The culture of Silicon Valley is peculiar. And not in a quirky, tech-bro kind of way. More in a criminal, willfully ignorant, Ponzi-schemes-masquerading-as-innovations kind of way, and no case exemplifies this so clearly as that of the once-renowned Elizabeth Holmes.

Holmes, 37, was convicted on January 3 of three counts of wire fraud as well as one count of conspiracy to commit wire fraud by lying to investors about the capabilities of her company, the now-defunct biotech firm Theranos. The jury remains hung on three additional charges of deceiving investors.

Managing Theranos since she founded it in 2003 at the age of 19 until its cataclysmic collapse in 2018, Holmes swindled corporations like Walgreens and the federal government’s Centers for Medicaid and Medicare Services (CMS) as well as some of the greatest names in private investing: heirs of Walmart, Amway, and Cox Communications. Oracle co-founder Larry Ellison. Conservative media mogul Rupert Murdoch. Former secretary of defense Jim Mattis even served as a member of the board of directors.

Theranos’ ill-gotten gains totalled $945 million all told. Poor, poor venture capitalists. It’s not like the signs weren’t there. Pfizer director Shane Weber concluded in 2008 that Theranos’ answers to technical questions were “oblique, deflective or evasive,” and recommended his own company stop working with them immediately. Former Schering Plough director Constance Cullen characterized Holmes’ responses in 2009 as “cagey” and indirect, and stopped replying to her emails.

It’s not difficult to pull off a magic trick when no one is looking. And if investors were looking at Theranos at all, it certainly wasn’t very hard. Lisa Peterson, who handles investments for the prominent DeVos family, never once visited a Theranos testing center, nor did she consult any outside expert in science, business regulations, or law before investing $100 million in 2014. Hall Group’s Bryan Tolbert invested $5 million in 2013, despite admitting that he did not understand how the technology supposedly worked. In 2014, lawyer Dan Mosley requested audited financial statements from Theranos. Holmes refused to produce any, and Mosley invested $6 million anyway.

What happens when a Stanford dropout claims, with no scientific evidence, to have developed a revolutionary and highly profitable new blood testing technology to an audience with MBAs, not MDs? The VCs think they have a golden goose. A Facebook. An Apple. An Amazon. But they don’t; they have a Theranos.

Elizabeth Holmes’ imitation of the tech world’s heroes is so obvious as to be cringeworthy. Steve Jobs, the late Apple co-founder, was known for wearing black turtlenecks, a choice repeated by Holmes, who told Glamour in 2015 that she owned “about 150” of the sweaters.

By pretending to be a brilliant college dropout ready to change the world (for immense profit), Holmes triggered the VCs primal Fear Of Missing Out. Despite not understanding the technology, not having clear financial statements, not even hearing coherent answers to technical questions, the VCs poured millions into Theranos. Why?

Because they’ve seen this movie before. They’ve seen Mark Zuckerburg, Bill Gates, and Steve Jobs. They know that a large investment on the ground floor of something so groundbreaking would make them unfathomably wealthy. But this is not a simple retelling; it is a truly unexpected twist on the original, and they were thrown for a very expensive loop. A golden goose chase, if you will.

Given that the culture of Silicon Valley hero-worship is unlikely to fade as long as new billionaires keep being minted, there is only one solution to prevent such fraud.

Venture capitalists need to see the world for what it is, not what smooth-talking executives posing as visionaries tell them it is. Theranos would be such an easy fraud to spot if they had seen any more than what they wanted to see.
Silicon Valley is a place of opportunity, but it is a fleeting opportunity. If you don’t jump on in time, you might miss the train to fortune. But if you don’t check the destination before boarding, you may find yourself short $945 million, spent on a ticket to nowhere.

And sorry, no refunds.