Of course, it has been ever since the end of the semiconductor era.
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 startups over the past year, but now, fraud is also in the air, as investors scrutinize startup 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 startup Frank, was arrested, accused of falsifying customer data. A jury found Rishi Shah, a co-founder of the advertising software startup Outcome Health, guilty of defrauding customers and investors. And a judge ordered Elizabeth Holmes, the founder who defrauded investors at her blood testing startup Theranos, to begin an 11-year prison sentence April 27.
Those developments follow the February arrests of Carlos Watson, the founder of Ozy Media, and Christopher Kirchner, the founder of software company Slync, both accused of defrauding investors. Still to come is the fraud trial of Manish Lachwani, a co-founder of the software startup HeadSpin, set to begin in May, and that of Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, who faces 13 fraud charges later this year.
Taken together, the chorus of charges, convictions and sentences have created a feeling that the startup world’s fast and loose fakery actually has consequences. Despite this generation’s many high-profile scandals (Uber, WeWork) and downfalls (Juicero), few startup founders, aside from Holmes, ever faced criminal charges for pushing the boundaries of business puffery as they disrupted us into the future.
It’s not over. It won’t be over as long as venture capitalists can inflate fraudulent businesses living off their angel and VC money long enough to either a) go public or b) get acquired and let the VCs cash in. Because the Patreons and the Substacks of the world are just as fake as the Franks and the FTXs, as were the Bloggers, Twitters, and Pajamas Medias before them.
None of these businesses actually make money. None of them will ever make money.