Hype culture will likely not come to an end soon, not in Silicon Valley despite the well-televised downfall of the so-called self-made and youngest female billionaire Elizabeth Holmes whose technology promises to change the medical diagnostics industry forever.
Found guilty of 4 out of counts after a 50 hours deliberation.
The entire 11 counts were grouped into defrauding or conspiracy to defraud patients and the same applies to investors as well.
On the patient side, the jury didn’t find her guilty stating that her technology produces unreliable results and that translates to shifting the blames back to the customers for not using their gumption.
Okay away from that, the group of counts is about her defrauding or conspiring to commit wire fraud all of which applies to investors. She was found guilty of four counts.
Maybe I’m being too sensitive but the picture being painted here is that the emphasis is all about the millions of dollars being poured into her business and not necessarily the impact of her horrendous test results and how detrimental they could be to the patient’s mental state if they receive bad news.
In fact, the prosecution didn’t hide the fact that the entire case was all about money as the majority of the time was spent on the topic.
During the hearing, for example, the ratio of patients’ testimony versus investors’ testimony is ultimately imbalanced with the latter superseding the former.
Although one can still understand some points as to why Investors didn’t directly tie the patients’ Theranos tests to Holmes which in a way made sense since there were multiple intermediaries between her and the individual patients.
Because if we’re to start counting, there are definitely individual doctors, clinical lab personnel, lab directors, and many other important individuals working on several blood specimens.
For the charges to stick, jurors had to believe Holmes had intended to defraud patients, not merely give them bad results.
But in contrast to investors, she had to be in the room with investors because that’s what she had to do in order to raise money for her startup.
There were also recordings and emails sent back and forth. The easiest part of the case was about money which was why the prosecution spent the majority of time on the topic.
She was found guilty on three counts of defrauding her investors which represented a total of about US$142 million from PFM Healthcare Master Fund, the DeVos family’s Lakeshore Capital Management, and Mosley Family Holdings.
On three more investor counts, there was no verdict; a mistrial has been declared on those counts.
Despite the fact that Theranos investors included high-profile individuals at the Silicon Valley such as Larry Ellison’s Tako Ventures, Tim Draper’s Draper Jurvetson Fischer, and Don Lucas, known for his early Oracle investment. ATA Ventures, a now-defunct fund that invested primarily in health software, and Crosslink Capital’s Beta Bayview were also among the investors, Silicon Valley’s reaction to the verdict claimed that Holmes wasn’t really part of Silicon Valley at all despite her trial in San Jose.
FYI, two founders of Silicon Valley investment firms also got in: Dixon Doll of DCM and Reid Dennis of IVP.
Okay, how about the fact that Holmes appeared at the TechCrunch Disrupt in 2014 or the fact that Andreessen Horowitz and Marc Andreessen were all vocal cheerleaders that called her the next Steve Jobs.
Well, that isn’t farfetched considering her usage of black turtlenecks and claims to sleep at works and being the future in medicine.
VCs told The Wall Street Journal early this year that they were spending less time on due diligence before investing.
The hype culture at the Silicon Valley didn’t only help Elizabeth Holmes get the much-needed support to rise to the top so fast, currently, we have celebrity CEOs such as Elon Musk, fraud allegations surrounded Nikola’s Trevor Milton even though indicted, Lordstown Motors is also being probed by the SEC for possibly misleading investors about preorders.
Both Canoo, another recent SPAC, and Lucid are under investigation.
Despite all these stories about CEOs faking it until they make it, one would assume that investors would do their own technical due diligence instead of relying on some else’s.
However, in a recent interview with Venture capitalists, The Wall Street Journal early this year that they were spending less time on due diligence before investing — the hot market makes it hard to compete.
Apart from venture capitalists, Hedge funds and others often rush into startups and Theranos is one of them especially when they’re pumped by the media.
One of the major sources of Thearnos’ funding was family offices for notables such as Rupert Murdoch, Betsy DeVos, and the Walton family, of Walmart fame. In 2018, The Economist speculated that family offices controlled $3 trillion to $4 trillion in capital. Likely, that number is higher now.
These investors receive information packets via press appearances – a good example of such would be the fact that investors testified about a 2013 article in The Wall Street Journal’s opinion section that touted Theranos’ tech as “faster, cheaper and more accurate than the conventional methods.”
Those claims were in fact false.
Investors further pointed to a 2014 Forbes article that said Theranos “does not buy any analyzers from third parties,” which wasn’t true, either.
It’s very uncommon for investors to expose wrongdoing because it can tank their investment so they’d better hype up the beast and cash out afterward.
After the downfall, Silicon Valley coverage has now changed to a somewhat skeptical overview a d tech companies are now subjected to increased scrutiny by government agencies.
Despite the outcome of the trial, that doesn’t mean the next Theranos won’t jump into existence and milk investors of their money.
One thing learned about the case of Theranos is the fact that startup founders often exaggerate the capacity of their companies and often go Scott-free even though few get caught red-handed like Elizabeth Holmes