If you’ve heard of Elizabeth Holmes you probably can picture a piercing stare that goes right through you from a small, blonde woman who carries herself almost exactly like Steve Jobs. If you haven’t heard of her, I encourage you to to stop reading this immediately and go buy Bad Blood by John Carreyrou. It was the best book I read last year by a mile.
Now, to set the record straight, I’m not being judgemental, Elizabeth Holmes from afar meets all the criteria of a sociopath. The woman actually did (does?) think that she was the female embodiment of Steve Jobs. She dressed like him, referred to all her company’s products as “the iPod of healthcare”, and hired the same advertising team that did Apple’s ads. Among other things.
Holmes’ founded a company named Theranos. As of less than five years ago, it was considered one of the most prolific companies in healthcare, if not tech as well. Theranos’ value prop was that it was able to take an otherwise negligible amount of blood sample from a person and perform a wide variety of blood tests almost instantaneously.
The Holmes persona checked off boxes that Silicon Valley’s startup world loves to fawn over. Dropout from a prestigious school? Check. Obsessed with work, to the point of having no personal life? Check. Under the age of 32? Check. (Paul Graham in 2013), describing what Silicon Valley VCs look for: “The cutoff in investors’ heads is 32.” Also: “I can be tricked by anyone who looks like Mark Zuckerberg.”) Only hobby is exercise? Check. Steve Jobs worship? Check. Unnecessary secrecy around your innovation? In tech, secrecy around new inventions is the norm.
The business model, novelty, and Holmes’ persona launched Theranos into the spotlight as they raised over $700 million with a valuation at $10B in 2013. While that may seem pedestrian nowadays, there were significantly fewer unicorns of that size almost a decade ago. There are already more than 500 unicorns in 2021.
(Source: CB Insights - Unicorns per year from 2013-2018)
Holmes founded the company in 2003 with a trust set up for education by her parents. Her boyfriend, Ramesh “Sunny” Balwani”, who was a software engineer, joined the company as president and COO in 2009. Balwani ran the company’s day to day operations, focused on developing their product. Holmes and Balwani recruited dozens of people to work on their project: simplifying the blood testing experience by minimizing pain and waiting time.
Balwani led Theranos’ operations despite having no prior experience or training in healthcare, science, or medical devices. He also was well known for being paranoid and a compulsive liar. To the point of living in his own world. Unsurprisingly, that was an issue with employees who noted there also were no qualified people on the board. The company was a ship with no technical rudder.
(An excerpt from Carreyrou’s Bad Blood, if you needed more convincing)
Eventually, in 2011, Theranos got some traction after Holmes was introduced to former Secratary of State George Schultz who literally joined Theranos’ board within the month. Not weird. Schultz then introduced Holmes to her soon-to-be “all star board” members over the course of the next three years. Theranos shortly after received a $350 million investment from Safeway to install its testing machines in 800 locations. Unsurprisingly, Holmes and the team missed dozens of deadlines and produced questionable results. So, the deal was called off FOUR YEARS LATER in 2015. Seemingly unaware of the issues going on with Safeway’s rollout, Walgreens also struck a partnership with Theranos for a rollout of their own. I’m telling you, read the book.
In addition to the physical-location rollout issues, GlaxoSmithKline and Pfizer both denied claims around the same time that Theranos’ blood tests were being used for patients undergoing drug trials. Despite all of these issues and questionable results, more money continued to pour in and more partnerships were drawn up. Theranos also was in the news for violating dozens of medical practices in their lab like improper equipment and cleanliness, undertrained staff, and abnormal testing procedures.
Finally in 2015, Carreyrou’s initial exposé was published in the Wall Street Journal, essentially saying that none of their technology actually worked. Which was correct. Around the same time, several well established medical professionals also raised significant doubts about the company and its product. It’s hard to believe that it took that long even after she had this quote in a New Yorker profile describing Theranos’ tech less than a year prior:
A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.
That’s what I wrote to summarize my 7th grade chemistry labs as well. If you ever hear that from a founder of a biotech company, back away.
Right now, per the New York Times, Holmes has been charged with 12 counts of wire fraud and conspiracy to commit wire fraud. She has been accused of knowing that Theranos blood tests were unreliable, of harming patients who relied on them and of overstating the company’s business deals and performance.
Seems like not enough given that she lied to patients, doctors, and investors about the accuracy of Theranos’ product. Lives and health were put at risk. Balwani will not be under trial until next year.
Holmes was an interesting domino to fall first. As the Verge put it, her case was the first of several with Travis Kalanick (Uber), Adam Neumann (WeWork), and several other high profile executives - wink wink - that crashed and burned. All of these companies, except maybe Uber, are mostly tech adjacent. It sure helped with investors, but usually left founders a bit out of their depth when push come to shove and a company had to be run.
The Theranos story will undoubtedly go down in the pantheon of failed Silicon Valley bets. Goes to show that sometimes all you need is gumption, a great idea, and funding to really blow up a whole sector.