The end of simulation in Silicon Valley

Recent charges, convictions and convictions all indicate that the start-up world's habit of playing fast and loose with the truth is actually having consequences .

< p class="css-at9mc1 evys1bk0">SAN FRANCISCO — Pretending is over. That's the feeling in Silicon Valley, with a bit of schadenfreude and a dash of paranoia.

Not only has funding for energy-guzzling start-ups dried up in the over the past year, but now fraud is also in the air, as investors take a closer look at start-up claims and a tech downturn reveals who took the 'fake' philosophy too far. until you do".

Take what's been going on in the past two weeks: Charlie Javice, the founder of the aid startup financier Frank, was arrested, accused of falsifying customer data. A jury found Rishi Shah, co-founder of adware startup Outcome Health, guilty of defrauding clients and investors. And a judge has ordered Elizabeth Holmes, the founder who defrauded investors of her Theranos blood testing startup, to start an 11-year prison sentence on April 27.

These developments follow the arrests in February of Carlos Watson, the founder of Ozy Media, and Christopher Kirchner, the founder of software company Slync, both accused of defrauding investors. Still to come are the fraud trial of Manish Lachwani, co-founder of the software start-up HeadSpin, which is due to begin in May, and that of Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, which facing 13 charges of fraud. later this year.

Taken together, the chorus of accusations, condemnations and condemnations has created a sense that the fast and loose trickery of the start-up world actually has consequences. Despite the many high-profile scandals (Uber, WeWork) and downfalls (Juicero) of this generation, few start-up founders, aside from Ms. Holmes, have ever faced criminal charges for pushing the boundaries of buffoonery. business as they disrupted us in the future.

Slow funding may be to blame. Unethical behavior can be largely ignored when times are good, as it was for tech start-ups in the 2010s. Between 2012 and 2021, funding for tech start-ups in the United States has increased eightfold to $344 billion, according to PitchBook, which tracks start-ups. More than 1,200 of them are considered "unicorns" worth a billion dollars or more on paper.

But when the money easy dries up, everyone repeats Warren Buffett's proverb about finding out who's swimming naked when the tide goes out. After FTX filed for bankruptcy in November, Brian Chesky, Airbnb's chief executive, updated the adage of millennial tech founders: "...