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ELIZABETH HOLMES’ STARTUP Theranos made her a multi-billionaire hailed as the next US tech visionary by age 30, but it all evaporated in a flash of lawsuits, ignominy and, finally, criminal charges.
The rise and fall of Holmes, who today was convicted of defrauding investors of her biotech startup, is a heavily-chronicled saga that prompted a hard look at her methods but also the unseemly aspects of startup life.
In many ways, Holmes fit the image of a Silicon Valley entrepreneur, from her dark-coloured turtleneck sweaters that evoked tech legend and Apple founder Steve Jobs to her dropping out of California’s elite Stanford University.
But much like in her trial, the fundamental question has been whether she was a true visionary who simply failed, as she claimed on the stand, or a skilled self-promoter who took advantage of a credulous context to commit fraud.
Her story begins in the US capital Washington, with her birth to a Congressional staffer mother and a father whose online biography says he was once an executive at Enron – an energy company that collapsed in a massive fraud scandal.
She won admission to Stanford, and there began work on cutting-edge biomedical initiatives, founding in 2003 what would become Theranos when she was just 19.
Part of Holmes’s ability to convince her backers was her apparent deep personal commitment – she applied for her first patent while still in college and after dropping out, convinced her parents to let her use her tuition savings to build the company.
‘Youngest woman self-made billionaire’
By the end of 2010 she had raised a whopping $92 million in venture capital for Theranos, which she pledged was developing machines that could run a gamut of diagnostic tests on a few drops of blood.
Over the next couple of years, she assembled what one news report called the “most illustrious board in US corporate history”, including former secretaries of state Henry Kissinger and George Shultz as well ex-Pentagon chief Jim Mattis.
“Sharp, articulate, committed. I was impressed by her. That didn’t take the place of having the device prove itself,” said Mattis in a surprise appearance on the stand.
Theranos hype kicked up another gear in 2014 and in the span of just over a year, a turtleneck-wearing Holmes appeared on the covers of Fortune, Forbes, Inc. and T: The New York Times Style Magazine.
Forbes gave her a $4.5 billion net worth in 2014, which was based on her half ownership of Theranos, and noted: “Youngest woman on Forbes 400; Youngest woman self-made billionaire.”
This glowing coverage had an impact on Theranos investors like venture capitalist Chris Lucas who told Holmes’s trial the Fortune article made him “proud we were involved, very proud of Elizabeth.”
But there were some things that didn’t end up in those glowing reports that gushed with statements like “Steve Jobs had massive ambition, but Holmes’s is arguably larger.”
Silicon Valley sexism?
For one, she personally put the logos of pharma giants Pfizer and Schering-Plough onto Theranos reports hailing its own blood-testing technology, which were then shared with investors.
That was done without the companies’ permission and was a key piece of the prosecution’s argument that she deliberately tried to inflate Theranos’s credibility in order to win over backers.
She also kept secret the machines’ failings and the fact that once Theranos began to do diagnostics on real patients, some of the tests were done using the same equipment sold to standard labs.
Ultimately though, it was a series of Wall Street Journal reports starting in 2015 — which Holmes tried to kill by appealing to the paper’s owner and Theranos investor Rupert Murdoch — that set the company’s collapse in motion.
Holmes’s case also raised questions about why she was prosecuted, but not other tech CEOs who engaged in the “fake it until you make it” Silicon Valley method or other bad behaviour.
Ellen Pao, the former CEO of Reddit and critic of tech industry discrimination, argued in a New York Times opinion piece that sexism bears some blame.
She noted that WeWork’s Adam Neumann and Uber co-founder Travis Kalanick raised billions with hype, while there have been allegations of racism and sexism at Tesla and misleading claims about vaping from Juul’s leaders.
Holmes “should be held accountable for her actions as chief executive of Theranos,” Pao wrote.
But “it can be sexist to hold her accountable for alleged serious wrongdoing and not hold an array of men accountable for reports of wrongdoing or bad judgement,” she added.
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There should be a lot more falling stars in silicon valley soon, they have had a very long boom and it can’t go on forever. Since about 2014 venture capitalists have thrown billions at anything AI or robot with the slightest potential to put some of those pesky humans out of a job.
The influx of covid money will keep it going for another while but its not sustainable. Silicon valley hates our privacy and freedom so tis no harm if they took a bit of a tumble
@Quiet Goer: This wasn’t about a failed venture, it was about fraud
@Mickety Dee:
Surprised it’s seen as fraud. She offered a vision to investors, the business failed. Unrealised promises and unreturned investments. Don’t all businesses do that? With some white lies swept under the carpet.
If CETA gets approved here by FG, corporate investors will sue for any unrealised returns on investments in a new ‘investment court’.
@Dean: You’d be very much on your own being surprised that it’s fraud Dean. Have you not read a single thing about it? Good lord man …..
@Dean: it was a fraud, they doctored the results of tests, told investors that their technology was tested and it worked and they sold these “working” machines to Walgreens. Even her voice was a fraud.
@Dean: it was fraud. She took millions from investors for a product tag she knew didn’t work. She doctored the test results to cover up her lies. She threatened and fired staff who spoke out against her or raise concerns of negligence and credibility. Everything about her and her business was fraudulent.
@Mickety Dee: This is a very simplistic view of investing in startups.
If you wanted to buy a healthy pig and somebody sold you one, that they not only knew to be unhealthy, but terminally ill, that would be fraud, because they offered a tangible product, which you accepted to purchase and you have a reasonable expectation that it should be fit for purpose and of merchantable quality.
If on the other hand, they told you that they had a vision of breeding flying pigs which would change the world and were working towards making that a reality, that they were in the research and development phase and needed investors to fund that for a share of any future profits if and when pigs flew, in that instance you are investing in an idea that may or may not deliver and if pigs don’t fly you lose.
Tbh this is something I can’t get my head around. I really do try but I can only ever seem to translate all this into….. “people with shed loads of money throw said money at anyone who dresses in clothes not suited to the climate they reside in. These individuals can also make something that doesn’t exist sound like it’s innovative just by using made up buzz words and know that it’s enough to fool the afore mentioned people who have the shed load of money”…!!!!
That’s basically it in a nutshell.
@2thFairy: what worries me more is that a former director of the American CDC is a board member!
The fact that he could be so fooled by such smoke and mirrors doesn’t instil a lot of confidence in me for that institution
@2thFairy: Yeah, seems that the people with all the money will throw it in all directions in the hope that some of it sticks to a startup that actually delivers, and they are in on the ground floor of the next Facebook or Twitter or whatever.
Wasn’t there a similar one about a perpetual-motion device that could deliver unlimited energy?
Just looked it up – Steorn!
@2thFairy: Frankly, most of the powerful old white guys around her were thinking with their libido…..
@2thFairy: she faked the test results. This was a lot more than just using buzz words. This was a very elaborate con by getting endorsements from highly respected individuals in the industry and faking the results of her diagnostic tests. So elaborate was her con even she believed her lies because of her sense of entitlement and importance. You should listen to the podcast. She made people believe they were going to change the world in terms of healthcare and back up those claims with fake results and when anyone questioned her ethics she destroyed them. Do you only victim blame when someone has money or do you do it to poor people too?
Total fraud. I mean. Ridiculous self-aggrandizing and what looks like shameless lies. You’d also have to wonder about the role of the board. Seems like they did ….. basically nothing other than get paid to lend their own prestige to the company and give it a sheen of legitimacy.
She’s going to jail!!!
@Marjory Proops-Tinklebottom: nah man. You should check out the rebranding she has done on herself.
“Fallen star”
Scammer is the correct term
Not even uncommon here. Once had to give the board a demonstration of the software. It was basically a fancy PowerPoint slide show with some extra hardware. As far as I was concerned it was a show of how the planned software would work. The MD wanted me to leave after the demo but a board member wanted me to stay for questions. They then proceeded to talk about roll out to clients and the sales plans. The MD had told them all development was complete and the reality was we were still fixing the last major update that had been rushed the year before. The demo had no stable code and we hadn’t really started any development. I was stuck there as he lied through his teeth when asked about the roll out I said it would be at least a year and MD scoffed 2 years later we finished the code
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