Inside Silicon Valley’s Culture of Spin

Founders have learned that they need to embellish to get funded, but at what point does making bold claims become an outright lie?

Inside Silicon Valley’s Culture of Spin
[Photo: Flickr user Markus Spiske; App Photo: Walt Disney (Pinocchio, 1940)]

“I get lied to by entrepreneurs every day,” says Bob Kocher, a venture capitalist who specializes in health IT.


Kocher is regularly confronted by sky-high revenue projections in pitch decks for customers that are currently enrolled in a free pilot; “advisors,” who the founders actually met once for coffee; or a pitch deck that lists a well-known hospital as a customer when the reality is that a lone physician, who happens to be a family friend, is playing with the product.

Kocher says he expects hyped-up marketing to a certain extent as part of the job, but it occasionally crosses the line. “Founders are trying to convince you of their vision, I get it,” he says. “But that often leads to [them] getting loose with knowable facts.”

Exaggerating claims. Glossing over failures. Fudging numbers. Getting loose with knowable facts. These things are all commonplace in Silicon Valley and other tech hubs, where dozens of startups are selling a dream to investors and the press in the hopes of breaking through the pack. Health-tech entrepreneurs, who raked in more than $4 billion in 2015 alone, are among the worst offenders.

But entrepreneurs say they have good reasons for doing it. Many founders use buzzwords like “Internet of Things” or “patient experience,” as they have seen investors flocking to trendy categories. Others have seen their competition exaggerate or cherry-pick the facts, so why shouldn’t they? As one health-tech entrepreneur, who requested anonymity, puts it: “Being honest in Silicon Valley is like being the one member of an Olympic team that isn’t on steroids.”

I interviewed a dozen operators at health-tech startups and investors to understand the culture of hyperbole: Is it helping or hurting founders? And at what point does making bold claims or fudging facts become an outright lie? For startups in the medical industry, this can result in real or perceived patient harm, as well as investigations and/or regulatory oversight For this reason, I focused on the health-tech space but recognize that hype isn’t “sector agnostic,” as they say. Here’s what I learned.


Where Is The Pressure To Exaggerate Coming From?

Kocher maintains that he’s far more likely to take a second meeting with an entrepreneur that levels with him. After all, he’ll find out anyway about the missteps and challenges if he agrees to finance the company and join the board. And it’s far better to hear it from the entrepreneur up front than find out later, which often results in an atmosphere of mutual distrust.

Fellow health investor Lisa Suennen is also on the hunt for straight-shooters. She’s usually able to see through the marketing and hype after decades of investing, but not always. On one occasion, she showed up to an initial board meeting for a portfolio company and saw an unfamiliar data set on the whiteboard. “These numbers were different than the ones I had seen on the pitch deck,” Suennan recalls. “They told me that I had obviously been given ‘investor data’ rather than the ‘real operating data’.”

But entrepreneurs who have tried being honest with investors say they have been burned. “VCs will give you points for honesty, but they won’t give you money,” says one entrepreneur who requested anonymity, as they are currently raising a round. “So we all pick and choose data to show growth.”

A twentysomething biotech founder, who also asked to remain anonymous, recalls an angel investor taking the team out to lunch to rewrite all of their bios before a VC pitch. That same founder was also turned down from a financing round for having “too much integrity.”

Twine Health CEO John O. Moore says the team did open up about their failures in pitch meetings, which might have been a factor in how long it took them to raise cash. Advisors counseled them to avoid using simple terms, like doctor, in favor of more vague ones, like provider. And Paul Roscoe, the CEO of Bessemer Venture Partners’ funded Docent Health, describes honesty as a “luxury” that he’s only been able to pull off because he’s spent multiple decades in the in the industry.


Even seasoned investors like Suennen, who say they always appreciate honesty, admit that entrepreneurs who gloss over their failures will often have a leg up over their competitors. “Embellishments might help in the short term,” she admits. “And many startups do get funded if the due diligence is poor.”

Does Hyperbole Really Harm Anyone?

Why should we care about a little gloss? It’s not really hurting anyone if a startup puts a trumped-up revenue projection in their pitch deck, or uses buzzwords instead of plain English.

One downside to jargon and hyperbole is that it often leads to misunderstanding among those outside the company, including the press, which shouldn’t be the intention for any marketing department. And the core product can easily get lost in the haze of a big vision.

Another is that it can help entrepreneurs in the short-term, but not in the long run. As Kocher explains, health care financing is a seven to 10-year investment. Nothing happens quickly in the industry, so investors expect to stick around for the long haul. CEOs who are found out for fudging numbers on a pitch deck are typically the first to get replaced. “If you sell me a dream, you’ll have to be stuck with this upset crazy person who doesn’t trust you for a decade,” says Kocher.

But far more concerning is when startups begin to believe their own hype and start making short-cuts to ramp up faster than the market typically allows. A prime example is Zenefits, a company that cast aside compliance for hypergrowth by allowing unlicensed salespeople to sell insurance. In some cases, this can result in potential harms to patients. Theranos, the blood-testing startup that promised to revolutionize the industry, is now facing a criminal probe and a federal investigation. The Centers for Medicare and Medicaid, or CMS, recently expressed concerns that deficiencies with the Newark, California, lab put patients in jeopardy.


We’re likely to see many more examples of companies like Theranos and Zenefits unless the startup world makes a big shift to a whole lot more honesty, transparency, and good old fashioned plain English.

Are you an investor or entrepreneur and have an opinion to share? Or you strongly agree/disagree? Reach out to me @chrissyfarr

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About the author

Christina Farr is a San Francisco-based journalist specializing in health and technology. Before joining Fast Company, Christina worked as a reporter for VentureBeat, Reuters and KQED