In 2003, Elizabeth Holmes founded Theranos, a company that was supposed to change the world. The startup promised a technology that would allow a full physical and mental health diagnosis based on just a single drop of blood. The revolutionary idea attracted investors who donated billions of dollars to the project. But after some time, Theranos went bankrupt and Holmes became widely known as Silicon Valley’s biggest fraud.
We at Bright Side have grown fascinated by Elizabeth Holmes’ story and decided to find out more about this unusual woman.
Elizabeth Holmes was born in 1984 to a family of civil servants. Whenever people asked little Ellie who she wanted to be when she grew up, she promptly replied, “A billionaire.” She was just 20 years old when this dream became a reality.
While studying at the Department of Chemical Engineering at Stanford University, Elizabeth became interested in biotechnology. During one of her internships, she was surprised by how long it took to analyze medical samples. It was then that she came up with the idea of a simple patch that could diagnose any type of disease. Holmes filed a patent application, dropped out of Stanford, and set up a medical startup called Theranos.
The company promised that people would be able to do medical tests at home. The wonder-patch was supposed to detect illnesses in their early stages without the need to waste time in hospital lines and laboratories. Soon, the idea of the patch transformed into the concept of a portable device which needed just a tiny drop of blood to perform the diagnosis.
The first million dollars invested in Theranos came from a friend of the Holmes family, Tim Draper. This increased the startup’s popularity, drawing the attention of figures like Rupert Murdoch, George Schultz, Henry Kissinger, and even Barack Obama.
Elizabeth Holmes quickly became a legend in Silicon Valley. She was signing contracts with pharmaceutical companies, delivering lectures for TED, and appearing on the covers of The New York Times and Forbes. Journalists dubbed the founder of Theranos, “Steve Jobs in a skirt”. Indeed, there were many similarities between the 2 entrepreneurs, including a love for black turtlenecks, incredible charisma, and the ability to remain in the spotlight.
But the strange thing about it all was that Theranos’ founder’s claims remained the only indicator of the research’s success. Not a single person had seen a working prototype of the diagnostic device. Still, Holmes inspired many with words about the upcoming revolution in medicine and it proved to be enough to keep the money pouring in. By 2014, Theranos was valued at $9.5 billion.
The problems began in 2015 when John Carreyrou wrote an article for The Wall Street Journal, calling Theranos’ incredible technology a sham. The journalist found out that the portable devices were yet to make a single accurate diagnosis. What’s more, is all of the blood samples submitted by the company’s clients were in fact sent for analysis to large laboratories (the exact type Holmes was so keen on criticizing). The subsequent inquiry confirmed Carreyrou’s claims. After that, neither expensive lawyers nor Holmes’ personal charisma could save her empire. Theranos’ value dropped tenfold, and its founder received a new title: “One of the World’s Most Disappointing Business Leaders” from Forbes magazine.
The Theranos phenomenon can be explained by the fact that in Silicon Valley, medical startups are quite rare. The type of a self-confident, university-dropout leader who talks about future technology typically worked miracles for brands like Apple. Investors felt confident that Elizabeth Holmes was also destined for success. Unfortunately, Apple and Theranos are far more different than they seem. The former allows room for risk-taking, including starting a business with nothing but a bunch of like-minded friends. The latter requires not just innovative ideas, but a highly professional approach to the implementation. As for Holmes, she became obsessed with creating a “magic bullet” solution, while ignoring her own lack of specialist knowledge. As it turns out, charisma and enthusiasm can only take you so far…
It’s thought that another one of Holmes’ mistakes was her authoritarian style of management. She saw the dedication to the common goal as the cornerstone of her business’s success. Working overtime and staying at the office until late in the evening were common practices at Theranos. On the other hand, the employees were discouraged from criticizing the management. Holmes didn’t like it when others pointed out her shortcomings and preferred to make all decisions herself. Coupled with a lack of expertise, Holmes looked more like a joke than anything else. This all goes to prove that even the most brilliant idea can fizzle out without a trace.
Although confidence is an important factor for any business, a successful modern company should be built on the same principles that were around 100 years ago. These include ample knowledge in the target field, a professional team, a willingness to consider different points of view, and a clear ethical position. Of course, such guidelines are useful not only for multibillion-dollar firms but for ordinary people as well. All of us would benefit from learning how to tell bold dreams apart from realistic plans!
Recently, HBO aired a documentary called, The Inventor: Out for Blood in Silicon Valley. The film examines why some people consider Elizabeth Holmes to be a fraud, a swindler, and a sociopath, while others still think of her as a visionary and a misunderstood genius.
Holmes’ story is less straightforward than it seems. Many people think that she was hiding the truth and telling investors of the company’s successes because she genuinely believed that Theranos was on the verge of creating a working prototype of a groundbreaking medical device.
What do you think of Theranos and its founder? Can a string of lies be justified with good intentions?