Interesting article originally published in the NY Times on the aftermath in the US and the tough consequences being faced by a number Executives who have been found to have exaggerated their numbers. I was particularly touched by the photo of Charlie Javice, Founder of Frank, looking bewildered and child-like as she left court clearly contemplating the gravity of her situation.
I remember the aftermath of the bursting of the bubble in 2001. We all surveyed the wreckage and discussed how the heady days of lofty valuations given off the back of limited due-diligence could never happen again. A short while ago, it was hats off to SBF for reportedly closing a massive funding round while playing a video game, now he's facing most of his life behind bars. The music always stops and, as Warren Buffett says, the tide goes out.
'Fake it till you make it' always sounded a bit like fraud to me but the standard of the due-diligence done in a lot of these cases was clearly awful. A lot of these Founders are kids and I can't help but feel a bit sorry for them. Where was the adult supervision?
Faking it is over. That’s the feeling in Silicon Valley, along with some schadenfreude and a pinch of paranoia. Not only has funding dried up for cash-burning start-ups over the last year, but now, fraud is also in the air, as investors scrutinise start-up claims more closely and a tech downturn reveals who has been taking the industry’s “fake it till you make it” ethos too far. Take what happened in the past two weeks: Charlie Javice, the founder of the financial aid start-up Frank, was arrested, accused of falsifying customer data. A jury found Rishi Shah, a co-founder of the advertising software start-up Outcome Health, guilty of defrauding customers and investors. And a judge ordered Elizabeth Holmes, the founder who defrauded investors at her blood testing start-up Theranos, to begin an 11-year prison sentence on April 27.