Elizabeth Holmes, a Stanford University dropout just like Steve Jobs and Mark Zuckerberg. She was the youngest female self-made billionaire on paper while still in her 20s. Her company, Theranos, raised over $900 million, not from retail investors like us, but investors like Tim Draper and Rupert Murdoch. The idea was to check for cancer, cholesterol, diabetes, and a host of other diseases in a matter of minutes using affordable methods. But the company's house of cards began to collapse soon after.
As a native Washingtonian, Elizabeth Holmes, CEO, and co-founder of Theranos was raised in the District. Her father, a vice president at Enron, and her mother, a worker for a Congressional committee, had a strong background in both business and politics.
Holmes attended Houston's St. John's School. Throughout high school, she was interested in computer programming and claims to have found her first company selling C++ compilers to Chinese institutions.
Holmes was encouraged to pursue medicine by her great-great-grandfather Christian Holmes, a physician, but she learned she was afraid of needles. This would later impact her decision to create Theranos. Holmes dropped out of Stanford in 2004 and utilized the remaining tuition money to create a consumer healthcare technology firm.
This startup, dubbed "Real-Time Cures," set out to democratize healthcare. Holmes said that her dread of needles inspired her to develop a blood test that required just a little bit of blood from the tip of a finger.
While still a teenager, Holmes founded Theranos back in 2003, and it immediately became a sought-after commodity in Silicon Valley, garnering a slew of prominent investors and business partners eager to carry her products. In 2015, Holmes' firm was valued at $9 billion(Too big to fail right?), thanks in part to her image as the next Steve Jobs(Even Jobs was a dropout).
Theranos was a health technology corporation considered the “next big thing” in blood testing. Theranos' blood collection technology's selling point was that it only required 1/100 to 1/1000 of the blood volume ordinarily necessary for testing.
THE VEIL DROPS
At the same time, concerns were raised regarding Theranos' technology. Ian Gibbons, Theranos' head scientist and one of the company's early recruits, advised Holmes that the tests were not yet suitable for the public to undergo and that the technology had flaws. The scientific community started to express their worries about Theranos as well.
The Food And Drug Administration started examining Theranos in August 2015, and authorities from the federal organization that regulates labs discovered "significant errors" in the tests Theranos was doing on patients.
By October 2015, Wall Street Journal writer John Carreyrou had released his research into Theranos's technological difficulties. Carreyrou's findings triggered the start of the company's downhill spiral. Carreyrou discovered that Theranos' blood-testing equipment, Edison, was incapable of providing correct findings, and hence Theranos put its samples through the same machinery employed by established blood-testing firms. ($9 Billion valuations for nothing but using the same thing, lol)
In her appearance on "Mad Money" on CNBC, Holmes defended both herself and her business. This is what happens when you strive to change things and first people think you're crazy, then they fight you, and then all of a sudden you change the world," Holmes said.
By 2016, the FDA, the Centres for Medicare & Medicaid Services, and the Securities and Exchange Commission were all investigating Theranos. Holmes was barred from the laboratory testing sector for two years. By October, Theranos had ceased operations of its labs and wellness centers. The SEC accused Theranos, Holmes, and Balwani of "massive fraud" in March 2018. Holmes agreed to relinquish financial and voting control of Theranos in exchange for a $500,000 fine and the return of 18.9 million shares of Theranos stock. In June 2018 Holmes and Balwani were indicted on criminal fraud charges. Both plead not guilty. By September 2018 Theranos announces that it will dissolve.
Later in the episode, Holmes announces that she is pregnant. Following the birth of her child, a court file shows that Holmes intends to claim that she was under the control of Balwani, whom she describes as abusive, at the time of the alleged crimes. Balwani has denied the accusations in court papers.
By November 2021, Holmes took the stand to defend herself. She maintained that she didn't attempt to deceive investors or patients. She alleged that Balwani oversaw the development of financial models for investors and was violent in their relationship.
On January 3, 2022, Holmes was convicted of scamming three further investors and conspiring to do so. She was found not guilty of three charges of cheating patients who paid for Theranos testing, as well as a conspiracy allegation. The jury was unable to reach a verdict on three charges involving individual investors. A date for sentencing was not immediately scheduled. When US District Judge Edward Davila sentences her, she risks up to 80 years in jail but is expected to get a considerably shorter term.
In the end, destiny had a different plan and Theranos became one of the most notorious examples of startup greed and arrogance.