The Story of Theranos: A Bloody Failure | Society

Written by Max Zhang ‘22

Theranos Device

Image from Wired. https://www.wired.com/tag/theranos/

Imagine the classic story of a Silicon Valley startup. An aspiring student, set on an idea for a product that could change the world, drops out of college to start their own company. As this idea grows, they gain traction and receive funding from investors in order to grow their company to massive proportions, making millions in the process. This seemed to be the path that Theranos, a biomedical technology company founded in 2008, was bound to follow. Theranos developed a family of products designed to conduct blood tests at home. The company was indeed founded by a college student, named Elizabeth Holmes, who dropped out of Stanford to start her own business. The company did indeed receive millions from investors and grow to make million-dollar deals with the likes of Walgreens and Safeway. However, looking back, Theranos is regarded as one of the worst disasters in the history of Silicon Valley.

In order to understand more about how Theranos came to be regarded as the worst failure in the history of startups, it is important to understand the central figure around its downfall, Elizabeth Holmes. Theranos was started in 2002, when Holmes, motivated by an idea for a wearable blood tester, dropped out of Stanford in order to start her own company. Eventually, Elizabeth pivoted to the idea of an at-home blood tester that could carry out a suite of tests, tests which traditionally would require machines the size of a printer to carry out. Armed with this idea, Holmes used her own personal connections to gain a sizable seed investment. Eventually, a prototype was created that could run a small number of tests with dubious results. This was when Elizabeth made her first morally questionable act, which was to test the machine on patients with cancer, with full knowledge that her machines did not work. Despite this, the company barreled forward, eventually making deals with Walgreens and Safeway to place Theranos testers in their pharmacies.

Up to this point, Holmes had been able to present Theranos as a viable company through a combination of half-truths and mild deceit; however, Holmes eventually began having to flat-out lie to keep Theranos afloat. She presented her investors with financial reports that predicted profits ten times more than what documents inside the company predicted. Theranos even presented lists of hundreds of tests to Walgreens that they said could be run on their machines, when in reality, none of those tests could be run with any measure of reliability. Eventually, the sheer number of lies that Holmes produced gave way to the fact that Theranos was in reality, an ailing company with no viable product. Following an article published in the Wall Street Journal, those lies came back to bite her. Hundreds of millions were lost by both Holmes and the company as investors, patients, and companies sued.

The important question to ask here is what to learn from this. It seems there were two factors on Homes’ part that led to the eventual downfall of the company. The first factor seems to be a lack of experience. The fields that Theranos worked in, medicine and chemistry, stand in stark contrast to the field of computer science that traditional software or technology startups work in. These days, even teenagers can begin to grasp the elements of coding and software engineering; however, medicine is a field that is only really delved into deeply at colleges and universities. Since Holmes only spent a few semesters at Stanford, she possessed little real knowledge and it was because of this that she couldn’t realize the impracticality of Theranos. She wanted a miracle machine that modern technology simply wasn’t capable of creating. However, many startups are based on ideas that are not yet practical, so the real reason Theranos ended so disastrously was because of Holmes’ deceitful tendencies. It was only because of her dishonesty that the company was able to grow so large and die so spectacularly. In the end, maybe we should learn from our childhood and acknowledge that our lies come back to bite us.