There was this old cliche back in the dot-com era about selling dollar bills for 99 cents. It was funny until companies like Enron and Worldcom started doing almost exactly that.
And I’m guessing that cliche wasn’t invented in the 1990s, but it seems like everyone is starting to forget the past again.
To be sure, some great companies emerged from the dot-bomb—Google and Amazon come to mind. Monster successes like those mean that you can always count on the gold rush to charge forward unabated, fueled by the notion that the average Joe (not me, the average one), can make a million percent return by getting in on the ground floor of the right startup.
Diligence be damned. I mean, a million percent of $100 is a million bucks. Small risk, huge reward, right?
Well, what if you’re not risking $100, but $23 million? Or more?
So last week, I read an article about questions and allegations swirling around uBeam, a company started by a 25-year-old first-time founder, and one with a technology that purports to charge your phone wirelessly using ultrasound.
Now, I’m not going to debate the viability of the product, I’ll be the first to admit that I got by in my electrical engineering courses on a wing and a prayer and a tutor and a smile. Besides, there are plenty of folks already debating said viability these days, including a former VP of Engineering calling the product “vaporware.”
But what I can debate is the culture and, of great significance here, the media.
Because almost a year ago to the day, same blog, same author, different headline: uBeam’s Ultrasound Wireless Charging Is Real, And About To Be Really Funded.
Now, I don’t mind the exuberance in that headline—the excitement, the thrill of breaking the news on a long-awaited, heretofore impossible technology. Every startup begins by dreaming, then assuming, then believing it can be the thing that changes the game in the universe in which it exists. That’s just being an entrepreneur.
But I want you to focus on one word in that headline.
What is that doing there?
Because there was absolutely no proof of that, yet. Although in the first paragraph, the writer all but dares you to doubt. Does the technology exist? “It does.” Not, “It might,” or “It could,” or “It does, but there isn’t a working prototype yet.”
The writer doesn’t deserve all the blame here. At the time of publication, uBeam had already landed $10 million in a Series A, with a Series A-list of rock star investors including Andreessen Horowitz, CrunchFund (?!), Shawn Fanning, Mark Cuban and Tony Hsieh, among others.
Another $13 million hit the table before that second, more thoughtful article hit the web. That article only surfaced after a series of blog posts from that allegedly disgruntled former VP (and not, you know, all the due diligence). The second article starts making comparisons of UBeam to Theranos, a company that hasn’t even stopped spiraling yet.
Yeah, Theranos, another first-time founder startup, one that says it can run multiple blood tests without needles and vials and doctors.
Except it hasn’t. Maybe. Or maybe not. It’s hard to tell.
But the similarities here in terms of rise to prominence are hard to ignore. Start with this New Yorker profile of Theranos CEO Elizabeth Holmes about a year-and-a-half ago and roughly two months after the TEDMED talk that propelled Theranos into the stratosphere.
Note the lack of scientific curiosity. Questions about viability and business model aren’t asked until about two-thirds of the way through a very long and gushing CEO profile. The surface is scratched, but what the article mostly hones in on is how many lives will be saved by early, cheap, home-based blood tests.
Wait. There’s a problem here again, and one that’s easy to overlook.
To be sure, I want UBeam and Theranos to succeed. I want mid-distance wireless charging and accessible blood testing, even if it is just advancing a new technology from dream to a hacked-together, not-ready-for-market reality.
But hacked-together, not-ready-for-market realities don’t value out at $9-billion-plus, as was the case with Theranos. You only get there on the assumption that such testing will save countless lives, a hypothesis that, just a few days ago, someone, specifically 538, finally addressed (spoiler alert: They doubt it).
And now, the scientist behind the science is out of the company. Mind you, all of this went down less than a year after 23andMe was forced to tamp down the gravity of its tech, which was indeed viable, just not as life-and-health-altering as founders made it out to be.
Again, let me reiterate that both companies are fighting these battles proactively and I hope that they’re for real. But if they aren’t, someone has a lot of explaining to do, namely, the folks that were supposed to do investor and journalistic due diligence.
I’ve always been fascinated by these stories, as much as I’m fascinated by stories about con artists and grifters. There’s a little of this in every entrepreneur, the actual and true confidence part of the confidence game, the part that lets you believe your story even though it isn’t true, yet.
But what I really marvel at is the other end of the equation. You can only fool someone who, ultimately, deep down, wants to be fooled. It’s probably a very fine line between believing this tech will work someday and believing it works today, as far as that belief can inspire the moving of huge sums of money.
It’s the difference between Elon Musk believing that he will send people to Mars and Leo DiCaprio as Frank Abignale in Catch Me If You Can shoving money into a suitcase on his way out a window, trying to explain to his fiancee that they don’t need anything but his ability to believe he is whatever he needs to be.
You only have to watch a couple episodes of American Greed, another guilty pleasure, to get a sense of the depravity of a con artist and how far he will go for a dollar and how much damage can be done in that wake.
Sure, 99% of criminal-enterprise-as-business-enterprise winds up with a pyramid scheme at its heart. But what do you call a company where the early investors make out like bandits while everyone else who comes in after the first round gets screwed?
Oh yeah, a Unicorn.