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As many point fingers at Elizabeth Holmes as she awaits a prison sentence, she still has at least one loyal believer: The man who signed one of her first checks.
Tim Draper, a venture capitalist who wrote Holmes a $1 million check when she dropped out of Stanford at 19 to start Theranos, says he still believes in what Holmes was trying to do. In a response to a series of questions, Draper sent me the following statement via email:
“This verdict makes me concerned that the spirit of entrepreneurship in America is in jeopardy. What has made America and Silicon Valley great is its ability to recognize what is possible. Elizabeth Holmes is an entrepreneur. She envisions a better future. Entrepreneurs invent and keep iterating until their product works. I still believe in what she was trying to do, and if this scrutiny happened to every entrepreneur as they tried to make this world a better place, we would have no automobile, no smartphone, no antibiotics, and no automation, and our world would be less for it.
A willingness to bet on these entrepreneurs and their visions has made Silicon Valley the innovation engine of the world. This is the nature of investing in progress.”
Draper declined to comment on questions specifically regarding whether any evidence presented in trial had shifted any of his opinions or regarding his thoughts on the near-one million test results Theranos had to void or correct.
Draper, a former neighbor of the Holmes family in California, is one of the last to continue standing by Elizabeth Holmes, or at least publicly. Some investors even sued the company when things went south, including hedge fund Partner Fund Management and Robert Colman, a former investment banker who brought the class-action suit against Theranos that revealed the extent of losses faced by the Walton family, Betsy DeVos family, Rupert Murdoch, and others.
While most appear to agree that Holmes did engage in the fraud she was accused of, Draper gets to a specific point: Without trial and error, there is no innovation. Some venture capitalists are worried that society might throw the baby out with the bathwater.
“It’s important to remember that there are fraudsters in every industry,” says Mark Tluszcz, CEO at Mangrove Capital Partners. “And in many ways the venture capital community has already moved on from this. Indeed those that were brave enough to invest in the health sector in the aftermath of Theranos’ demise have been rewarded handsomely.”
The Theranos case was an extreme one, according to Bill Sahlman, a professor at Harvard Business School, who has studied entrepreneurship for 40 years and been involved in around 200 different companies. “In all of my experience, I’ve not seen anyone do what they did,” he says.
It’s important that investors are willing to take gambles and risks early on, as ideas can change and teams can morph, according to Sahlman. At the same time, there’s a line founders shouldn’t cross. Fraud, for instance, would cross that line.
“If someone came in tomorrow, including a 19-year-old Stanford student, and said: ‘Look, I’ve developed this way to detect colon cancer 15 years before it shows up… Here’s the protein marker. Here’s why I’ve been able to find it and other people haven’t.’ I’d back them in a heartbeat,” Sahlman says.
“Now, I wouldn’t perpetuate the funding if it turned out they weren’t able to do what they said they would,” he adds.
The other end of the spectrum is that Silicon Valley has a widespread, underlying disease that needs to be addressed—Theranos may only be an ugly growth of that.
“While venture capitalists have been quick to absolve their industry from any stink-by-association with l’affaire Holmes, the fact is Theranos checked every box of the symptoms that broadly characterize the current VC blitzscale bubble,” Len Sherman, a Columbia Business School professor, wrote to me in an email. “I for one do not believe Holmes is alone either in CEO behavior, venture board governance breakdowns or in inadequate investor due diligence.”
Different standard?
More food for thought on Elizabeth Holmes. Has she been held to a different standard than other startup founders, and might that have something to do with her being a woman? CEOs like Josh Tetrick of Hampton Creek or Travis Kalanick of Uber haven’t been charged, even though they have allegedly made deceptive claims to investors, too. That’s something on the mind of Katherine Putnam, a startup consultant and angel investor.
“I think the choice to bring charges against her had a lot to do with [her being] a female who defrauded a bunch of wealthy white men,” Putnam tells me. “That doesn’t make her more or less guilty though.”
The unfortunate reality of Theranos is that some women founders in healthtech are now being compared to Holmes, according to the New York Times—women founders already struggle to land funding from venture capitalists compared to male peers.
“Right now, who’s been prosecuted? One white woman. She represents all of them as far as people are concerned, and that’s unfortunate,” Putnam says.
WeWork turns WeRent? Let’s check back in on Adam Neumann, the former WeWork CEO, who has been quietly scooping up thousands of apartments in the past year, per the Wall Street Journal. He’s talking to friends and associates about “his ambitions to build a company that would shake up the rental-housing industry,” people familiar with the matter tell the Journal. Let’s see who lines up to invest.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
My colleague Jeremy Kahn contributed to the reporting of this essay.
VENTURE DEALS
– OpenSea, a New York-based NFT marketplace, raised $300 million in Series C funding led by Paradigm and Coatue. Kathryn Haun’s new fund also participated in the round, according to Newcomer.
– HUMAN Security, a New York-based cybersecurity platform that protects enterprises and internet platforms from sophisticated bot attacks and fraud, raised $100 million in funding led by WestCap and was joined by NightDragon.
– Waymark, a San Francisco-based Medicaid provider-enablement company, raised $45 million in Series A funding co-led by a16z and NEA and was joined by Lux Capital.
– Symphonic Distribution, a Tampa, Fla.-based digital music distribution platform, raised $37 million in Series B funding led by NewSpring and Ballast Point Ventures.
– Good Parents, a remote patient monitoring and continuous care platform for pediatric patients, raised $16 million in Series A funding led by Vive Collective, which is backed by Clearlake Capital.
– headversity, a Calgary, Canada-based preventative mental health training technology for employers, raised $10 million in Series A funding led by Level Equity and was joined by Westcap Management.
– Strados Labs, a Philadelphia-based early detection and predictions of worsening respiratory diseases medical technology company, raised $4.5 million in pre-series A funding from investors including SOSV, cultivate(MD), Wavemaker360 Health, Blu Venture Investors, and Broad Street Angels.
PRIVATE EQUITY
– TPG invested $360 million in Fractal, an artificial intelligence and advanced analytics solutions company. Apax sold some of its stake as part of the deal, but remains a shareholder in the company.
– Candle Media, backed by Blackstone, agreed to acquire an approximate 10% stake in Westbrook, Will Smith and Jada Pinkett Smith’s entertainment company, for around $60 million, per the Wall Street Journal.
– ChargePoint Technology, an Arcline Investment Management portfolio company, acquired Terracon Corporation, a Franklin, Mass.-based single-use product and accessory manufacturer for mixing, transferring, and storing fluids in the biopharma and life science markets. Financial terms were not disclosed.
– Corsair acquired a majority stake in Aurora Payments, a Tempe, Ariz.-based payment solutions provider for small and medium sized businesses. Financial terms were not disclosed.
– Cortec Group acquired Goettl Home Services, a Las Vegas-based residential HVAC and plumbing maintenance, repair and replacement services company, from Baum Capital Partners. Financial terms were not disclosed.
– EagleTree Partners acquired Andronaco Industries, a Kentwood, Mich.-based specialty polymer and composite-engineered flow control product designer and manufacturer. Financial terms were not disclosed.
– The Heubach Group, an SK Capital portfolio company, acquired Clariant Pigments, the global colorants business of Muttenz, Switzerland-based Clariant. Financial terms were not disclosed.
– MidOcean Partners acquired Casper’s Ice Cream, a Richmond, Utah-based ice cream and frozen dessert manufacturer. Financial terms were not disclosed.
– ServiceTitan, backed by Thoma Bravo, Dragoneer Investment Group, and others, agreed to acquire FieldRoutes, a cloud-based and mobile SaaS provider in the pest control and lawn care industry. Financial terms were not disclosed.
– Social Good Company, backed by Apax Partners, agreed to acquire Network for Good, a Washington, D.C.-based cloud-based fundraising software for nonprofits. Financial terms were not disclosed.
– symplr, backed by Clearlake Capital Group and Charlesbank Capital Partners, agreed to acquire Midas Health Analytics Solutions, a Florham Park, N.J.-based strategic guidance, tactical plan, and care management intervention solution for healthcare customers, from Conduent Incorporated. Financial terms were not disclosed.
– TPG Capital acquired a majority stake in Confluent Medical Technologies, a Scottsdale, Ariz.-based materials science, development and manufacturing partner to medical device manufacturers. Ampersand Capital Partners remains a minority investor.
– Trella Health acquired PlayMaker Health, a Brentwood, Tenn.-based mobile-first CRM company. Financial terms were not disclosed.
– WindRose Health Investors recapitalized Terrapin Pharmacy, an Annapolis, Md.-based distribution and medication adherence services and technology pharmacy. Financial terms were not disclosed.
EXITS
– Corvus Insurance acquired Tarian Underwriting Limited, a London-based cyber underwriting platform, from Beat Capital Partners. Financial terms were not disclosed.
– ServiceTitan agreed to acquire FieldRoutes, a McKinney, Tex.-based software for pest control, lawn care, and other field service businesses provider, from Gryphon Investors. Financial terms were not disclosed.
– The Hilb Group acquired The Churchill Agency, a Brentwood, Tenn.-based insurance company, from The Churchill Agency Ventures. Financial terms were not disclosed.
OTHER
– CLEAR acquired Whyline, a New York-based virtual queuing and appointment technology, in an all-cash deal. Financial terms were not disclosed.
– OpenSea is in talks to acquire Dharma Labs, a San Francisco-based blockchain lending platform, per Axios.
– Pico acquired Redline Trading Solutions, a Boston-based trading and market data software solution. Financial terms were not disclosed.
– Unleashed Brands acquired Premier Martial Arts, a karate, krav maga, and kickboxing franchise. Financial terms were not disclosed.
IPOS
– Affinia Therapeutics, a Waltham, Mass.-based gene therapy to cure rare and prevalent diseases, filed for an IPO. The company reported a net loss of $34.5 million in the nine months ending in Sept. 2021 and has yet to generate product sales revenue. NEA, Atlas Venture, and F-Prime Capital back the firm.
– Trajector, a Newberry, Fla.-based benefits technology platform for military veterans and disabled individuals, withdrew its IPO filing.
SPAC
– 1.12 Acquisition Corp., a blank check company backed by a Bridgeport Partners affiliate, filed for a $350 million IPO. The SPAC is led by Frank D’Angelo, partner of Bridgeport Partners, and Don Layden, head of Strategy and corporate development and M&A for NCR Corporation.
PEOPLE
– March Capital, Santa Monica, Calif.-based venture capital and growth equity firm, promoted Julia Klein, Solomon Hailu, Hyun Koo and Louis Gresham to partners.
– Ethos Capital, a Newton, Mass.-based private equity firm, hired Chris Ritchie as a partner. Formerly, he was with ABRY Partners.
– HCI Equity Partners, a Washington, D.C.-based private equity firm, promoted Scott Gibaratz to partner; Brendon Biddle and Tim Frend to managing directors; and Matt Clark to vice president.
– Thoma Bravo, a Chicago-based private equity firm, promoted Andrew Almeida, Tara Gadgil, Mike Hoffmann, Brian Jaffee, Carl Press, Adam Solomon, and Peter Stefanski to partners from principals.
– TPG, a Fort Worth, Tex.-based private equity firm, hired Matt Jones as co-managing partner of TPG GP Solutions. Jones was formerly with Pantheon.
Financial Services
