The fraud trial of Elizabeth Holmes, who founded the failed blood testing start-up Theranos, has plenty of implications for Silicon Valley.
Her rise and fall has been held up as the ultimate test of Silicon Valley’s fake-it-until-you-make-it culture. At some hot start-ups, it is not uncommon for founders to inflate their revenue or hype their company’s products to raise money and secure deals, even if their products may not quite do what was advertised, said Margaret O’Mara, a University of Washington professor who has written a book on the history of Silicon Valley.
Ms. Holmes also wrapped herself in the mythology of the tech industry. The Stanford University dropout styled herself after the late Apple co-founder Steve Jobs, headquartered her company in Palo Alto, Calif., and benefited from a laudatory media.
The outcome of Ms. Holmes’s trial may be a referendum on that behavior, lawyers and others said. If Ms. Holmes is found guilty, start-up entrepreneurs may be more careful with the claims they make to investors and partners, knowing that they could be charged with fraud, said Neama Rahmani, president of the West Coast Trial Lawyers and a former federal prosecutor.
But a “a non-guilty verdict will vindicate a Silicon Valley culture of celebrating aggressive innovation at the expense of the complete and whole truth,” said Jeffrey M. Cohen, an associate professor at Boston College Law School.
Still, some in Silicon Valley have pushed back against the idea that Ms. Holmes and Theranos represented the typical start-up. That’s because Ms. Holmes raised the bulk of her money from investment firms that represented wealthy families, and not traditional venture capital firms that generally invest in fast-growing tech start-ups. Ms. Holmes was also building medical devices, not software as with many other start-ups.
For that reason, Ms. O’Mara said, some Silicon Valley insiders might dismiss the importance of the outcome.