Welcome to the monthly Tech Primer! Each month, the tech team will be explaining the top trends that are rising up in the tech space, explaining what they are and why it is considered important. The insights can then be used if clients ask questions about them, to show you know your stuff. For the January edition, we will discuss:
Theranos: Is Silicon Valley still valuing hype over reality?
Who was Theranos and what has happened?
Theranos was a US healthtech company which, along with its founder Elizabeth Holmes, was seen as the darling of the scene. Operating from 2003, the company claimed to be able to diagnose 100s of diseases from just a few drops of blood. Buoyed by hype and worldwide excitement, it grew fantastically as a result, clocking 800 employees as well as $700m in funding. Just one problem - Theranos couldn’t do anything of the sort and all this money was raised in hope and expectation, not proof.
Since the company’s technology was exposed in 2015, Holmes has been tried and recently found guilty of four counts of fraud. Her defence argued that she was simply a businesswoman who failed - not a con artist. The federal jury did not agree however, and she may now face decades in prison.
While not an isolated case, this is a very high-profile example of Silicon Valley’s ‘bubble’ being exposed - millions being invested in something that didn’t exist. The question now is what sort of wake-up will this be for the industry, but also what is the responsibility of startups, investors and communicators going forward to avoid this happening again.
How has trust been impacted globally?
The problem in Silicon Valley is that the line between fraud and ‘faking it’ culture is very thin. It’s also a vicious cycle of technology and the science behind it vs investment. Science does great things, but it often moves slowly. It’s peer-reviewed, it can take years of analysis and testing. Whereas investors want one thing - growth. And they want it quickly.
Trust, or a lack thereof, has been an issue for the technology industry for years but more so for big tech companies. The likes of data usage, how they treat developers, long privacy agreements that you don’t understand but have to sign - it’s not hard to understand why. But this may well create even more distrust with companies big and small. You may question what Facebook does with your data, but at least it’s agreements and its financials can and will be heavily scrutinised - more so than a startup who is talking about how its technology could change the world.
The impact of the Cambridge Analytica scandal on the trust held in tech companies was a significant milestone, and so is this. But this case in particular is so dangerous; not just because of the millions lost, but because human lives were at risk. Many who used the company's tests, including a cancer patient, say they were misdiagnosed. So distrust sits not only with investors, but also the media and consumers alike.
What does this mean for the technology industry?
Silicon Valley companies generally have a reputation for faking it until they make it. And while Theranos has obviously misled investors, it is also a product of the investor environment. Startups need funding to survive and thrive, investors need quick returns on what they’re putting in. So, startups tell investors what they think they want to hear.
Tim Blauwkamp - founder of Theranos competitor Karius - feels that investors are now scrutinising opportunities more. This is a good thing, if unsurprising given the capital lost, but this is also standing in the way of potential innovation. Blood diagnostics is said to have slowed down as a whole, with Blauwkamp stating: “in some circles there's a scepticism of investing in the space altogether.” Meaning science, as opposed to just funding, is losing out.
But some think investment has even sped up since Holmes was indicted. The FT reports that “lawyers who advise start-ups said investors had even begun skipping background checks and other routine due diligence to win hot deals, in some cases relying on the analysis performed by previous backers.”
Having a balance between scrutiny and freedom to innovate will be complex and take massive conviction. Not much regulatory progress was made during the Trump administration, and it also appears to be in limbo under Biden’s tenure. Silicon Valley is often underpinned by NDAs so this also reduces the possibility of whistleblowing. Ironically, the industry itself is ‘trusted’ to be responsible. But given the evidence, and with so much money at stake, another Theranos could certainly happen in the years to come.
What does that mean for us as communicators?
PR and media relations are often seen as ‘spin’ and would very much have played its part in the Theranos disaster. Companies are so desperate to stand out and be seen as unique – which is fine. But we have to ensure this is rooted in honesty. It’s not just about trying to get some column inches; it can lead to millions being invested in something that isn’t accurate or, worse, threatens life.
Part of the reason Theranos was so lauded was because it told journalists that the science was absolutely accurate. Thinking this was a great story of US innovation, leading the world in healthtech, journalists lapped it up and wrote extremely positive stories that further supported the myth.
We as communicators, particularly ones that may work with but are external to tech companies seeking investment, have to be the last line of defence when it comes to publicising things that cannot be validated. Focus on being unique, focus on being aspirational, but in ways that can be scrutinised and proven. Great comms creates influence; we have a responsibility to use that influence to build trust in the right places.
This is true of any tech company, but particularly in this case. As Stanford professor John Ioannidis puts it: “This is not a laptop or a mobile phone, this is life and death.”
That’s all for this month’s Tech Primer. If your client has any tech-related questions, let us know and we’ll be happy to offer advice.