I n 2002, Elizabeth Holmes arrived in Silicon Valley with a scholarship to Stanford University and lofty plans of entrepreneurial success. By 2003, Holmes dropped out of college and filed for her first patent. This marked the birth of Theranos, a biotechnology company that would allow consumers to run more than 100 blood tests from the comfort of their homes using what they called the Edison device.
This revolutionary technology caught the eye of investors and soon reached a valuation of more than $9 billion. With her uncharacteristic forced baritone and signature black turtlenecks, Holmes was touted as the Steve Jobs of biotech. In the age of “unicorn” startups, Theranos led the way of innovation in the Silicon Valley. But, as is the case with many tech startups, not all that glittered turned out to be gold.
With her uncharacteristic forced baritone and signature black turtlenecks, Holmes was touted as the Steve Jobs of biotech.
In 2018, the Securities and Exchange Commission, or SEC, charged Holmes with multiple counts of defrauding both patients and investors. With the help of multiple whistleblowers, the Wall Street Journal’s John Carreyrou revealed that the cutting-edge technology trumpeted by Theranos was, in fact, an intricate ruse. On Jan. 3, 2022, a jury found Holmes guilty and scheduled her sentencing for fall 2022.
While the collapse of Theranos occurred nearly a decade ago, the recent conviction and sentencing of Holmes has reignited the media frenzy surrounding the case. In collaboration with John Carreyrou and other Theranos whistleblowers, Alex Gibney created the HBO film “The Inventor: Out for Blood in Silicon Valley.” Streaming service Hulu also released “The Dropout,” clinching an Emmy Award for actress Amanda Seyfried’s haunting portrayal of Holmes. While, in 2015, I had not paid close attention to the Theranos case, its resurgence in popular culture certainly caught my eye in the depths of COVID-19 quarantine.
Before dissecting the crumbling of the Theranos empire, it is important to understand what exactly the company aimed to do. As an avoider of needles, Holmes sought to democratize blood testing by making it a painless process. Through the creation of the Edison device, a small black box which would allow for a few drops of blood to yield a plethora of test results in a short span of time, Holmes promised “less people (would) have to say goodbye too soon.” The mechanism of the Edison was seemingly a simple one: A “nanotainer,” a tiny container made up of two vials, would be filled with the blood drops and placed in a cartridge that would then determine what tests needed to be run within the device.
Through the creation of the Edison device, a small black box which would allow for a few drops of blood to yield a plethora of test results in a short span of time, Holmes promised “less people (would) have to say goodbye too soon.”
Our understanding of blood testing has since developed, and the infeasibility of this idea would now be apparent to any medical professional. Nonetheless, in Theranos’ time, it was eaten up by investors eager to reap the benefits of the lucrative biotech industry. Holmes’ charm only added to Theranos’ appeal, attracting the likes of Oracle’s Larry Ellison and media mogul Rupert Murdoch. The influx of funding she received allowed her to recruit an A-list board of directors, featuring Henry Kissinger, Jim Mattis and George Shultz. With this star-studded lineup, Theranos was a force to be reckoned with.
As its empire grew larger, however, so did the magnifying glass the public held up to it. It wasn’t long, therefore, before the cracks began to show. In 2013, Theranos started placing its Edisons in Walgreens stores. While this agreement with Walgreens seemed to take the company to its zenith, it simultaneously sparked the gradual downfall of Holmes’ unicorn.
As the company began formally testing on human patients, its employees started noticing key discrepancies between what clients were promised and what was taking place in the laboratories. In Walgreens Wellness Centers, Theranos’ menu-like testing lists boasted nearly 200 tests. However, actual blood samples taken by the finger-stick method only accounted for several. The other tests were conducted using diluted blood run through larger diagnostic testing devices created by Siemens and DiaSorin rather than Theranos’ own Edisons. These practices led to wild inaccuracies that were reported back to patients regardless of error.
As the company began formally testing on human patients, its employees started noticing key discrepancies between what clients were promised and what was taking place in the laboratories.
To keep investors on board, Holmes would also often encourage fudging results and running quality control tests over and over again until they passed. When Theranos began offering tests for more severe conditions, patients were often given life-altering diagnoses that were categorically false. Many employees concluded that a moral line had definitively been crossed, and that it was time for them to quit their jobs.
Months after leaving the fraudulent biotech business, former lab workers Tyler Shultz and Erika Cheung were contacted by John Carreyrou from the Wall Street Journal. Carreyrou had caught wind of Theranos’ business practices by way of an anonymous tip, and decided to investigate further. After a series of covert messages exchanged on LinkedIn, the former employees agreed to speak to Carreyrou as anonymous sources.
Shultz purchased a burner phone with cash and proceeded to hand over scores of falsified data. Within weeks, Carreyrou reached out to Theranos for clarity, confronting them with numbers that Holmes and Shultz had discussed in previous correspondence.
Immediately after, the two whistleblowers were faced with a legal nightmare. The Theranos legal team threatened lawsuits, arguing that they had violated nondisclosure agreements and released trade secrets. Shultz, the grandson of board member George Shultz, was made to pay more than $500,000 in legal fees in the coming years. Cheung, on the other hand, was able to protect herself by claiming whistleblower status under Centers for Medicare and Medicaid Services, or CMS, a federal regulatory agency.
After the release of Carreyrou’s article, the seemingly impenetrable facade cracked.
Suspicions from the Food and Drug Administration caused a ban on the nanotainer, which effectively shut down any Theranos product usage. Then, a surprise investigation from CMS revoked the California Theranos lab licenses, rendering production impossible. Having lost the public trust that had driven her biotech unicorn, Holmes was confronted with a tough pill to swallow: The jig was up.
In March of 2018, the SEC charged Theranos with civil fraud. While Holmes decided to settle with the SEC, she was hit with a criminal indictment less than four months later.
On September 4 of 2018, Theranos was formally dissolved.
Just weeks ago, Holmes was sentenced to 11 years and three months in federal prison. She will serve time for fraud charges that have followed her company for the last decade. While her rapid fall from grace has come to a close, the stain she left on Silicon Valley will prove hard to wash out.
Born in the beginning of the 21st century, unicorns were labeled as startups which quickly reached valuations of more than $1 billion. As startups rush to attract investors and attain unicorn status, fraud has become increasingly common. Some might even say that the “fake it ’till you make it” mentality is morphing into something of a time-honored tradition in Silicon Valley.
Some might even say that the “fake it ’till you make it” mentality is morphing into something of a time-honored tradition in Silicon Valley.
But maybe it is time to reconsider the ethics of innovation. While Holmes was certainly not the first to tout lies surrounding the realistic state of her product, she was one of the first to so notably do so with human health in Silicon Valley.
What Elizabeth Holmes did was immoral in the highest sense. Her gargantuan ego birthed a chief executive officer who disregarded human lives and minds with reckless abandon. While I certainly hope that no human even half as callous as Holmes ever graces the startup industry for the foreseeable future, I believe her downfall provides a cautionary tale to entrepreneurs attempting to jump into any innovative health ventures.
It is often easy to get caught up in the lavish lifestyle that the Silicon Valley life promises. As someone who grew up going to school less than ten miles from the old Theranos headquarters off Sand Hill Road, I myself have often emptily dreamed about corporate meetings dotted with iced americanos from Palo Alto’s Coupa Cafe. I cannot imagine the allure the area draws to those who have spent their entire lives building an identity based on their plans to create a startup.
I admire dreams and certainly possess a couple of far-fetched ones myself, but will never justify deceit as a means to reach those dreams. As Holmes prepares to reflect on her own tainted dreams for 11 ¼ years, it is my hope that we all reflect on our own aspirations and their impending effects on others around us.
If, in doing so, you happen to envision taking a gander down any path that involves voice alterations and a black turtleneck, please, for all of our sakes, turn and run the other way.