Fake it till you fund it?

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Fake it
Silicon Valley investment gurus have long promoted the idea that startups should ‘fake it till you make it’ to become successful. The infamous fall of Theranos is a perfect showcase of how this attitude can turn into a disaster. We take a closer look at this philosophy of exaggeration and weigh up the merits of ‘fact vs. fiction’ when life sciences entrepreneurs are dealing with potential investors.


Startup companies often face a ‘chicken or the egg’ problem: they need funding to develop product prototypes, but they need product prototypes to attract funding. ‘Fake it till you make it’ is a tempting proposition as it offers an enticing shortcut: by exaggerating, embellishing, or even fabricating proof-of-concept data, startups are able to get on the radar of investors. The aim is to set a positive cycle in motion: funding facilitates talent recruitment; talent enables the development of prototypes; prototypes are needed to raise additional financing – at which point the initial exaggeration/embellishment/fabrication that got the ball rolling is (hopefully) forgiven and forgotten.

A fallen unicorn

In the heyday of social media startups, ‘fake it till you make it’ was common advice doled out to new startups. Entrepreneurs were told they would be at a disadvantage if they didn’t deploy this tactic (as their competitors surely would). There is evidence that several current tech giants (including Uber) veered far from the truth and even flouted the law in their aggressive path to growth. But to date, no one has taken this tactic to more of an extreme than the fallen unicorn Theranos.

Founded in 2003 by then 19-year-old Elisabeth Holmes, health startup Theranos raised over $700 million from investors on the promise of a revolutionary blood-analysis technology capable of producing rapid and accurate results from a simple finger-prick sample. By 2014, the company had reached a staggering peak valuation of $10 billion. Alas, this value was built on false claims: the system shown to investors had been faked in the hope that the company’s R&D team would be able to turn it into reality later on. Theranos could never deliver the dreamed-up technology, and information from whistleblowers eventually lead to the demise of the company, and a fraud conviction for Elisabeth Holmes in 2022.

“Where exactly is the line separating acceptable hype from lies and fabrication?” – Willem Broekaert

Many consider Theranos to be an extreme outlier – an example of ‘fake it till you make it’ being taken far too far through an exceptional combination of charisma, dishonesty, and immorality. But can we prevent similar cases from cropping up, and where exactly is the line separating acceptable hype from lies and fabrication?

A fine line

The life sciences industry is regarded as fact-based and data-driven – due diligence from investors is notoriously thorough when examining startups with new technology ideas. However, when entire datasets are skillfully fabricated, it is not so easy to detect deception without access to insider information. This is why some investors request key proof-of-concept data to be generated or repeated by independent players, such as other academic laboratories or contract research organizations.

Of course, startups based on new ideas also need to be able to sell their story to grab the attention of investors. The investor pitch will typically contain both current information (such as underlying principles of the technology, supported by data and prototypes), as well as forward looking information about future versions of the technology, potential applications, and market prospects.

Fact vs. Fiction

When it comes to the current information, we advocate zero tolerance for any shade of ‘faking’. At this point, the line is the truth: any data shown should be real and presented in full transparency so as to be verifiable and repeatable. If entrepreneurs want investors to back their company, they need to engage with each other in a long-term relationship which requires mutual trust, respect, and sustained transparency. Presenting incorrect or misleading information is a very bad start, bound to derail that much-needed trust sooner or later. The life of a startup is full of roadblocks and setbacks, and trust is the glue that keeps the stakeholders together to navigate the difficult periods ahead.

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That being said, we believe there is some room for artistic license when entrepreneurs are painting a rosy picture in their forward-looking information. Since no one can predict how the future will play out, there is no way to tell whether the promises will come true. The technology as it stands might very well evolve into future incarnations that allow for applications beyond what is currently possible.

It is natural – even desirable – that entrepreneurs are passionate and optimistic about the future of their company. They need to walk a fine line between selling their long-term vision with confidence and conviction, while not overselling it to the point where investors turn cynical and disengage. Our key recommendation is to clearly separate fact from fiction, and plainly point out all underlying assumptions being made. In this way, investors can verify future projections in the business plan and make up their own mind about how realistic they are. Then, if there is a match, they can confidently engage in a long-term trust-based relationship with the startup to help realize the entrepreneur’s vision.