Good morning [%first_name |Dear Reader%],

Over the past few months, three founders of three large and famous startups have found themselves accused of fraud. 

The most recent is, of course, cryptocurrency exchange FTX’s Sam Bankman-Fried (SBF). This week, US prosecutors opened a sweeping fraud investigation into him and others involved in the collapse of the world’s second-largest crypto exchange. 

Then, there was Theranos founder Elizabeth Holmes, who was sentenced to about 11 years in prison last month. Not too long ago, Holmes had been celebrated as “the world’s youngest self-made female billionaire” by Forbes magazine and the “next Steve Jobs” by Inc. based on her claims to have revolutionised diagnostic technology. 

And finally, there’s salesman-turned-billionaire Trevor Milton, the founder of Nikola, who was convicted of fraud in October for misleading investors in the electric truck company.

All three founders, before their fall from grace, were considered young and intrepid geniuses by the investors who had bought into their companies. FTX, for instance, had been valued at a whopping US$32 billion even in January this year, when crypto prices were sinking. Theranos has been valued at over US$10 billion in 2013 and 2014, and Nikola at US$34 billion in 2020. 

One of FTX’s investors Sequoia Capital had, in fact, published a 73-page-long profile of SBF just months before things went downhill titled: Sam Bankman-Fried Has a Savior Complex—And Maybe You Should Too. Sequoia eventually pulled that article down. 

The narratives spun out about these three founders isn’t anything we haven’t seen before. Larger-than-life visionaries and eccentric innovators setting out to solve the world’s biggest problems—inequality, lack of access to healthcare, climate change—with one elegant solution. All-powerful Gods/heroes committed to using their powers for good. 

It’s an age-old story. It’s also a simplistic story. One that, as we now see, wasn’t so much built around the value of the solutions they were touting, but the charm and personality of the founders themselves. 

But here’s the thing, right? While there are always going to be discerning members of the audience who ignore the charm and ask critical questions (like, is the king really wearing any clothes?), there’s also always going to a large number of people, perhaps even a majority, who continue to be blinded by the fairy tales. 

So what really separates the two?

Can investors really ever be friends with founders?

Sequoia’s profile of SBF is chock full of vivid, intricate scenes peppered with hyped up dialogue.