See, when you do due diligence you should assume that the company lies
Really? I'm not naive enough to believe that everything you get to hear during due dilligence is 100% truth but I also don't think we live in a world where everyone can get away with deception and lies. After all the civilized world has developed a constitutional state with a law that offers some level of protection.
So there is a point where business between a company and an investor is conducted in good faith. If it comes out later that the company has forged technological results to defraud investors, to me that's a very good reason to sue. Saying the investors didn't look well enough is futile as a) you could use the same argument to justify pretty much any case case of fraud and b) it's impossible to do perfect due dilligence.
When there are millions of $ on the line 'good faith' doesn't cover it any more. You have to make sure that you are spending that money on something real. That doesn't mean there can't be risk involved, it doesn't mean that companies invested in won't fail. But you owe it to yourself, your partners and those who trusted you with their hard earned money that you do everything in your power to invest wisely.
The state will protect you if you have done your own homework.
I'm not saying the investors didn't look well enough, I'm saying that if they hired some party to look at the technology that party was asleep at the switch or they didn't do due diligence at all. There is no way that outside expert in the field would have been fooled if they came prepared to look at the technology in depth.
If the investment was done before the technology was realized then they probably would have raised some issues with respect to the fact that the core tech was unproven and might very well not work for a number of reasons.
Due diligence will never be perfect, that we agree on. But to get the core issue wrong is extremely rare, first and foremost you verify each and every claim the company made. It is not a discovery process, it is a verification process and given the fact that Theranos made some pretty strong and very verifiable claims is what makes me wonder how much DD was actually done.
From the outside looking in it looks as if a whole bunch of totally clueless investors couldn't wait to fork over their money to not miss the boat without so much as a shred of doubt about the miracle machine.
Really? I'm not naive enough to believe that everything you get to hear during due dilligence is 100% truth but I also don't think we live in a world where everyone can get away with deception and lies. After all the civilized world has developed a constitutional state with a law that offers some level of protection.
So there is a point where business between a company and an investor is conducted in good faith. If it comes out later that the company has forged technological results to defraud investors, to me that's a very good reason to sue. Saying the investors didn't look well enough is futile as a) you could use the same argument to justify pretty much any case case of fraud and b) it's impossible to do perfect due dilligence.