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What Investors Learned From the Elizabeth Holmes Trial: ‘Zero’

Lure of hot market overshadows risks despite lesson of Theranos

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Elizabeth Holmes Found Guilty in Theranos Fraud Trial
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It took a jury seven full days to conclude that Theranos Inc. founder Elizabeth Holmes was guilty of four counts of fraud after a three-month trial. The startup world had been watching in suspense, but it was largely for the spectacle of it all -- not because anyone thought the verdict would significantly change behavior in venture capital fundraising.

Holmes was convicted of defrauding investors in the blood-testing startup of hundreds of millions of dollars, which should spur investors to scrutinize their portfolio companies more carefully, especially in the specialized world of healthcare. And the guilty verdict suggests founders should beware of their optimism slipping into dishonest exaggeration. But in a red-hot startup investing market, no one’s willing to slow down.