September 11, 2021
Photo: David Odisho/Bloomberg via Getty Images
Hello and welcome to Pipeline. Today is the 20th anniversary of 9/11 and I hope you take some time today to remember and honor those who lost their lives and the survivors of that terrible day in our nation's history.
This week: the metaverse's first victim, the interview any founder interested in comms should read, and why Silicon Valley is on trial in the Elizabeth Holmes case.
There's a thing I like to call "startup math" that's a hallmark of any young company's pitch. Building a better email? Clearly that's a trillion-dollar opportunity with a total addressable market of anyone who has sent email. Taking a sample size of fellow YC founders who haven't churned in six weeks means that the startup will absolutely hit 50% of the market in the next few months, right? Startups like to evangelize an outsized vision of how big their company will grow. And VCs won't take meetings with founders who don't take big swings.
Startup math and selling a vision is part of being a founder, but where is the line between pitching a version of the future you don't deliver on versus outright fraud? That's what's being debated in a courtroom in San Jose as the trial of Elizabeth Holmes kicks off. The verdict is going to come down to whether Holmes had a clear intent to deceive (and lie and cheat and steal, as the prosecution says), or if Holmes was a naive founder who thought her startup was going to make it but made too many mistakes to overcome (as her defense contends).
The prosecution's position: Government lawyers hammered home the idea that Holmes was "out of time and out of money" and would defraud investors and the public to steal their money and keep her company alive.
The defense's position: Holmes was a true believer in her company, a stereotypical Silicon Valley CEO who dedicated her life to her company. In fact, she never sold a single share of her stock. Instead, as a college dropout, she had surrounded herself with other people who had more experience. Her lawyers pointed the finger at the lab directors, Walgreens, Safeway, Sunny Balwani and even the advertising agency Theranos used as the ones who were accountable instead.
Silicon Valley is on trial, whether it likes it or not. Yes, Elizabeth Holmes did not take venture capital from traditional Sand Hill Road firms. The main exception is the check she got from Tim Draper, who will never live that deal down. But Theranos didn't go through YC or raise a Series A from a16z.
One big question I have is how the trial will affect founders in the future. We've already seen how Holmes' actions have made it harder for other female CEOs. I've also heard from comms people that there was a shift in how the tech press covered startups after Theranos and now there's a higher standard for proof of business success (particularly for health care startups). What the outcome will mean for startups and venture capital (if anything) is something I'm thinking a lot about, and I'm curious what's on your mind too as I embark on covering this trial, so shoot me a note: email@example.com. I'll be making the trek down to San Jose every so often, and will start including some more of my reporter's notebook tidbits into Pipeline to keep you up to date on the case.
On my mind:
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