As many point fingers at Elizabeth Holmes as she awaits a prison sentence, she still has at least one loyal believer: The man who signed one of her first checks.
Tim Draper, a venture capitalist who wrote Holmes a $1 million check when she dropped out of Stanford at 19 to start Theranos, says he still believes in what Holmes was trying to do. In a response to a series of questions, Draper sent me the following statement via email:
“This verdict makes me concerned that the spirit of entrepreneurship in America is in jeopardy. What has made America and Silicon Valley great is its ability to recognize what is possible. Elizabeth Holmes is an entrepreneur. She envisions a better future. Entrepreneurs invent and keep iterating until their product works. I still believe in what she was trying to do, and if this scrutiny happened to every entrepreneur as they tried to make this world a better place, we would have no automobile, no smartphone, no antibiotics, and no automation, and our world would be less for it.
A willingness to bet on these entrepreneurs and their visions has made Silicon Valley the innovation engine of the world. This is the nature of investing in progress.”
Draper declined to comment on questions specifically regarding whether any evidence presented in trial had shifted any of his opinions or regarding his thoughts on the near-one million test results Theranos had to void or correct.
Draper, a former neighbor of the Holmes family in California, is one of the last to continue standing by Elizabeth Holmes, or at least publicly. Some investors even sued the company when things went south, including hedge fund Partner Fund Management and Robert Colman, a former investment banker who brought the class-action suit against Theranos that revealed the extent of losses faced by the Walton family, Betsy DeVos family, Rupert Murdoch, and others.
While most appear to agree that Holmes did engage in the fraud she was accused of, Draper gets to a specific point: Without trial and error, there is no innovation. Some venture capitalists are worried that society might throw the baby out with the bathwater.
“It’s important to remember that there are fraudsters in every industry,” says Mark Tluszcz, CEO at Mangrove Capital Partners. “And in many ways the venture capital community has already moved on from this. Indeed those that were brave enough to invest in the health sector in the aftermath of Theranos’ demise have been rewarded handsomely.”
The Theranos case was an extreme one, according to Bill Sahlman, a professor at Harvard Business School, who has studied entrepreneurship for 40 years and been involved in around 200 different companies. “In all of my experience, I’ve not seen anyone do what they did,” he says.
It’s important that investors are willing to take gambles and risks early on, as ideas can change and teams can morph, according to Sahlman. At the same time, there’s a line founders shouldn’t cross. Fraud, for instance, would cross that line.
“If someone came in tomorrow, including a 19-year-old Stanford student, and said: ‘Look, I’ve developed this way to detect colon cancer 15 years before it shows up… Here’s the protein marker. Here’s why I’ve been able to find it and other people haven’t.’ I’d back them in a heartbeat,” Sahlman says.
“Now, I wouldn’t perpetuate the funding if it turned out they weren’t able to do what they said they would,” he adds.
The other end of the spectrum is that Silicon Valley has a widespread, underlying disease that needs to be addressed—Theranos may only be an ugly growth of that.
“While venture capitalists have been quick to absolve their industry from any stink-by-association with l’affaire Holmes, the fact is Theranos checked every box of the symptoms that broadly characterize the current VC blitzscale bubble,” Len Sherman, a Columbia Business School professor, wrote to me in an email. “I for one do not believe Holmes is alone either in CEO behavior, venture board governance breakdowns or in inadequate investor due diligence.”
More food for thought on Elizabeth Holmes. Has she been held to a different standard than other startup founders, and might that have something to do with her being a woman? CEOs like Josh Tetrick of Hampton Creek or Travis Kalanick of Uber haven’t been charged, even though they have allegedly made deceptive claims to investors, too. That’s something on the mind of Katherine Putnam, a startup consultant and angel investor.
“I think the choice to bring charges against her had a lot to do with [her being] a female who defrauded a bunch of wealthy white men,” Putnam tells me. “That doesn’t make her more or less guilty though.”
The unfortunate reality of Theranos is that some women founders in healthtech are now being compared to Holmes, according to the New York Times—women founders already struggle to land funding from venture capitalists compared to male peers.
“Right now, who’s been prosecuted? One white woman. She represents all of them as far as people are concerned, and that’s unfortunate,” Putnam says.
WeWork turns WeRent? Let’s check back in on Adam Neumann, the former WeWork CEO, who has been quietly scooping up thousands of apartments in the past year, per the Wall Street Journal. He’s talking to friends and associates about “his ambitions to build a company that would shake up the rental-housing industry,” people familiar with the matter tell the Journal. Let’s see who lines up to invest.
See you tomorrow,
My colleague Jeremy Kahn contributed to the reporting of this essay.
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