“The Theranos story is an important lesson for Silicon Valley. Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.” (From 2018)
than just Theranos. In October the SEC fined Zenefits, an employee-benefits startup, for misleading investors about its compliance with insurance laws.
Historically, the startup world’s “fake it till you make it” culture wasn’t a much of a problem; venture investors encouraged startup founders to think big and a high percentage of them fail anyway. So what if someone stretches the truth a little in pursuit of world domination? The nature of technology requires a degree of magical thinking to function.
“That’s not ‘My cola tastes better than yours.’ That’s ‘Let me explain to you how the world’s going to be,’” says Chris Bulger, managing director at Bulger Partners, an investment bank that advises technology companies on acquisitions. “Is that person lying when they turn out to be wrong?”,” startups can raise large sums of capital from private investors and become sizable businesses without the scrutiny, onerous disclosures, and strict regulatory compliance of being a public company.
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