If you need convincing that Elizabeth Holmes is a person with feelings, and not a villain out for blood, just look through her text messages. “You are breeze in desert for me,” she sent Ramesh Balwani, her business partner and boyfriend, in 2015. “My water. And ocean.” Even when Wall Street Journal reporter John Carreyrou was investigating her medical-testing company, Theranos, Holmes still had love on her mind. “Was thinking about you this morning,” she texted Balwani that June. Balwani reminded her to stay focused: Theranos was under attack.
Six pages of text messages are some of the first documents to come out of Holmes’ trial, which began this week, more than three years after she was indicted on charges of defrauding investors, as well as doctors and patients, about Theranos’ capabilities. She has pleaded not guilty. The defense’s task over the coming months is to humanize Holmes, showing the jury a young and ambitious entrepreneur who made some mistakes in her pursuit of success. The government will try to convince jurors that she became a billionaire at the cost of her customers’ health, and jeopardized her investors along the way.
And Silicon Valley will be paying attention. The landmark case scrutinizes one company, one founder—but in doing so, it will shine a harsh light on some of the norms of startup culture, including the expectation that founders pursue their ideas with something like reckless determination. Elizabeth Holmes had become, as lead prosecutor Robert Leach put it in his opening statement on Wednesday, “one of the most celebrated CEOs in Silicon Valley and the world. But under the facade of Theranos’ success, there were significant problems brewing.” The question for the jury, then, is to decide at what point startup swagger turns into fraud.
“I'm glad the ‘Fake it till you make it’ mantra of Silicon Valley is coming into question,” says Eric Bahn, cofounder of Hustle Fund, an early-stage VC firm. “For the past decade, it almost felt like a rallying cry for founders and investors alike.”
At the same time, Bahn says, he worries that the attention on Holmes could turn into greater scrutiny of female founders, who, studies have shown, already have a harder time raising money in Silicon Valley. "I have heard one anecdote already about a female health care founder being questioned on her thoughts about Holmes, and how that founder felt like she was already being compared.” A recent story in The New York Times found that plenty of other female founders face comparisons to Holmes.
Holmes’ story has already left an indelible mark, not just on Silicon Valley but on American culture writ large. She was a beguiling character for investors and media alike—the blonde baritone in black turtlenecks—and her downfall attracted as much attention as her rise: hundreds of magazine articles, a best-selling book, a podcast series, several documentaries, a forthcoming television series starring Amanda Seyfried. As a result, the first week in court was mainly spent on the difficult task of selecting a jury who had not been steeped in the coverage and could present an unbiased opinion.
Jurors were also asked if they had been exposed to domestic abuse, as the defense plans to argue that Holmes was subjected to “a decade-long campaign of psychological abuse” by Balwani. (Balwani has denied any allegations of abuse. He has also been charged with fraud, and has also pleaded not guilty. His trial is set to begin in January.) About half of the jury pool raised their hands, according to The New York Times.
Holmes was just 19, a sophomore at Stanford, when she started Theranos in 2003. Fearful of needles, she came up with an idea for a medical device that could run multiple tests on a single drop of blood. She relied on other successful founders as a template, down to her exaggerated voice and Steve Jobs–inspired uniform. Silicon Valley has long rewarded founders who oversell their ideas and make deals on potential rather than prototypes—that’s how most of the Valley’s most powerful companies were created.
As the trial approached, some in Silicon Valley rejected the view of Holmes as an archetype. “Journalists like to present Theranos as typical of Silicon Valley, but people like Elizabeth Holmes are actually much rarer there than in the rest of the business world, or in politics,” Paul Graham, the founder of Y Combinator, tweeted last week. Scott Kupor, a managing partner at Andreessen Horowitz, tweeted that it was “silly” to suggest that Silicon Valley’s culture was on trial with the Holmes case. “(Alleged) fraud is not the same as willful suspension of disbelief when you have full access to the data and teams required to perform diligence.”
If Holmes isn’t indicative of the tech industry, then she at least falls into a category of tech founders who have allegedly run their startups afoul of the law. Manish Lachwani, the cofounder of Headspin, was charged with wire and securities fraud last month. In the past few years, the CEOs of Trustify and Quintillion were each sentenced to prison for fraud; the CEO of Zenefits reached a settlement with the SEC over accusations that the startup misled investors. Last September, the CEO of NS8 was arrested on fraud charges. (He has pleaded not guilty.)
Over the next few months, Holmes’ defense will argue that every tech company goes through a cycle of trying, failing, trying, and failing more, before finally becoming great. Theranos, they will say, was simply in one of those middle stages, caught between vision and execution. “Failure is not a crime,” said Lance Wade, who is representing Holmes, in his opening statement. “Trying your hardest and coming up short is not a crime.”
The outcome of Holmes’ trial will set straight what the industry tolerates as “trying your hardest,” and what it considers deceit. Whichever way the jury decides, Silicon Valley will be watching.