SAN FRANCISCO — Theranos founder Elizabeth Holmes was charged with “massive fraud” by the Securities and Exchange Commission Wednesday, a downbeat coda to a once high-flying Silicon Valley start-up that promised to revolutionize the blood analysis process.
Fascinating. I would love to know about her psychological motivations. Seems like she might have a lot in common with Bernie Madoff.
Should’ve stayed in school. (It’s safer there.)
I just read the Wall Street Journal article from November 2016 about former Sec. of State George Schultz’s grandson, who was the first whistleblower, and what Theranos did to him. Jeez. Google
“Theranos Whistleblower Shook the Company—and His Family”
Stanford alum Tyler Schulz blew her cover.
Did she graduate from Stanford or drop out early?
Dropped out as a sophomore
The whole story is pretty fascinating. WSJ has been reporting for the last 2.5 yrs, and Vanity Fair has a few good features. The company from the start was a bit bizarre because there was a lot of buzz around them (I work in a related field) and nobody could really figure out what the company was doing. This is super unusual in biotech startups. If you know the field, you can always guess or figure out exactly what the ‘novelty’ in a startup’s technology is, and how they might be able to grow it into a full-fledged sellable technology platform. Plus their board of directors didn’t have a single credible expert in analytical biochemistry, device engineering or pathology. All very strange. And they were in a company without a product for so so long.
It’s a sad Silicon Valley story of inflated expectation, not asking the right questions, relying on connections and clout, etc. A lot of startups fly by the seat if their pants in the beginning and sort things out later. Anyone who used Dropbox in its early days will know the mess it was. Same with many other software/apps. Healthcare on the other hand is not something to experiment on your customers with. In addition to the governing bodies involved and regulations, paperwork, certifications needed to serve customers, chemistry research just isn’t something you can do ‘brute force’ to meet deadlines.
The ability to test small samples of blood exists. There is plenty of academic literature on it. I think she started a company on this thinking it was simple to take academic work and turn it into a scalable business. The real world use of science is complicated by considerations that don’t come up in the basic research lab. Pin prick blood collection is full of contamination from skin, some blood analytes are very low in concentration (especially in those who are ill and seeking the test) and need larger samples to get reliable results, etc. What Theranos ended up doing was diluting their small samples of blood collected from patients and analyzing it with conventional machines. Statistics was not in their favor, so a lot of patients ended up with unreliable results.
There’s plenty of blame to go around. Most of it falls on Holmes, but she was 19 years old. What do people expect? The VCs that piled money on her idea could have asked some medical pathologists before investing. But then a lot of her investors were family friends, as was her board of directors. The Theranos board was full of people with power in government and dragged all of Arizona into passing a law that allows people to get blood work done without prescriptions. There were doctors who spoke up about how unreliable Theranos results were based on their experience with patients, but nobody wanted to hear criticism about a ‘unicorn.’ Had Holmes needed to pitch to the big VCs that are known for backing science/medicine start ups like most other start ups, they would not have gotten off the ground. Or if they did fund it, they would have insisted on subject matter experts joining the board.
Holmes is a charismatic speaker. I’ve seen in person. To me, I think the whole situation was basically how sometimes people stretch the truth to sound better than they are, and things spin out of control. All the reporting leads me to believe that Holmes was/is really immature. She built her ‘brand’ and out of stubbornness couldn’t back down from it. When you get millions in investment and realize you don’t have the science chops to pull off your idea, you need help. But where do you turn to for help if your idea isn’t actually viable? I wonder if she really knew what she was getting herself into when she came up with her business plan, or how much can you really know what you’re getting into when you have 1 year of college and heading into a field where a PhD is the starting point?
Interesting analysis, @geraniol
I’m looking forward to John Carreyrou’s (the WSJ reporter who broke the story) book about it coming out later this spring. Apparently it’s going to be made into a movie starring Jennifer Lawrence.
I wonder if Stanford will accept her back to school if she returns? It will be interesting to see if Dept of Justice wants to make an example of her. I remember reading a blog article 3 or 4 years ago by a writer who used their service and found it wanting and questioned the viability of her company. That blog article was right on point.
Stanford grads are very successful in professions that require degrees. Since Stanford has a reputation as a “startup” school, students at Stanford might have a tendency to think they will be successful in whatever start up they try and that is far from the truth (most startups fail). Experience is far more important in start ups than taking classes at Stanford, most people will be on there 3rd or 4th start up before they have any success.
It seems that Tyler Schulz is doing a similar thing right now. Any investors?
@JamesVanc, have you come back to haunt us as @BenBen1234? You still have that unhealthy obsession with the Forbes list, I see…
Yes poor Stanford, its alumni are not doing well at all…life is tough @BenBen1234 oops i meant @JamesVanc
Just started reading the book about her and it seems she is well-connected and so far has gotten away with some pretty serious deception. Hopefully, if the allegations are true, she will serve time.
Elizabeth Holmes, the college dropout who founded the blood-testing company Theranos, and the company’s ex-president Ramesh “Sunny” Balwani were hit with federal criminal wire fraud charges Friday.
Both Holmes, who stepped down as CEO of the crippled company earlier Friday, and Balwani appeared in U.S. District Court in San Jose, Calif., for arraignment.