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Guilty Verdicts for Elizabeth Holmes Could Impact Other Silicon Valley Start-Ups

SAN JOSE (KPIX) -- The implosion of Elizabeth Holmes's company Theranos coupled with this week's guilty verdict in her federal fraud trial has sent shockwaves through Silicon Valley.

The events have also shone a spotlight on a culture that can often be brash and prides itself on delivering breakthrough technologies at breakneck speeds

"This hasn't only been Elizabeth Holmes on trial. This has been Silicon Valley on trial," said Joint Venture Silicon Valley President and CEO Russell Hancock.

Hancock says the verdict may force tech innovators to be a little more buttoned-down and reign in some of the more over-the-top claims sometimes made about unproven technology.

"There's a high standard now. You have to talk in tones that are clinical, factual and measured. And it's not enough to simply talk about changing the world," Hancock said.

However, others argue the impact of the guilty verdicts is not altogether clear. They say Holmes operated on the margins of the biotech industry in a house of mirrors she created.

"It was a cult of personality. It was not really a science company. And they never generated the data or the technology to actually demonstrate that her vision had any legs," said Mark Schwartz, a biotechnology and business professor at San Jose State University.

Schwartz worked for decades in the biotechnology industry before entering academia at San Jose State. He says the warning signs were there, but were largely ignored.

Schwartz says Holmes stocked her board of directors with luminaries from the world of politics and government but not actual scientists. He says she also stubbornly refused to pull back the curtain and demonstrate in a transparent fashion what he technology could do.

He says future investors should not be so easily fooled by style over substance.

"She really painted a swashbuckling figure. A woman in the tech field, point-of-care diagnostics, something to feel really good about," Professor Schwartz said. "She was a compelling speaker. She was an attractive woman. She gathered a lot of high-powered names around herself and the press glommed onto that."

Others say the Holmes trial should act as a cautionary tale -- a reminder to Silicon Valley that truth matters and lies have consequences.

"At some point, this fake-it-until-you-make-it culture was going to run up against reality in a way that was going to hurt people's lives. And now I think we need to start asking ourselves the questions about these promising new companies a lot earlier," said CNET Executive Editor Ian Sherr.

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