![]() ![]() However, in some cases, even astute Investors known for their independent minds hesitate to speak up-a possibility most recently highlighted in the WeWork disaster. four-star general), and William Perry (former Secretary of Defense).Ī well-functioning Board may have been able to uncover the truth and force some change, as the Benchmark handling of Uber showed. The list of high-rolling ex-government officials includes Henry Kissinger and George Shultz (former Secretaries of State), Jim Mattis (retired Marine Corps. It has been said that Theranos’s Board was better suited to attack a country than ask tough questions on the workings of a medical device. ![]() Some voices have aimed at a distinct failure in governance, starting with its Board of Directors. If not a culture of lies and a lack of experience, what is the cause of the Theranos fiasco? This is like claiming that Jayson Blair was an indictment of ‘the journalism ethos’ - Benedict Evans January 4, 2022 I can’t be bothered to go into this again, but no, *telling lies* is not the ‘Silicon Valley ethos’. He’s credited for Hotmail’s success and has led early investments in Tesla and SpaceX. A controversial figure, Draper’s track record indicates savviness. One of the early Investors in Theranos, and a valiant defender of Holmes until she was indicted (more on that later), is Tim Draper. They highlight investors including Rupert Murdoch and Larry Ellison, who are phenomenal entrepreneurs but not professional Investors, and wealthy families such as the Waltons (behind Walmart).Ī closer look at Crunchbase’s database shows that such finger-pointing is not totally honest. For these advocates, Theranos is the poster child of what goes wrong when new entrants in the asset class play VC. Silicon Valley Venture Capitalists, on the other hand, point to the fact that no reputable VC firm had invested in Theranos. Like the illustrious inventor whose name they borrowed for their device, Theranos executives probably found “ 10,000 ways that won’t work.” But none other. The Edison machine, touted for its almost magical capabilities-it was supposed to deliver as much as 200 test results with a single drop of blood-never worked. There is a surprisingly high level of confusion on the causes for the Theranos debacle.Īnti-Silicon Valley critics argue that fraud shows the limits of the “fake it till you make it” ethos that seems pervasive in Startupland. My conclusion is that the most salient issue underlying the Theranos case is not technical, such as governance or inexperience in due diligence-although they play a role-but has psychological roots: confirmation bias. In this post, I analyze the accounts of fraud detailed in the recent indictment and debate what Investors should, and could, have done about it. So, what’s new? I believe that everybody missed how she and her partner convinced Investors to put money in a company that promised wonders and delivered only ruin. More lines have been written about Elizabeth Holmes than, as one article argued, on Elvis. When it is all over, and the whole truth is known, Theranos will undoubtedly join the great frauds of business history, competing with the likes of Enron and Worldcom. ![]()
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