Elizabeth Holmes guilty verdict sends a warning to Silicon Valley. Will investors listen?
Stanford dropout at 19 with a baritone timbre and piercing stare, became Silicon Valley’s sweetheart when she convinced wealthy investors she could revolutionize blood testing and promised Americans that their medical lives would be changed forever.
After over $900 million of investments from wealthy donors, falsified blood tests, felony charges in 2018, and a guilty verdict four years later, the promises from the former Theranos CEO fell flat on their face in the public eye.
But in Silicon Valley, where most startups fail and the mantra of “fake it till you make it” is gospel, it remains to be seen whether tech investors and entrepreneurs will change their risky habits following Holmes’ conviction.
Holmes, 37, was convicted of four of 11 charges of fraud and conspiring to commit fraud against investors on Monday.
Theranos CEO convicted; how to cut wireless costs
Before her downfall, Holmes seemed to be the perfect bite for Silicon Valley investors looking for their next meal. She traced the footsteps of her ultra-successful predecessors like Mark Zuckerberg, Bill Gates, and Steve Jobs in dropping out of college at 19 years old to pursue her business, even to the point of adopting Jobs’ signature black turtleneck into her own style.
kept producing misleading results.
Holmes was indicted in 2018 and both she and her ex-business partner and former boyfriend Sunny Balwani were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
“Silicon Valley’s darling, the fastest self-made female billionaire at the time, is going to do many, many years in prison,” Rahmani said. “So it’s going to change how people operate.”
Silicon Valley makes a god of Big Tech. But religious faith is exactly what it needs.
“I think it will generate some more caution among entrepreneurs, but for the most part, human nature being what it is, there is still going to be a tendency to exaggerate, especially when you know you might not get funded if you don’t,” Greenfield said.
“And I don’t think it will change many investors’ attitudes,” he added. “People are still going to want to reach for the moon.”
Aron Solomon, Esquire Digital’s chief legal analyst, said the guilty charges might even be an incentive for investors to put more money in risky startups.
Holmes was found not guilty on charges of fraud and conspiring to commit fraud against paying customers. But her guilty charges for defrauding investors, coupled with possible wider clearance to prosecute fraud, could mean a legal safety net for investors.
“This is a win for those kinds of investors,” Solomon said. “Because now, they have additional leverage over startup founders. This is just going to intensify that culture of risk.”
Holmes’ sentencing, which could be months from now, and Balwani’s trial, which has yet to begin, will further determine the trial’s impact on startup culture. Holmes faces up to 20 years in prison for each of her convictions, but legal experts anticipate she will serve far less time.
Contributing: Michelle Shen, USA TODAY; The Associated Press