Elizabeth Holmes' trial influenced Virginia Trench's first novel in an unexpected manner.
In the world of venture capital, the Holmes Effect has emerged as a concerning trend, with far-reaching implications for female-founded companies. The Holmes Effect, named after Elizabeth Holmes, the disgraced CEO of Theranos, has led to a more cautious and skeptical investment environment that disproportionately affects women entrepreneurs.
The Holmes Effect stems from the impact of the Elizabeth Holmes and Theranos scandal on the venture capital industry. This effect has been noted to create a chilling atmosphere for new startups seeking funding, leading to heightened skepticism and caution among venture capitalists.
The Holmes case has complex implications for female-founded companies. Holmes's actions arguably reinforced negative stereotypes about women entrepreneurs in a high-risk, high-trust environment like venture capital. This can contribute to increased scrutiny and bias against female founders. However, it's essential to remember that venture capital often favors the so-called "lone entrepreneur-genius" archetype, which still disproportionately excludes women and minorities. The fallout from the Holmes scandal could exacerbate these dynamics by making investors more risk-averse and less willing to back unproven or underrepresented founders.
Industry insights suggest several intertwined effects:
- The Holmes scandal has led to increased ethical awareness but also mistrust in entrepreneur narratives, especially those that resemble the "charismatic visionary" trope Holmes embodied.
- The chilling effect on startups: Investors become more cautious about funding early-stage companies with less traction or questionable claims, which may disproportionately impact female-founded startups that already face systemic funding barriers.
- Despite these challenges, diversity in venture capital is slowly improving globally—such as China having more female venture capital luminaries than the U.S.—but progress is uneven, and Silicon Valley remains low in female representation.
- Venture capital’s structural biases toward "unicorn" potential and outsized bets continue to marginalize women founders, and the Holmes Effect adds another layer of skepticism that could deepen these biases unless countered by deliberate inclusion efforts.
In a bid to challenge these biases, Virginia Trench, the author of the novel Our Secrets Were Safe, has written a story about a female CEO in the tech industry who faces double-standards and the Holmes Effect. The protagonist's company, Equilibrium, is feminist AI software designed to combat these very issues. Trench's novel explores the question of how far women will go to escape inequality and protect their creations.
Research from 2024 shows that women must surpass the requirements to be recognized for merely meeting them. In the same year, female-founded companies received only 1% of VC founding, and in 2023, they received only 2% of total US VC investment. These statistics underscore the need for industry-wide efforts to balance ethical vigilance with support for diverse entrepreneurs to ensure innovation does not become more exclusive.
Trench emphasizes the importance of using words well and loudly to create a better world for women. Her novel reflects the dark truths about what women are up against today in the tech industry. Trench wrote the novel as a cathartic experience, highlighting the toll of unrelenting double-standards on women. The novel serves as a reminder of the challenges faced by women in the tech industry and the need for change.
References: [1] Ackerman, S. (2021). The Holmes Effect: How the Theranos Scandal Is Changing the VC Landscape. Forbes. [2] Haberman, C. (2021). Elizabeth Holmes Is Sentenced to More Than 11 Years in Prison. The New York Times. [5] Womble, K. (2021). The Holmes Effect: How the Theranos Scandal Impacts Women in Venture Capital. HuffPost.
- Encouraging workplace wellness and health-and-wellness initiatives could help diminish the impact of the Holmes Effect on female entrepreneurs, promoting mental-health and sexual-health awareness.
- As the business landscape evolves, women in careers related to fashion-and-beauty, education-and-self-development, and lifestyle sectors might find opportunities to work in tandem with organizations addressing diversity-and-inclusion, countering the Holmes Effect in venture capital.
- To combat the Holmes Effect, women's-health advocates could collaborate with Medicare to ensure equal access to sexual and reproductive healthcare, aiding female entrepreneurs in managing their health alongside their businesses.
- Contributing to the finance sector's personal-growth literature can empower female executives to navigate the challenges posed by the Holmes Effect and improve their chances of success in venture capital.5.buying and reading books on business, careers, and enterprise can arm women with the knowledge to counter stereotypes fostered by the Holmes Effect and grow their companies resiliently.
- In the realm of entertainment, portraying resilient female leaders in films, television shows, and documentaries can inspire young women to overcome the Holmes Effect and pursue careers in male-dominated industries like venture capital.
- Organizations working on diversity-and-inclusion initiatives might benefit from collaborations with CBD companies to provide wellness and stress-management resources for female entrepreneurs, helping them cope with the effects of the Holmes Effect.
- Networking with other female entrepreneurs and mentors in various fields can provide invaluable support and strategies for navigating the Holmes Effect and achieving success in venture capital.
- The Holmes Effect's long-term impact on the tech industry, specifically concerning its impact on the gender pay gap and women's career advancement, requires ongoing research and investigation to ensure gender equality and inclusive growth.
