The trial of Elizabeth Holmes, the former founder and CEO of Theranos is underway in San Jose, CA after a long delay. She is charged with defrauded investors and customers into thinking her “revolutionary” blood testing machine was going to change the world- It didn’t. The company had a $9 billion valuation and customers like Walgreens. She wore “Steve Jobs like turtlenecks” and claimed she was the next Silicon Valley visionary. But reporting by The Wall Street Journal revealed that its technology was not working as promised.
What prosecutors need to convince the jury is that she had the “intention to deceive” and she was not just “hyping” the products like many entrepreneurs have a tendency to do. The first one is fraud, the second one is showmanship because being wrong about your product is not a crime.
Did Holmes commit fraud or just a bit of puffery and hubris? Don’t all founders brag about what their new products can do? They attract investors by saying they have the “new new” thing and many times don’t deliver.
Entrepreneurs have the mantra of “fake it until you make it”. They stretch the truth. Steve Jobs did it with the 2007 demo of the new iPhone.
But manipulating a product in a demo is different than saying your product does something, and it doesn’t and then secretly sending blood samples for outside lab tests to perform the service that was suppose to be done by your product.
One of the important lessons is we all need to know when to quit. You have to be able to admit defeat if your new product after alot of development and effort does not work. As Will Rogers said- “If you find yourself in a hole, the first thing to do is stop digging”. I shut my first company down when it was clear it was not going to work no matter how hard I tried.
Elizabeth Holmes defense? She claims her former boyfriend and Theranos President, Sunny Balwani made her do it as a result of his control and abuse. It’s an interesting defense since perhaps Holmes isn’t claiming that Theranos didn’t practice fraud, just that it was not her fault.
What do you think?
I think she believed her product worked in the beginning. I do believe the fraud was perpetrated when she then secretly started sending blood samples for outside lab tests to perform the service that was suppose to be done by their product. I recognize that she believes she was “forced” but that’s kind of beside the point in the larger sense.
Great point- sending the work out to a contractor saying it was from her machine is fraud