Holmes and Neumann: The unicorns who didn't pass muster

Their short-lived successes tell us there is no limit to greed, there is a lot of money to go around and that we must be careful about our egos

Earlier this week, the founder of the now-defunct unicorn, Theranos, was found guilty on four of the eleven charges levelled against her. While the sentencing is yet to be pronounced, which some speculate would mean 20+ years of prison time, this seemed like the logical end of Elizabeth Holmes' dream run. At its peak, she owned 50 per cent of her company Theranos, valued at $9bn, before her con was discovered. As we revel at the revelation, we must also remember the titans who backed her ascent. People like Bill Clinton, Rupert Murdoch, Larry Ellison, Henry Kissinger and George Schultz, who invested in Theranos and promoted her at every stage possible. White men, who had had their day and were possibly looking to patronise an upcoming young woman and forgot to look at the details of her supposed invention. Hindsight is perpetually 20/20, and today you wouldn't find any of these gentlemen questioning or endorsing her credentials. As David Bowie said, fame puts you where things are hollow.

Elizabeth Holmes symbolises everything that's wrong with the startup world, with wild evaluations and investments that do not require any profits. Holmes promised a do-it-yourself kit, which would detect more than 1200 diseases in one drop of blood. This was revolutionary, and she had all the trappings of a successful Silicon Valley entrepreneur – she wore black, just like Steve Jobs, she spoke in a deep voice, she was a Stanford dropout, and had the backings of very influential men, from the worlds of business and government, who would vouch for her. Except, the invention wasn't there – she had set up a very elaborate ruse to attract investors and fool the inspectors from FDA. Holmes also had a battery of 800 employees and micromanaged every keystroke each of them typed. She was also in a relationship with her business partner, Ramesh "Sunny" Balwani, a red flag, especially when not disclosed to the investors. Silicon Valley thought she would be a symbol of women power amidst the technology world filled with men. Her web of deceit and lies spread wide, and towards the end, it became difficult to differentiate truth from the fake hood. That, perhaps, is the power of marketing.

As I followed the news about Holmes and simultaneously read 'Billion Dollar Loser', a biography of Adam Neumann, the founder and former CEO of WeWork, it struck me how much of this blah is run by well-orchestrated marketing blitzkriegs. The signs that these prodigal founders are literally running on borrowed time and money are for all of us to see. I remember Neumann's foray into India, when he landed in Bengaluru with his team to explore opportunities, in sync with Prime Minister Narendra Modi's Startup India initiative. He had decided to party late into the night at a top hotel where he was staying. He started drinking vodka with his team by the pool and then moved the party to his suite. The next morning, when he was scheduled to meet with the investors eager to meet the wonder kid, he wouldn't answer his phone. The hotel security who broke into his suite found him passed out.

Both these stories sounded grand while they lasted. Fueled by unscrupulous investors, who sometimes don't know what to do with their money, the unicorns can fly for a while. But sooner than later, it will come crashing down. Right now, many parts of the world seem to be advocating for startups, which is a good sign for any economy. I am not one for regulatory bodies, but given the inflated valuations, and the money that seems to be going around, I do feel there needs to be a body of experts who can determine whether the claims are legitimate or not. The markets do not deserve any bubble, after which it will be impossible for small-town startups to blossom. If not to anyone else, we owe it to the dreamers, who can then compete with the best in the world.

Holmes and Neumann remind us there is no limit to greed. Their short-lived successes also tell us there is a lot of money to go around – and that we must be careful about our egos. WeWork went from a $47 bn valuation to bankruptcy in a record six weeks. Theranos was wiped out in a few weeks when the story broke in Wall Street Journal. She was asked at her recent hearing if she had tried to stop the story from being published by invoking her connection with the Journal's owner, Rupert Murdoch, who was also an investor in her company. She had said, "Yes, I did." Murdoch, however, decided not to intervene and eventually lost his $150 million investment. In an interview, when asked why she routinely wore black, she showed the documentary maker her wardrobe, which consisted of women's black suits, in dozens. The interviewer asks her, "Just like Steve Jobs?" Holmes, perhaps trying to hide her embarrassment in being called out, said, "He wore jeans."

She will have a lot of time on her hands to decide such mundane things over the next twenty years or more.

(The author is the founder of ZEducatr and a former Chief of Communications with the United Nations in New York, where he worked for more than a decade.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.