founder Elizabeth Holmes went on trial this week for wire fraud and conspiracy.
Robert Leach, assistant US attorney, set out the case against Holmes, accusing her of papering over the gaping holes in Theranos’ tech with PR fluff and exaggerated revenue projections.
She’s also accused of knowingly promoting the company’s blood tech as revolutionary, when it did nothing standard blood-testing tech couldn’t do.
The defence’s strategy is pretty twofold: blame Holmes’s business partner and ex, Ramesh Balwani, for Theranos’s downfall, and argue naivety-induced failure isn’t a crime.
This approach was captured by Holmes’ lawyer:
- “The villain the government just presented is actually a living, breathing human who did her very best each and every day.”
What makes this trial interesting - other than the schadenfreude I feel at Elizabeth Holmes’ Icarus Syndrome - is its relevance to the startup landscape today.
Theranos represented an exhilarating idea, a charming-if-not-odd founder, and a charismatic team. What makes it different to any other startup VC’s are chasing after today?
Over-promising and hype is baked into startup culture, perhaps unsurprisingly given the influx of investment in early stage companies with grandiose valuations lately. This influx, and the excitement that comes with wanting to get in on investment rounds as early as possible, makes it incredibly easy for basic gaps in science, engineering technology to slip through the gaps.
Is this the fault of the founder, who exaggerated his or her ability, or of the investor, who let their excitement get in the way of doing enough due diligence? I’m conflicted.
The line between fraud and ‘faking it till you make it’ is so thin. This case will be pivotal in helping draw it.