Why Silicon Valley wants to forget Elizabeth Holmes

At first, tech insiders defended the Theranos CEO. As fraud charges mounted, they grew silent — or remorseful. Established VC firms didn't invest in her company, but Theranos benefited from a culture they helped propel.

Theranos founder Elizabeth Holmes arrives at the Robert F. Peckham Federal Building with her defense team on August 31, 2021 in San Jose, California

Theranos founder Elizabeth Holmes (second from left) arrives at the Robert F. Peckham Federal Building in San Jose with her defense team on Aug. 31.

Photo: Ethan Swope/Getty Images

When Elizabeth Holmes stands trial this week, her defense could involve a few options. Her lawyers might argue she was abused by former Theranos COO and boyfriend Sunny Balwani and believed what he said was true, according to newly unsealed documents. (He denies it.)

Then there's another tack that's been hotly contested in the run-up to the trial: the "This is just how Silicon Valley works" defense.

Inevitably, it's not just Holmes on trial for the alleged fraud that vaporized a lab-testing company once worth nearly $10 billion. Silicon Valley's culture will be examined for its habit of enthusiastically embracing visionaries and supporting those who took a "fake it till you make it" approach that has let a lot of companies grow. Startups in Silicon Valley launch with MVPs — not most valuable players, but minimum viable products — and build from there. Selling moonshots and visions of massive societal change define Silicon Valley more than its porous and shifting borders in the Bay Area.

Holmes' lawyers fought to be allowed to talk about how exaggerating and promising is a normal part of startups. The job of the government's prosecutors will be to convince a jury that Holmes wasn't just hyping her startup's blood-testing capabilities, but doing so with an intent to deceive investors and the public. She faces 10 counts of fraud and two counts of conspiracy to commit fraud, and, if convicted, could face 20 years in prison.

Both Balwani and Holmes have pleaded not guilty, and Balwani's separate trial is expected to begin in early 2022. The opening arguments for Holmes' trial are expected to start Wednesday.

As the trial begins, Silicon Valley insiders are already pushing back at the idea that this case has anything to do with them. The notion that Theranos didn't precisely follow every page in the Silicon Valley playbook — for example, it didn't have experienced biotech investors on its board — is an important part of the story, argued former a16z partner Benedict Evans in a Twitter thread. Venture capitalists have been quick to point out that Theranos only received a check from Tim Draper, a family friend who happened to be co-founder of DFJ, but not another Sand Hill Road firm.

Defending Elizabeth Holmes

Still, there was a time when Holmes was respected and defended by many venture capitalists as a part of Silicon Valley, and Holmes seemingly basked in the attention it brought her. She had the quintessential startup story: A Stanford dropout, she operated in stealth for nearly a decade before going public with its blood-testing technology. She became known for wearing black turtlenecks, and consciously or not, drew comparisons to Steve Jobs for her vision and her wardrobe choices. A magnet for publicity, Holmes appeared on the covers of Forbes, Fortune and Inc., and was named one of Time's "100 Most Influential People" in a write-up by her board member and former secretary of state, Henry Kissinger.

Three days before The Wall Street Journal published its first article suggesting problems at Theranos, a story written by Laura Arrilaga-Andreessen, wife to Marc Andreessen, for T: The New York Times Style Magazine on five entrepreneurs, including Holmes, who could change the world, appeared online. (The story drew ethical concerns after it emerged that Arrilaga-Andreessen's connection to a16z and Airbnb CEO Brian Chesky hadn't been disclosed.) By the time the article landed on doorsteps, with Holmes as one of six "Greats" covers, former Wall Street Journal reporter John Carreyrou had published his first article on Theranos.

The Journal's editors placed an understated headline on an article that would unravel a $9 billion startup and lead to a founder facing fraud charges: "Hot Startup Theranos Has Struggled With Its Blood-Test Technology."

After it was published, several Silicon Valley VCs rushed to defend the startup. Marc Andreessen started blocking critics of the startup and compared her to Steve Jobs (his tweets have since been deleted).

Founder Collective's Micah Rosenbloom penned an essay "In defense of Theranos" where he argued that few were actually hurt by her misleading story and that "startups by definition should evangelize a vision."

"This a clear case of hype outpacing reality. Certainly if Theranos was a public company, they would need to be more careful with guidance, but they're not," he wrote just a few weeks after the first article.

Looking back, Rosenbloom told Protocol his assumption at the time was that the company had been using existing technology as a stop-gap until its own R&D caught up. Now, following the publication of books, podcasts and movies about Theranos, he said there were clear ethical breaches (potentially criminal ones, depending on the trial outcome) and he has "nothing to say in defense of the team at this stage."

Plenty of health care venture capitalists pointed out that they were not involved with the company, having done the diligence and suspecting things were fishy from the start.

GV founder Bill Maris, who has since left the firm, told Business Insider in 2015 that he was happy GV had passed on the deal and threw the blame to journalists who he felt had clearly never tried the test. "We looked at it a couple times, but there was so much hand-waving — like, Look over here! — that we couldn't figure it out," Maris said at the time. "So, we just had someone from our life-science investment team go into Walgreens and take the test. And it wasn't that difficult for anyone to determine that things may not be what they seem here."

Holmes, though, had connections most startup founders don't. She pitched her Silicon Valley image to high-powered government officials and family offices. She fit the bill well enough: Theranos had a Palo Alto headquarters, and Holmes had her Stanford ties and connections. She also had an ardent believer in Draper, who repeatedly defended Theranos even after the implosion. "I feel we have taken down another great icon," Draper told CNBC in 2018, after Holmes had settled with the SEC and was barred from serving as a director or officer at a company for 10 years.

The Silicon Valley image

Even if other Sand Hill Road names passed on the deal, it didn't stop Holmes from raising over hundreds of millions from investors like the family offices of Walmart heir Sam Walton, the family of former education secretary Betsy DeVos, and media mogul Rupert Murdoch.

She built a board of directors filled with high-powered D.C. types including two former senators, two former secretaries of state, a former general, a former admiral and a former CEO of Wells Fargo. Those high-powered figures are also on the 200-name-long potential witness list that could appear in the star-studded trial, which also includes famed litigator and Theranos attorney David Boies, former Defense Secretary James Mattis and whistleblowers Tyler Shultz and Erika Cheung.

Silicon Valley's investors remained unscathed from the deal. But Theranos did trade on the region's image and sold that vision of disruption to anyone who would listen: the press, East Coast elites, and corporate partners like Walgreens and Safeway.

Female founders say Holmes' actions also damaged their reputations: They face constant comparisons to the disgraced entrepreneur, they say.

"SV and VCs can't wash [its] hands of this fiasco," tweeted Altos Ventures' Ho Nam. "Just as VCs can't take credit for winners they shouldn't take the blame. But the SV environment and culture made this happen."

As much as Silicon Valley may want to point to Theranos as an extreme outlier, there are plenty of other venture-backed startups that have had their own troubles of hype outpacing reality (see WeWork or Tesla) or other cases where venture-backed founders are facing fraud charges (see the recent arrest of Headspin founder Manish Lachwani, accused of inflating ARR and lying to Tiger Global, or the charges uBiome founders Jessica Richman and Zachary Apte face for defrauding investors).

Holmes sold a vision of Silicon Valley to her investors in the way that startup founders are taught to do. One question that may be answered in the trial is exactly where the line between optimism and deceit falls.


Apple's new payments tech won't kill Square

It could be used in place of the Square dongle, but it's far short of a full-fledged payments service.

The Apple system would reportedly only handle contactless payments.

Photo: Nathan Dumlao/Unsplash

Apple is preparing a product to enable merchants to accept contactless payments via iPhones without additional hardware, according to Bloomberg.

While this may seem like a move to compete with Block and its Square merchant unit in point-of-sale payments, that’s unlikely. The Apple service is using technology from its acquisition of Mobeewave in 2020 that enables contactless payments using NFC technology.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at or

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.

Why does China's '996' overtime culture persist?

A Tencent worker’s open criticism shows why this work schedule is hard to change in Chinese tech.

Excessive overtime is one of the plights Chinese workers are grappling with across sectors.

Photo: VCG/VCG via Getty Images

Workers were skeptical when Chinese Big Tech called off its notorious and prevalent overtime policy: “996,” a 12-hour, six-day work schedule. They were right to be: A recent incident at gaming and social media giant Tencent proves that a deep-rooted overtime culture is hard to change, new policy or not.

Defiant Tencent worker Zhang Yifei, who openly challenged the company’s overtime culture, reignited wide discussion of the touchy topic this week. What triggered Zhang's criticism, according to his own account, was his team’s positive attitude toward overtime. His team, which falls under WeCom — a business communication and office collaboration tool similar to Slack — announced its in-house Breakthrough Awards. The judges’ comments to one winner highly praised them for logging “over 20 hours of intense work nonstop,” to help meet the deadline for launching a marketing page.

Keep Reading Show less
Shen Lu

Shen Lu covers China's tech industry.

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.


Spoiler alert: We’re already in the beta-metaverse

300 million people use metaverse-like platforms — Fortnite, Roblox and Minecraft — every month. That equals the total user base of the internet in 1999.

A lot of us are using platforms that can be considered metaverse prototypes.

Illustration: Christopher T. Fong/Protocol

What does it take to build the metaverse? What building blocks do we need, how can companies ensure that the metaverse is going to be inclusive, and how do we know that we have arrived in the 'verse?

This week, we convened a panel of experts for Protocol Entertainment’s first virtual live event, including Epic Games Unreal Engine VP and GM Marc Petit, Oasis Consortium co-founder and President Tiffany Xingyu Wang and Emerge co-founder and CEO Sly Lee.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.


Lyin’ AI: OpenAI launches new language model despite toxic tendencies

Research company OpenAI says this year’s language model is less toxic than GPT-3. But the new default, InstructGPT, still has tendencies to make discriminatory comments and generate false information.

The new default, called InstructGPT, still has tendencies to make discriminatory comments and generate false information.

Illustration: Pixabay; Protocol

OpenAI knows its text generators have had their fair share of problems. Now the research company has shifted to a new deep-learning model it says works better to produce “fewer toxic outputs” than GPT-3, its flawed but widely-used system.

Starting Thursday, a new model called InstructGPT will be the default technology served up through OpenAI’s API, which delivers foundational AI into all sorts of chatbots, automatic writing tools and other text-based applications. Consider the new system, which has been in beta testing for the past year, to be a work in progress toward an automatic text generator that OpenAI hopes is closer to what humans actually want.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories