The Holmes verdict is a clear signal that the startup ecosystem must be built in good faith • TechCrunch | Jobs Recent


Let’s start the assumption that the agreement with the founder of the venture is based almost entirely on trust, especially at an early stage. Sure, due diligence matters in the investment process, but lying about your capabilities can undermine the founder-investor relationship — and in extreme cases, to the detriment of the larger global startup market.

In the aftermath of Elizabeth Holmes’ conviction on Friday for defrauding investors, I saw people argue that she was only guilty of messing with the wrong people – the rich. It follows that Holmes’ wealthy investors deserved to lose their money. I’d argue that what she did helped undermine the whole deal, which is why she’s going to jail.

As Amanda Silberling of TechCrunch wrote about the company on Friday:

Holmes founded Theranos in 2003 after dropping out of Stanford. It offered investors and partners a technology that would revolutionize the healthcare system – instead of drawing blood intravenously and waiting days for test results, its technology would puncture a small amount of blood and immediately run dozens of tests on it. She soon became president of a $10 billion company, only to find that the technology didn’t work.

Holmes built the company by convincing investors that she could create something she knew was a lie.

The tech startup ecosystem exists in part because investors with capital are willing to risk some of that money on a founder with an idea.

These investors can be fabulously wealthy individuals. They can be athletes like Stephen Curry or Serena Williams or entertainers like Kevin Hart or Ashton Kutcher. But they can also be larger entities, such as venture capital firms, mutual funds or pension funds investing on behalf of people who are not fabulously wealthy.



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