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Data Sheet—Sunday, December 11, 2016

December 11, 2016, 9:18 PM UTC

“Is Magic Leap the next Theranos?” seems to be the question everyone’s been asking in tech circles since tech news site The Information published a report about Magic Leap on Thursday.

For those not familiar, Magic Leap is a secretive, Florida-based company working on a what it calls “mixed reality” technology. It has raised millions of dollars from the likes of Google, but so far it has only published a couple of video of what looks like sci-fi technology overlaying animations on the real world. But at least one of the videos was created using computer animations instead of Magic Leap’s actual technology, according to The Information. That fact, and others pointed out in the article, raise questions about whether the company overhyped its still-unfinished technology.

Theranos, meanwhile, is a Silicon Valley blood-testing company, and over a year ago, a series of reports from the Wall Street Journal called into question its technology and claims. This resulted in lawsuits, government investigations, a ban on its founder from running another lab for two years.

The temptation to compare the two is easy to see. Secret technology, massive amounts of funding, big visions, unproven technology—and public claims that may not match reality. There’s certainly something uncomfortable about this.

Still, there’s a major difference between the two, and it comes down to fraud. Theranos misled the public about the technology it was using on patients, and even when it did use its proprietary technology, the company reportedly overstated its accuracy to regulators. And a few months ago, it voided two years worth of test results.

Magic Leap, on the other hand, has yet to release a product. It’s definitely concerning that it produced a whiz-bang promotional video that failed to show its own technology. But it wasn’t for marketing a specific product (if so, customers would have easily figured out that the product didn’t work as advertised), and it didn’t endanger anyone’s health. Sure investors may be having second thoughts, but venture capitalists are in the business of putting money into risky technology that could be a huge success or never make it out of the lab.

But that still leaves us to grapple with Silicon Valley’s culture of hype. Where is the line between zealous marketing and deception?

The press along with entrepreneurs and their investors will likely always disagree on an answer—after all, they have different prioritizes. Personally, I’d argue that when things veer into potentially hurting people (their health, livelihood, and so on), it might be time to come clean.

Kia Kokalitcheva


This is the Startup Sunday edition of Data Sheet, Fortune’s daily tech newsletter, edited by reporter Kia Kokalitcheva. You may reach me via Twitter, email, or an entirely new platform that your startup developed. Feedback welcome.

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