Guilty or not, the Elizabeth Holmes verdict won’t change Silicon Valley

A guilty verdict won’t chasten investors, and a not-guilty verdict won’t leave founders feeling free to lie. The tech industry has already learned whatever lessons it’s willing to take.

Elizabeth Holmes

Elizabeth Holmes faces up to 20 years in prison if she’s found guilty of fraud.

Photo: Justin Sullivan/Getty Images

Elizabeth Holmes has long been convicted in the court of public opinion. But after four long months, a jury of her peers will decide whether the Theranos founder is criminally guilty of defrauding investors and patients.

For Holmes, the verdict will have obvious personal consequences, including the threat of up to 20 years of prison. But for the rest of tech, experts outside the Silicon Valley bubble say it’s unlikely there will be some dramatic revelation or change in behavior, regardless of the outcome.

A guilty verdict won’t scare entrepreneurs off of exaggerating the numbers to get funding, nor will a not-guilty verdict embolden a generation of founders to stretch the truth. Instead, many of the lessons of Theranos are already learned, and in some cases, already being forgotten during a time when there’s plenty of money sloshing around at sky-high valuations for companies that have shown very little substance behind the vision they’re selling.

“I think we would all like to believe that there will be vicarious learning, that it would reduce the amount of pushing the envelope in terms of ethical behavior and integrity,” UC Berkeley professor Jennifer Chatman said of the potential verdict. “Unfortunately, that's not what I think is going to happen. And I think so because Elizabeth Holmes is not prototypical as an entrepreneur.”

Holmes rose to such prominence in part because of how atypical she was in the tech industry as a solo female founder running a health sciences company as a college dropout. Her charisma and charm helped her build Theranos and raise nearly a billion dollars, attracting a board of political heavyweights in the process.

But that je ne sais quoi that made Holmes and Theranos what they were is also what will keep startup founders and investors from taking the verdict as any kind of wake-up call, said Chatman, who researches organizational culture and narcissistic CEOs.

The fact that Holmes was so atypical as an entrepreneur is compounded by a social psychological bias called fundamental attribution error. People are more likely to look at Holmes and view her bad behavior as inherent to her personality or a character trait, while they’re less likely to hold themselves accountable in that moment because they have full context of their actions, Chatman explained. A classic example is a manager calling an employee lazy who shows up to a meeting late, but then making apologies when they are the ones delayed, knowing the context of why they were held up.

Regardless of whether Holmes is found guilty or not, people are likely to dismiss it and easily distance themselves from it by saying “That’s not me” or “That would never happen to me,” Chatman said.

“I want to think that people will get a message from this, but I have a feeling it's going to have little-to-no effect,” she said. “It's too easy for people to discount her.”

One group that has at least learned a little are investors, but it won’t be because of a fresh verdict. Investors learned their lessons years ago when the first Wall Street Journal story broke, said Wharton management professor Jacqueline “Jax” Kirtley. “Where the biggest impact of this story is going to play out is at the investor level, and I don't know that the investors ultimately are going to care as much about the verdict,” Kirtley said.

After the Theranos news first broke in 2015, all of those unique outliers for Holmes became signals for venture capitalists to re-evaluate. Investors now point to the lack of Silicon Valley VCs in her cap table as a major warning sign: Many tech leaders hailed her as the next Steve Jobs, but even Jobs raised money from Sequoia and Venrock. A board filled with former generals and politicians rather than scientists would now be seen as a red flag, not a calling card. Most unfairly, the path has become even harder for female founders, particularly in health care, as many say they still feel they face more scrutiny in wake of Holmes.

Given the revelations in court about Holmes’ and Sunny Balwani’s relationship, and her claims of abuse (denied by Balwani), Kirtley is concerned that investors could pay more attention to mixed-gender founding teams after the verdict. “I do worry that that could become something that investors look at — mixed-gender teams with a female lead,” Kirtley said. “Because this is one example that they're going to look at that is suddenly top of mind that they need to pay attention to, or they think they need to pay attention to, and that’s what worries me a little bit.” The fact that Holmes hid their relationship from investors may particularly trouble potential backers.

What Kirtley is less worried about is whether entrepreneurs will feel like they can get away with lying if Holmes is found not guilty. Funding the next Theranos should be harder because investors have learned some lessons and know more about what to look out for.

“The entrepreneurs don’t get to say ‘Oh she’s not guilty, I can do whatever I want,’” she said. “I don’t know that anyone gets to be emboldened by this because people who have more power have learned a lot of lessons. Those lessons aren’t going to change because of the verdict.”

Columbia Business School professor Len Sherman isn’t as optimistic.

He admits he feels like Scrooge at Christmas, but he argues that there are more fundamental issues at play that weren’t specific to Theranos, and whatever lessons investors learned from Theranos have already been forgotten in another period of exuberance.

“Theranos checks every box of what I believe are some wretched excesses in the Silicon Valley ecosystem,” he said.

Theranos had one of those charismatic CEOs that people got swept up in despite their character, Sherman said, pointing to examples like Jobs and Travis Kalanick.

Paired with the ability to attract a lot of cash and investors who are skimping on diligence, such characters could be running away with companies, he said, in a time he calls the “blitzscale bubble.”

“A big point at this trial was ‘Where were those investors?’ and ‘Why didn’t they do more diligence?’ but I would say that there’s even less due diligence being done in 2021 than in the period of 2012 to 2015 that they were talking about in this trial,” Sherman said.

Add in a founder-friendly term sheet that allows the charismatic CEO to retain power, and there’s no ability for the board to rein in that behavior, he added. (Holmes never sold a share of Theranos stock, a move the prosecution said was so she could retain voting control.)

While Sherman wishes a Theranos verdict could prompt Silicon Valley to be more introspective, he’s doubtful a verdict in either direction will change the entrepreneurial ecosystem.

“I see this trial as being not only not unique, it's just this is the way business is being done, and we're gonna see it again,” Sherman said.

The verdict will establish a narrow fact of criminal liability. What it won’t settle is whether Holmes is an object lesson or outlier. Holmes’ impact on the broader culture is indelible, and a part of the narrative others place on the tech industry. But it hasn’t bent the story Silicon Valley tells about itself.


How 'Dan from HR' became TikTok’s favorite career coach

You can get a lot of advice about corporate America on TikTok. ‘Dan from HR’ wants to make sure you’re getting the right instruction.

'Dan from HR' has posted hundreds of videos on his TikTok account about everything from cover letters to compensation.

Image: Dan Space

Daniel Space downloaded TikTok for the same reason most of us did. He was bored.

At the beginning of the COVID-19 pandemic, Space wanted to connect with his younger cousin, who uses TikTok, so he thought he’d get on the platform and try it out (although he refused to do any of the dances). Eventually, the algorithm figured out that Space is a longtime HR professional and fed him a post with resume tips — the only issue was that the advice was “really horrible,” he said.

Keep Reading Show less
Sarah Roach

Sarah Roach is a reporter and producer at Protocol (@sarahroach_) where she contributes to Source Code, Protocol's daily newsletter. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Sponsored Content

A CCO’s viewpoint on top enterprise priorities in 2022

The 2022 non-predictions guide to what your enterprise is working on starting this week

As Honeywell’s global chief commercial officer, I am privileged to have the vantage point of seeing the demands, challenges and dynamics that customers across the many sectors we cater to are experiencing and sharing.

This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

Keep Reading Show less
Jeff Kimbell
Jeff Kimbell is Senior Vice President and Chief Commercial Officer at Honeywell. In this role, he has broad responsibilities to drive organic growth by enhancing global sales and marketing capabilities. Jeff has nearly three decades of leadership experience. Prior to joining Honeywell in 2019, Jeff served as a Partner in the Transformation Practice at McKinsey & Company, where he worked with companies facing operational and financial challenges and undergoing “good to great” transformations. Before that, he was an Operating Partner at Silver Lake Partners, a global leader in technology and held a similar position at Cerberus Capital LP. Jeff started his career as a Manufacturing Team Manager and Engineering Project Manager at Procter & Gamble before becoming a strategy consultant at Bain & Company and holding executive roles at Dell EMC and Transamerica Corporation. Jeff earned a B.S. in electrical engineering at Kansas State University and an M.B.A. at Dartmouth College.

1Password's CEO is ready for a password-free future

Fresh off a $620 million raise, 1Password CEO Jeff Shiner talks about the future of passwords.

1Password is a password manager, but it has plans to be even more.

Business is booming for 1Password. The company just announced it has raised $620 million, at a valuation of $6.8 billion, from a roster of A-list celebrities and well-known venture capitalists.

But what does a password manager need with $620 million? Jeff Shiner, 1Password’s CEO, has some plans. He’s building the team fast — 1Password has tripled in size in the last two years, up to 500 employees, and plans to double again this year — while also expanding the vision of what a password manager can do. 1Password has long been a consumer-first product, but the biggest opportunity lies in bringing the company’s knowhow, its user experience, and its security chops into the business world. 1Password already has more than 100,000 business customers, and it plans to expand fast.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.


Biden wants to digitize the government. Can these techies deliver?

A December executive order requires federal agencies to overhaul clunky systems. Meet the team trying to make that happen.

The dramatic uptick in people relying on government services, combined with the move to remote work, rendered inconvenient government processes downright painful.

Photo: Joe Daniel Price/Getty Images

Early last year, top White House officials embarked on a fact-finding mission with technical leaders inside government agencies. They wanted to know the answer to a specific question: If there was anything federal agencies could do to improve the average American’s experience interacting with the government, what would it be?

The list, of course, was a long one.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.


5 takeaways from Microsoft's Activision Blizzard acquisition

Microsoft just bought one of the world’s largest third-party game publishers. What now?

The nearly $70 billion acquisition gives Microsoft access to some of the most valuable brands in gaming.

Image: Microsoft Gaming

Just one week after Take-Two took the crown for biggest-ever industry acquisition, Microsoft strolled in Tuesday morning and dropped arguably the most monumental gaming news bombshell in years with its purchase of Activision Blizzard. The deal, at nearly $70 billion in all cash, dwarfs Take-Two’s purchase of Zynga, and it stands to reshape gaming as we know it.

The deal raises a number of pressing questions about the future of Activision Blizzard’s workplace culture issues, exclusivity in the game industry and whether such massive consolidation may trigger a regulatory response. None of these may be easily answered anytime soon, as the deal could take up to 18 months to close. But the question marks hanging over Activision Blizzard will loom large in the industry for the foreseeable future as Microsoft navigates its new role as one of the three largest game makers on the planet.

Keep Reading Show less
Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at
Latest Stories