The Week in Business: A Rude Awakening for Start-Ups

What’s Up? (July 3-9)

A Verdict on Theranos and Silicon Valley Culture

For many tech start-ups, the era of seemingly endless optimism and immunity — from scrutiny, skepticism and, most of all, serious legal consequences — began to fray when an exposé on the blood-testing company Theranos was published in 2015 that raised questions about the effectiveness of the company’s technology. On Thursday, a jury found Ramesh Balwani, Theranos’s No. 2 executive, guilty of 12 counts of fraud, delivering another potent warning to Silicon Valley. Prosecutors’ evidence against Mr. Balwani showed that he had been deeply involved in almost every aspect of the company and had knowingly misled investors and customers. The verdict was more severe than that of Elizabeth Holmes, the Theranos founder and chief executive, who in January was convicted of four counts of fraud. It also arrives amid other troubling signs in the start-up world: Tech stock prices have plummeted this year, and investors have become more risk averse.

Job Growth Stays Strong

U.S. employers added 372,000 jobs in June, giving the labor market a bigger boost than expected — perhaps too big for the Federal Reserve, whose officials are looking to slow the economy. Wages also continued to climb quickly last month, and though the Fed’s chair, Jerome H. Powell, maintains that high wages are not the chief cause of rising prices, the numbers were another sign that the rate of inflation is still far from the central bank’s target of 2 percent. But as concerning as these data points may be for the Fed, they were mostly reassuring for President Biden, as Friday’s jobs report suggested that the United States was not in a recession and that the labor market, which he considers a feather in his cap, was still strong.

Article source: https://www.nytimes.com/2022/07/10/business/the-week-in-business-start-ups-theranos-fraud.html