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Elizabeth Holmes’ verdict won’t change Silicon Valley

Elizabeth Holmes’ verdict won’t change Silicon Valley
Written by publishing team

There is no doubt that former Theranos CEO Elizabeth Holmes will appeal the four charges she was convicted of: conspiracy to defraud investors and electronic fraud. She still has the Silicon Valley mentality, after all: Reality can turn out your will. But what we Learned from the Theranos trial? next to nothing.

Holmes was found guilty on four of the 11 counts after about 50 hours of deliberation. These charges can be aggregated, roughly, into defrauding patients and defrauding investors. The jury found her not guilty of defrauding patients or of conspiring to defraud patients.

This is the result of the decisions that prosecutors make who wish to. Wins. Patients witnessed significantly less time than investors and spent more than an hour in total on the platform. The plaintiffs also did not clearly link the patients’ tests to Theranos with Holmes. In a way, this made sense: there were more intermediaries between Holmes and individual patients. Besides the individual physicians of the patients, there were also clinical laboratory staff, laboratory managers, etc. For the charges to remain fixed, the jurors had to believe that Holmes was sperm To defraud patients, not just give them bad results.

When it came to investors, plaintiffs had Holmes dead in rights. Unlike the patients, she was in the room. There were emails and recordings. Holmes’ connections were more clear, and what she knew was also clearer. The easiest part of this case to prove was about the money, and this is where the prosecution spent the bulk of its time. Did Holmes lie to investors? The jury believed so on three counts, which represent a total of about $142 million from primary healthcare PFM fund, Lakeshore Capital Management for the DeVos family, and Mosley Family Holdings for Daniel Mosley. On three other counts of investors, there was no judgment; The trial was declared invalid on these charges.

It was strange to see Silicon Valley’s reaction to the ruling: the claim that Holmes was not really Part of Silicon Valley at all, despite the trial in San Jose. Theranos investors included notable Silicon Valley investors: Larry Ellison’s Tako Ventures, Tim Draper’s Draper Jurvetson Fischer, and Don Lucas, known for his early investment in Oracle. ATA Ventures, a now-defunct fund that invests primarily in health programs, and Crosslink Capital’s Beta Bayview were among the investors. Two co-founders of Silicon Valley investment firms also joined: Dixon Doll of DCM and Reid Dennis of IVP.

There are cultural ties, too. Holmes appeared on the TechCrunch Disrupt in 2014. While Andreessen Horowitz did not invest, Marc Andreessen was audio fan For Holmes – until the next Steve Jobs called her. From extra-voting stocks to black collars, from Holmes’ claims of sleeping at work to employees sleeping in their cars, the connection was there.

But the delusional optimism represented by Holmes’ rise wasn’t confined to Silicon Valley — at least, not anymore. It is widely spread. Elon Musk’s success with Tesla sparked a frenzy of electric vehicle SPACs, which was followed by a wave of fraud allegations. There’s Nicola, whose founder Trevor Melton has been accused of fraud. The Securities and Exchange Commission (SEC) is inspecting Lordstown Motors for possible misleading investors about pre-orders. Canoo, another recent SPAC, is also under investigation. As well as Lucid Motors.

There has been much talk of “faking it until it’s fulfilled” as a founder dogma, particularly in Alex Gibney’s Theranos doc, inventor. You would think this would make investors more likely to do their own technical due diligence, rather than relying on someone else. But some venture capitalists said The Wall Street Journal Early this year they spend less Time spent on due diligence before investing – A hot market makes competition tough.

This rush isn’t just investment capital. Hedge funds and others have also moved into start-ups. One of the main sources of financing for Thearnos was the family offices of notables such as Rupert Murdoch, Betsy DeVos, and the Walton family, of Wal-Mart fame. in 2018, The Economist He speculated that the family offices controlled a capital of between 3 and 4 trillion dollars. This number is likely higher now.

These investors received information packages that included Holmes’ appearances in the press. Investors often testified about an article published in 2013 in The Wall Street Journal Opinion section describing Theranos technology as “faster, cheaper, and more accurate than traditional methods.” This was not true. Investors also referred to 2014 Forbes The article that said Theranos “does not buy any analyzers from third parties,” which was also not true.

After Theranos, the substance of Silicon Valley’s coverage changed, and it became more skeptical. Tech companies have sometimes objected to the increased scrutiny — well, everyone has a say — but in some ways, it makes sense. Investors are not exactly incentivized to expose wrongdoing, as this can dilute their investment. In addition, it is embarrassing.

Nothing about the outcome of this experiment will prevent Theranos Next from spoiling investors because no one gets punished when investors don’t engage in due diligence. The burden instead falls on the legal system—and thus the average taxpayer—to obtain a guilty verdict in court. And because it’s easier to prove than behavior that is likely to harm ordinary people, this is where prosecutors will focus.

Because if we’ve learned one thing, it’s this: Startup founders who overestimate the capacity of their companies are the ones who hold back, but only if they’re caught red-handed, as Holmes did. Fortunately for investors — and the hype cycle around startups — you don’t go to prison for being corny.


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