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Elizabeth holmes venture capitalism11/15/2023 This is driven by the fact that there are fewer listed firms and initial public offerings, the greater role of the private market in raising money, and the rise in the number of unicorn firms. Despite these reports and the risks associated with investing in private firms, there is an argument that we should democratize access to private markets because retail investors are missing out on lucrative investment opportunities. These stories on mismanagement and fraud are drawing public attention to the operations, management, corporate governance structures and financings of unicorn firms. The ongoing collapse of FTX will undoubtedly see Sam Bankman-Fried charged by federal or state prosecutors. The founder of Nikola was convicted of similar fraud charges just last month. The chief executive officers (“CEOs”) of WeWork, WrkRiot, Uber, and Zenefits have all resigned within the last three years due to various allegations of mismanagement and fraud. Holmes, unfortunately, is not the only unicorn founder to get a lot of press coverage recently for breaking the law. It is yet to be determined how harsh the verdict of Ramesh “Sunny” Balwani, the former president and chief operating officer of Theranos, is going to be. Many observed that this example illustrates perhaps that women may be sanctioned more harshly when their behavior violates sex-role stereotypes, like managing a startup. Holmes was found to have defrauded investors but not patients. Now, three years later, Holmes has been convicted and sentenced to over 11 years in federal prison. Theranos’s funding bubble burst when the Securities and Exchange Commission (“SEC”) charged Holmes with massive fraud. Holmes appeared on the covers of magazines while Theranos enjoyed the benefits of an “all-star” board of directors, including a medical advisory board. Holmes quickly raised billions of dollars from non-traditional investors, and Theranos joined the prestigious “unicorn” club. Holmes dropped out of Stanford University to start Theranos, a blood-testing startup. The press once celebrated Elizabeth Holmes as the youngest female entrepreneur and billionaire. The following stories can serve as case studies on bad corporate governance, poor leadership, and a complete lack of oversight, for generations to come. Investors seem to love tech visionaries whose brash rhetoric fueled the recent tech boom and collapse. Anat Alon-Beck, law professor at Case Western Reserve University School of Law, and John Livingstone, research fellow at Case Western Reserve University School of Law and visiting lecturer at University of California, Berkeley, Haas School of Business, discuss trends in recent tech founder fraud scandals.Īre the recent tech founder scandals going to change Silicon Valley or future appetite for investments in tech firms? It seems that investors are unphased by losing millions through the failures of Elizabeth Holmes or the sudden collapse of crypto exchange FTX.
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