Tom Flattery, deputy district attorney for the County of Santa Clara.

Madrid has been charged with 45 new felony counts, including 31 for commercial burglaries. Like China’s spies, Madrid focused on small proprietors who hadn’t invested much in protecting their stuff, says Sterner. Police estimate he stole $400,000 worth of goods and spent thousands more using stolen credit cards during his last spree. Madrid is being held on $1 million bail while awaiting a pretrial hearing later this month; his lawyer declined to comment. It’s not espionage, but he faces more than 29 years in prison. The FBI’s Phelan continues to warn startups that security should be their first priority.

The bottom line: Weak security can make startups a tempting target for simple burglary as well as foreign espionage.

Vance is a technology writer for Bloomberg Businessweek in Palo Alto, Calif.

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