Did Elizabeth Holmes Lie To Investors, Or Did Theranos' Scientists Lie To Elizabeth Holmes?
It’s unlikely that there was much actual lying involved at Theranos, but there was a great deal of deception.
Entrepreneurs always paint the rosiest possible picture for their investors: the technology is nearly ready, the markets are huge, the demand for the technology is so strong that a tidal wave of profit will soon wash over the company. Experienced investors expect this kind of hype and know to discount it. Their mistake, in the case of Theranos, was that they didn’t discount it enough. Theranos had (and may still have) a decent chance to become a niche player in a large but low-margin industry, and could eventually be worth a few hundred million dollars. But it was never going to justify a $9B valuation.
Entrepreneurs always paint the rosiest possible picture for their investors: the technology is nearly ready, the markets are huge, the demand for the technology is so strong that a tidal wave of profit will soon wash over the company. Experienced investors expect this kind of hype and know to discount it. Their mistake, in the case of Theranos, was that they didn’t discount it enough. Theranos had (and may still have) a decent chance to become a niche player in a large but low-margin industry, and could eventually be worth a few hundred million dollars. But it was never going to justify a $9B valuation.