Mid-Week Updates, No 22

Tech in Ukraine, Tech in prison and a bit of Turkey

Thanks for the feedback on my Ukraine update from yesterday and yes, it was not a very optimistic take on things, but I try to be as reality based as I can. Whichever way you look at it, things look grim and while the war may draw to some sort of conclusion sooner than we may think today, the subsequent disintegration of Russia is not going to be a pretty affair. Luckily I have readers who point me to more positive scenarios and this article in the WSJ is one example which looks forward to a strong and determined Ukraine with a vibrant tech community:

The country emerging from Putin’s War will be a formidable new force in Europe whose interests and outlook place it firmly in alignment with the U.S.

Let’s hope so. The national Ukrainian resolve and the spin-offs coming out of ‘war tech’ will be fertile ground for future investors and hopefully a new European success story.

The Holmes Saga

Elizabeth Holmes presented herself yesterday at the Federal Prison Camp in Bryan, Texas to start serving her eleven-year sentence for defrauding investors in the Theranos case. A few comments on this.

The sentence in my mind is, for a non-violent crime, a pretty harsh one and symptomatic of the US criminal justice system. While billions of dollars of investment have gone up in smoke in the Theranos case thanks to Holmes’ deceptions, some of the culpable behaviour is attributable to the investors themselves. I see this regularly in the venture world where eager investors often willingly ignore warning signs, are subject to deep fears of missing out or are simply seduced by the sometimes toxic combination of unrestrained founder energy and the possibility of access to a market worth billions. And in this case it was a founder who managed to convince the world she was the female reincarnation of Steve Jobs. Time to get in the deal and when it was time to re-up, more cheques were written. Really, the brightest among us are capable of shutting out the negative as they so want to believe it. The ‘old men’ and ‘young female founder’ dynamic no doubt also played a role here.

And so often it happens that venture capitalists and private equity folks just proceed even when they are sensing the bad omens, yet still betting that things will somehow work out. Holmes was a master in taking her investors down this ill-fated journey, knowingly misrepresenting stuff. That said, I would not be comfortable putting her away for this long. Her reputation and career are destroyed forever, a large fine and some nominal prison time would have sufficed here. And yes, this will happen again and again. The lure of an easy fortune will keep fooling even the best investors. If you are in the business, stay alert, always.

Turkey

Given the attention I gave the subject a few weeks ago, I should have closed the loop on Turkey’s elections. Yes, the closer we got to the run-off of last Sunday, the clearer it became that Erdogan was going to secure a win. He took 52% of the vote while his opponent Kiliçdaroğlu put in a commendable 48%. A populist choice with consequences for overall freedom and democracy in Turkey, no doubt. For the West an uneasy partner who is sometimes ‘in’, but sometimes also quite ‘out’ and therefore not the most reliable NATO partner. But he negotiated the Ukraine-Russia deal to allow grain exports, so he will be able to play an important role in the war and its eventual aftermath. In that he may well deliver on his promise to make Turkey an independent and globally influential power broker. We’ll see.