Thursday, December 7

A conviction for “broken promises” puts Silicon Valley on alert

But, they add, the culture of deception is not going away any time soon in the tech sector, with investors looking for the big opportunity in a billion-dollar industry.

“Any startup founder who thinks their technology isn’t ready but had faith it would be at some point, they must be very nervous,” said Aron Solomon, principal legal analyst at Esquire Digital, a marketing firm for lawyers. .

“I bet a lot of company founders … watched the trial and thought they probably did some of the same things as Elizabeth Holmes,” he added.

Holmes, 37, was convicted of fraud for lying to investors about a blood-testing device she said would transform that industry and make them filthy rich.

The disgraced businesswoman claimed that she was developing a device that could diagnose various diseases with a few drops of blood, which would speed up the treatment of patients with cancer or HIV.

The tests should be much faster and cheaper than those currently used by laboratories.

The project received hundreds of millions of dollars from investors who saw it as the next Apple or Google.

Only it wasn’t.

The Holmes trial exposed the fine line between brashness and deception that some say characterizes Silicon Valley.

Startup founders have to sell visions of a big success to gain support, Solomon explained.

They often talk in the present tense about things they hope to have in the future if there were enough time and money.

“You’re always faking it, you’re trying to make your product better and better by constantly iterating on it,” Solomon added.

Holmes testified at his trial that a new generation of his blood-testing machine, nearing completion, would have performed as expected.

The problem with the model comes when, as in the case of Holmes, the promise of success is a pipe dream, according to analyst Patrick Moorhead.

“There is a difference between presenting a bold idea and lying to investors,” he said. “I think that’s what we saw here.”

Silicon Valley has a long history of making millionaires out of college dropouts who managed to come up with a good idea.

Titans of modern capitalism, from Bill Gates (Microsoft) to Jeff Bezos (Amazon) or Larry Page (Google) to, perhaps most famous of all, Steve Jobs (Apple), got rich off an idea.

But for every Jobs there are hundreds whose brilliant idea comes to nothing.

Risk investors looking to multiply their capital often hear dozens of proposals from these people.

With so much money at stake, stretching the truth is a way of life for many in the startup industry.

“Everything will probably stay the same” after the trial, anticipates Wesley Chan of Felicis Ventures.

“Everyone looks at Elizabeth Holmes as the exception, not the norm, but this behavior is actually common in our business,” he says.

Paddy Cosgrave, founder and president of Web Summit, agreed that there will always be people trying to push boundaries, but insisted that this is the exception.

With so many companies, some commit illegalities, “but I don’t think it’s a cultural issue. I don’t think the technology sector is rotten,” he says.

Kristin Carey of startup Extended Reality Group said startups may have to answer more questions from investors after the Holmes trial, but cautioned that that’s not necessarily a good thing.

Perhaps, he suggested, what they need is the freedom to push their idea forward.

“If any of the founders of today’s successful companies had this scrutiny, would they be here?” he questioned.