We are all aware that fake it til you make it is one of the premier mantras of the tech industry. At this point, we should also keep in mind that you can fake it for just so long – Adam Neumann’s WeWork being a notable case in point – and careful what you fake: in the case of Theranos and the company’s founder and CEO Elizabeth Holmes, it led to 11 counts of fraud that are being litigated as we speak.

As the Mercury News reported, “Holmes is charged with allegedly bilking investors out of hundreds of millions of dollars, and defrauding patients with false claims that the company’s machines could conduct a full range of tests using just a few drops of blood.”

Here’s a cautionary tale for you: despite the fact that Holmes followed the Silicon Valley playbook – attend an Ivy League school (Stanford dropout); be mediagenic (the tech might have been flawed, but in every photo of Holmes that the media proffered, she looked perfect); get a LOT of press (aka due diligence for clueless investors). Bonus points: dress in a manner that recalls a tech icon – in this case, Steve Jobs (easy one: black turtlenecks. Done!).

Faking It 1.0 and Elizabeth Holmes

Yes, there’s more:

Financial projections: It’s always good to target a potentially huge market and to show big numbers, but in the case of Theranos, considering that Holmes couldn’t provide a working product despite all of the hype that she was generating, what would lead one to believe that she’d be any better at financial projections?

Traction and strategic partnerships. Both are very important and while it’s easy to put numbers in marketing material or an investor decks, re traction, as well as logos of strategic partners, are you in discussions with those partners, or are the commitment letters signed? “Ms. Holmes admitted that she had personally added the logos of drug companies to Theranos’s validation reports without their permission. Those reports documented studies of Theranos’s blood tests done in partnership with pharmaceutical companies and had helped convince investors and partners that the start-up was the real deal,” The Verge reported.” … Those documents have been a major part of the case against Holmes… Investors testified that they thought the documents had been generated by the pharma companies themselves.

“Holmes wasn’t trying to fool anyone, she said. “I wish I’d done it differently.””

Note to self: ‘oops’ is not a compelling defense.

At the end of the day and considering that this is Silicon Valley, wasn’t the actual product here Elizabeth Holmes herself?

There’s an old saying that goes that ‘the buck stops here,’ meaning that it’s the person in charge who assumes the responsibility, although at her trial, Holmes has spent most of her time blaming those around her or, in other words, passing the buck.  Beaucoup bucks were passed, collected from investors, and spent lavishly by Holmes, not necessarily on all things Theranos. Just another iteration of what Matt Stoller calls “Counterfeit Capitalism,” which he defines as ” the increasingly common tendency of capital markets to finance loss-making companies.” ‘Disruptors’ are seemingly going to change the vertical – no matter that they sustain incredible and sometimes insurmountable losses.

Said The Verge. “The high-profile trial stands as a cautionary tale for Silicon Valley start-ups, which often embrace the same kind of hustle, ambition and change-the-world idealism that propelled Ms. Holmes to the top echelons of the industry. Despite the tech industry’s reliance on hype, few executives have been indicted on charges of lying to investors, making Theranos an outlier.”

Or maybe a start.

 

As to which way this case will go, the jury’s literally still out. The trial continues next week. The fact that this case is even being tried is an indication that accountability may well be the new order of the day, so heads up, founders: that means that you are accountable, or to again borrow an old term: the buck stops with you. The tech sector is no longer in its infancy, and speaking of the buck, that deer-in-the-headlights posture just won’t cut it anymore. Onward and forward.