In March 2018, Theranos, a Silicon Valley blood test startup, came to a dramatic end with the founder and CEO, Elizabeth Holmes, being indicted on fraud charges. It turned out, Theranos labs lied about their phlebotomy technology, intimidated employees, and diluted blood samples. It was a shocking conclusion after only a couple years ago, Holmes had been hailed as “The next Steve Jobs” and “One of the youngest self-made billionaires.” From the very beginning, Theranos had caught the attention of big investors including Walgreens who poured millions of dollars into it. In the end, the Theranos scandal left behind a bloody mess. It destroyed relationships, lost more than $600 million of investors money, and put patients’ health in jeopardy.
Timeline of Theranos Blood Test Startup
- 2003: Holmes launches Theranos at 19 years old after dropping out of Stanford. The company is advertised as changing health care by lowering costs of preventive blood testing and needing to only prick your finger for a dozens of blood samples.
- 2013: Theranos labs goes public with the launch of their device, Edison. Walgreens starts a partnership with Theranos and announces the first wellness center opening.
- 2014: Holmes is featured on several magazine covers, projected to be worth $4.5 billion, and Theranos is valued at $9 billion.
- July 2015: FDA clears Theranos labs for HSV-1 test. They also make a partner deal with Capital BlueCross, an insurance company, to build wellness centers on the east coast.
- October 2015: A scathing article in Wall Street Journal by John Carreyrou is published. It claims Theranos lab technology, Edison, can only do 15 out of 240 tests so they have been diluting the blood and sending to other laboratories. Also the article states the results from Edison are highly inaccurate. Holmes fights back by interviewing on several shows.
- 2016: The FDA inspects Theranos laboratories to find serious issues with equipment and quality control. Walgreens terminates its contract with Theranos by shutting down 40 wellness centers and files suit.
May 2018: The U.S. Securities and Exchange Commission charges the Theranos CEO with long term fraud of exaggerating the performance of labs technology and profits. Holmes is fined and banned from owning a public company for ten years.
How Did Elizabeth Holmes Hide Theranos Problems?
Holmes has no background in medical field and no public proof Theranos blood test worked, yet investors and the media were convinced she had successfully designed a diagnostic machine.
Here is how Elizabeth Holmes Fooled the Public:
- Holmes described herself as a martyr who was sacrificing everything to make a difference. This made people root for her and be against any doubters. After the article by Wall Street Journal was published, Holmes said “This is what happens when you try to change things. First they think your crazy and then they try to fight you.”(Check out the rest of the interview, here).
- Second, she dressed in black turtlenecks (the same outfit as Steve Jobs) in every interview and magazine cover positioning herself as a figure of Silicon Valley innovation.
- Last, Holmes knew how to avoid questions about the Theranos labs but describe the company to make people feel excited in its vision. One Forbes reporter said he had doubts about Theranos labs when interviewing Holmes “but exited the interview briefly fantasizing about what it would be like to work at Theranos, something I’ve never done after interviewing a biotech CEO.”
When Theranos and Elizabeth Holmes were finally exposed as frauds, it became clear just how brilliantly Holmes had lead people on. She knew how to manipulate answers to make questions about her technology seem outrageous and that Theranos blood test had already proven that it worked.
Keep in mind, Theranos was also known for having employees sign heavy confidentiality agreements and were not afraid to sue or fire anyone who talked.
How Did The Theranos Scandal Get Out?
The fraud came to light by a former employee, Tyler Schultz. He happened to be the grandson to George Schultz, a former secretary of state and also on the board for Theranos. When Tyler worked for them, he witnessed machines failing to pass quality control tests and employees throwing away outlying results. Tyler quit the company and reported the Theranos blood test to a reporter. Slowly the revelation brought down the company but not before Theranos threatened to sue him. Unfortunately, after blowing the whistle on the company, Tyler’s grandfather stopped talking to him because he felt Theranos CEO, Holmes, could have come through on all the promises.
Looking back upon Theranos
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