Silicon Valley’s culture, which has long been celebrated for encouraging innovation, is in the spotlight following a jury’s guilty verdicts for investor fraud of Elizabeth Holmes, founder and CEO of blood-testing startup Theranos.

After a nearly four-month trial and seven days of deliberations, the jury found Holmes guilty on four counts of defrauding investors on Jan 3.

A hearing has been set for this week at which prosecutors will reveal whether they plan to retry Holmes on the three charges the jury could not decide. Holmes, 37, faces up to 20 years in prison for each guilty count, though legal experts said she is unlikely to receive anything close to the maximum sentence.

While Holmes awaits her sentencing, some said the Theranos case embodies systemic problems with startup culture in Silicon Valley, particularly the region’s famous practice known as “fake it until you make it”. That business method has been attributed to some successful Silicon Valley companies like Google, Netflix, Facebook and Apple.

“It’s baked into the culture,” said Margaret O’Mara, author of The Code: Silicon Valley and the Remaking of America, to the BBC. “If you are a young startup in development-with a barely existent product-a certain amount of swagger and hustle is expected and encouraged.”

The trial featured dozens of witnesses, including Holmes, who cast herself as a trailblazer in male-dominated Silicon Valley, one who was emotionally and sexually abused by her former lover and business partner, Ramesh “Sunny” Balwani.

Holmes’ defense argued that the misinformation she and her company gave investors was characteristic of tech industry exaggeration at best and that investors were experienced enough to interpret Holmes’ projections as “uncertain”, not fraudulent.

Holmes founded Theranos in Palo Alto in 2003 when she was just 19 and a Stanford University dropout. She had raised more than $1 billion, leading Theranos to a $9 billion valuation when it gained mainstream attention in 2013. Holmes quickly soared to fame and was even called “the next Steve Jobs”.

Kenneth Fong, founder and chairman of venture capital firm Kenson Ventures with a focus on biotech startups based in Palo Alto, said Holmes’ burning desire to succeed and her emulation of Steve Jobs without the substance behind her had pushed her to the brink of collapse.

“That Holmes emulated Steve Jobs with her wearing the turtleneck said it all about her aspiration to succeed like Jobs without understanding Jobs’ life success was based on substantive achievements and results,Zid Fong in an interview with Seal News Leading Oriental.

Holmes said the technology her company was producing was capable of testing for hundreds of diseases with just two drops of blood. But it was exposed years later that the company was built on lies and fraud.

She won over big-name investors and advisers from Oracle co-founder Larry Ellison to media mogul Rupert Murdoch, former US secretaries of state George Shultz and Henry Kissinger and former defense secretary Jim Mattis.

In 2015, a Wall Street Journal investigation into the company unveiled that the technology was not working as promised. The company collapsed three years later. Charges of fraud were first filed against Holmes in 2018.

Theranos’ blood-testing technology produced incorrect results, and the company relied on third-party machines. Some who used the company’s tests, including a cancer patient, said they were misdiagnosed.

Due diligence breakdown

A culture of secrecy in Silicon Valley is also blamed for Theranos’ technology going unanalyzed, along with a lack of due diligence by investors.

McKeever Conwell, founder and managing partner of RareBreed Ventures, told Technicality Media that the case also shows the breakdown of due diligence by investors. “What’s the accountability of those investors for their due diligence?” Conwell said.

When asked questions about the technology, Holmes claimed that trade secrets barred her from answering about the technology and the company’s finances. According to the Journal’s investigation, Theranos tried to cover up its failures and how the health of patients was jeopardized.

In a Mercury News editorial, it criticized the Silicon Valley’s “fake it until make it” culture for ignoring “integrity” while putting emphasis in “don’t’ get caught”.

“The words ‘integrity’ and ‘Silicon Valley’ are seldom used in the same sentence these days,” the editorial said. “Silicon Valley won’t keep attracting the brightest entrepreneurs from around the world unless it gets its house in order.”

Insiders said Holmes’ guilty verdict signals a stark warning to other entrepreneurs making overly ambitious promises about their technologies, often with little proof. But others believe Holmes’ verdict may not be enough to change the Silicon Valley culture of faking it, where criminal charges are rare and money continues to flow.