Pssst! Want to make 10X your investment? Ah, human nature: we all carry around more computing power than it took to put a man on the moon, but it has not made us any smarter when it comes to scams of the digital age.
Elizabeth Holmes may have dodged the bullet. After being slapped by the SEC for committing “massive” financial fraud, “raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance” she only has to pay a $500K fine and give up her worthless shares in Theranos.
The technology vision dazzled us. Of course, you should be able to test for a multitude of conditions from just a single drop of blood. That is until we find out the technology was never there but there was a cover-up that just kept sucking in the money in. We have not heard from the DoJ criminal probe yet, so there may still be hope for justice. But, as they say in the TV commercial: “there’s more!”
Give me $2Billion so spins the genial CEO of secretive Magic Leap, Rony Abovitz, and I’ll give you the most fantastic augmented reality experience ever. It’s just been a little delayed; the technology is tougher than we thought but you’ll see it soon. Really? It’s been seven years peppered with fake demos, breathless stories, a million dollar theft, a lawsuit and round after round of fund raising from supposedly smart money. Why do we fall for this? Why don’t we remember the rule: “If it sounds too good to be true, it probably is.”
Why – because sometimes the results actually do pan out. Many, maybe most of the marvels we take for granted everyday were considered science fiction not that long ago. But we get into trouble by seeming to forget another smart piece of guidance: “Extraordinary claims require extraordinary evidence.” Solitary earth shattering breakthroughs are rare. Instead, they seem to “suddenly appear” but only after years of painstaking work and often failures.
The formula seems the same. First a charismatic leader that is really good at raising money steps forward. Second, he/she promotes a vision for the future that will revolutionize people lives. Next, add some brand name investors to lend credibility. And finally, add some secrecy so it appears the product or service is so disruptive you can’t let competitors get near it.
You can do this on any scale. It does not have to be in the hundreds of millions and billions. Take uBeam and its promise of wireless power transmission. Not since Nikola Tesla hit up J.P. Morgan for $150,000 in 1901 (a little less than $4 Million in today’s dollars) has the topic been quite so hot. To be fair, Tesla was a proven brilliant scientist and inventor with quite a track history. Whether he was right about his approach in this area will probably never be settled but in the end Tesla went bust.
But Meredith Perry, uBeam’s CEO, appears to eerily echo our buddy Elizabeth Holmes of Theranos. Let’s see: under 30 and charismatic; invented the technology in her garage while an undergraduate; attracts big name investors – Mark Cuban, Marissa Meyer, and Marc Andreessen; product is delayed for years and when demonstrated is pretty underwhelming. (As in: You’ve got to be kidding? That’s it.) Did I mention her former VP of engineering claims that it’s all a sham? Oh well, at least she only suckered investors for a little less than $50Million, so far.
Here’s one more. Ever hear of Clinkle and Lucas Duplan? Back in 2011, at 22 and barely out of Stanford he does the Silicon Valley dream trip. You guessed it; raises $30 Million from high profile investors to launch a “visionary” mobile payments company. Original concept does not work. Company implodes and Duplan tries to pivot to a new concept. Sigh.
Finally, are you having a twinge of regret that you are missing out on the millions made in Bitcoin? Thinking about buying in to one of those ICO’s (Initial Coin Offerings)? Do you even understand Blockchain and Bitcoin? Caveat emptor: Cryptocurrencies scams are estimated to defraud and out right steal $9Million a day for the first two months of 2018. Yep, one every minute seems about right.