Theranos’ downfall and Holmes’ deception lesson for our start-ups
It’s a culture that can never be allowed to infect Australian start-ups.
Ms Holmes is facing decades in prison after she was convicted on Tuesday morning Australian time of three of nine fraud counts and one of two conspiracy counts for a years-long scheme while she was running Theranos, a start-up which claimed to revolutionise blood testing.
Theranos’ promise was to allow patients to test for a range of health conditions with a few drops of blood from a finger prick, and Ms Holmes effectively scammed thousands of people – employees, customers and investors – into thinking its technology was a reality.
The company raised nearly $US1bn on this promise, from famous venture capitalists including Tim Draper, Larry Ellison, and Donald Lucas. Investors were quick to buy into the dream but in reality, Theranos ran most of its tests on technology from other companies, and results using its own device were unreliable.
Investors did not ask the right questions of Theranos- if many at all - and the media too lapped up its founder’s lies.
Ms Holmes’ journey – and those of other rabidly ambitious Silicon Valley high-growth start-up founders – are a stark contrast to our local tech success stories, which have created billions in real value for investors and the Australian economy.
Take Atlassian, the Sydney-based software company which now has more than 6,000 employees, millions of users, and has made billionaires out of its co-founders Mike Cannon-Brookes and Scott Farquhar.
The company didn’t take any outside investment for nearly a decade, instead financing the company with $10,000 in credit card debt.
It also didn’t hire any salespeople for years, instead allowing its flagship product – Jira, a project and issue tracker – to effectively sell itself.
Theirs was a relatively slow journey to global success. It’s a similar story to that of design world-beater Canva, which began life as an online tool to create school yearbooks and is now one of the most successful tech companies in Australian history, with more than 60 million monthly active users across 190 countries.
Its co-founders Melanie Perkins, Cliff Obrecht and Cameron Adams have retained their humility at every turn. They’re each now billionaires and are giving back to the local start-up ecosystem through personal investments in young companies, and Ms Perkins and Mr Obrecht have both pledged to give away their fortunes to charitable causes.
Their attitude – one of sustainable growth, transparency and giving back to the community – is one shared by most Australian tech companies and is something they must all hold onto.
Our local start-ups aren’t perfect, of course. Australian entrepreneurs can sometimes fall victim to tall poppy syndrome, and our relatively small venture capital and start-up scenes at times can lack global vision and ambition.
But the greed and moral bankruptcy displayed by Elizabeth Holmes, who was once held up as a poster child of Silicon Valley success, is a powerful lesson in what our technology start-ups need to avoid in order to continue to thrive and change the world for the better.
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The four guilty verdicts for Theranos founder Elizabeth Holmes have capped a downfall for an entrepreneur who represented the worst of Silicon Valley, a culture at times defined by blatant grifting, dubious business models and ‘faking it until you make it’.