The Theranos Startup Story: From $9 Billion to $0 With Criminal Charges

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📈 Case Study: The Theranos Startup Story: From $9 Billion to $0 With Criminal Charges

The dramatic improvements in medicine over the past hundred years have been one of the most defining factors of modern civilization. What used to be life-threatening diseases are now mild annoyances that we only wait out because of modern medicine. Undiagnosable diseases back then are now identifiable thanks to modern techniques and testing.

This article will take a look at Theranos, a company that claimed to be able to revolutionize how blood testing is done. We will see how the company grew and how it ultimately crumbled because of its high claims.

How Theranos Began

Imagine you are taking a blood test for general diagnostics. General practice is to take multiple draws of blood to accomplish several tests. Theranos, however, offered an alternative to this.

A health technology company, Theranos claimed to be able to conduct a multitude of tests with only a few drops of blood. Only using a few drops of blood for blood work means a more efficient healthcare system: one that is cheaper and faster.   

This was all said to be possible through Theranos’ proprietary technology. Through Theranos’ “invention,” the Edison, up to 200 tests can be performed using only a few drops of blood. A breakthrough like this had great implications for how healthcare is accomplished across the world.

Continued Growth

Within a relatively short time frame, Theranos expanded quickly. With the company’s claims, a lot of people had their eyes on the potential of Theranos.

There were practical applications and financial opportunities that people wanted to achieve with Theranos.

A Good Image

Back in 2003, Elizabeth Holmes was taking up a degree in Chemical Engineering at Stanford University. Eventually, in the same year, she dropped out of Stanford to pursue her ideas of new ways of doing blood tests. 

Holmes was the founder of the start-up, Real-Time Cures. This start-up eventually became Theranos as we know it. While serving as CEO for Theranos, Holmes was well known for her charisma, image, and aura. Holmes proved to be crucial for how Theranos grew. Through Holme’s commanding presence, she took Theranos forward—serving both as face and leader for Theranos.

Approaching the Right People

Elizabeth Holmes approached different venture capitalists to fund her vision for Theranos. A key point here is that Holmes approached venture capitalists that were not well-versed in medical technology or health technology. Theranos got around $6 million in funding by late 2004. 

The promise of a revolutionary way of doing blood work enticed different entities to partner up with Theranos. Besides the original venture capitals which funded Theranos, others helped Theranos grow up to a top worth of $9 billion. Partners included Safeway and Walgreens, plus other funding firms and stakeholders.

A House of Secrets

Theranos was secretive, not only with its technology but also with how the company worked. As it was known in the industry, Theranos worked via “stealth mode.” This means Theranos did not generally publicize its findings and research, nor did it have press releases. 

This enabled Theranos to acquire more and more partners to expand itself without explaining what they were working on. By claiming Theranos could not say how exactly their blood testing works—because it was a trade secret—partners got into agreements where they took Theranos’ word for it. 

Claiming Something Revolutionary

By claiming to have revolutionized how blood testing was done, Theranos brought something new to the table. Using Edison, Theranos would have made traditional blood testing obsolete. This would have carved a new practice in the healthcare industry.

Tests would not only be cheaper, but they would also be automatically processed, more accurate, and portable. This attracted a lot of attention: from media hype, investors, and business partners.

The Beginning of The End

While Theranos was growing rapidly, multiple people became skeptical of the company. For example, a Stanford professor publicly raised suspicions about Theranos’ claims because there were no peer-reviewed articles about Theranos’ technology. In the health sciences, this was a highly unusual practice.

However, a turning point for Theranos was when journalist John Carreyou published his article about Theranos. In this article, Carreyou published that Theranos was not using its technology for their demonstrations—instead, normal blood testing techniques were used.

There was never any innovative technology, and the supposed “Edison” was allegedly never even real. 

Though Theranos tried to defend itself, the damage was already done. Other people within the company spoke out on Theranos’ false claims. The exposure of Theranos’ lies about their technology severed ties with Walgreens and Safeway. Plus, Theranos received repercussions from the FDA, SEC, and multiple lawsuits.

Eventually, in 2018, Theranos dissolved after years of legal trouble. From a valuation reaching up to $9 billion, Theranos dropped to being worth nothing. In that same year, Elizabeth Holmes and her COO Ramesh "Sunny" Balwani were charged by the U.S. Attorney's Office for the Northern District of California.

Several accusations were made throughout the years. In February 2021, Holmes was accused by federal investigators of destroying evidence during the last days of Theranos.

What Can We Learn From Theranos?

Theranos did some things that we should imitate, but it also did some things we should avoid. What should we pick up from the story of Theranos?

The first is that bringing something to the table is crucial. Theranos provided something revolutionary in their industry. Otherwise, there would be no attracting factor for customers or partners for your business. 

Second, how you present yourself is important. Elizabeth Holmes led Theranos as its face and CEO with a certain presence. Charisma, image, and aura all help with how people approach and think of you.

Third, always choose who you approach for your business. Elizabeth Holmes got millions in funding early on by choosing people who did not understand the health technology industry well. Choosing who you approach helps increase your chances of getting a good deal for your business, but can hurt the success of your business immensely. Choose to raise money from people who may be harder to raise money from, but know your industry inimimently. This will allow you to leverage their experience when push comes to shove.

Most importantly, always back your claims. Theranos continuously made false claims about its technology and effectiveness. Do not make claims you cannot follow up on—it may come to backfire on you later down the line.

The Bottom Line

Theranos was a company that grew quickly because of the value its claims created. A new way of doing blood tests meant a drastic change for the healthcare industry. However, false promises led to Theranos losing everything it had built up.

While claiming something to differentiate your business from competitors is crucial, making claims you cannot follow up on will only harm your business. Theranos relied on false claims to create value. Once its lies were exposed, everything fell. 

How Theranos grew its business and how it lost everything is something businesses and companies should learn from.

💻 SaaS Of The Week: BuzzGuru

One of the hardest things for companies to wrap their minds around is influencer marketing. It’s novel, new and still an emerging market and it’s hard for organizations to navigate how to find influencers, measure success and get positive ROI. BuzzGuru is trying to solve this.

Basically, BuzzGuru is marketing intelligence and analytics to discover influencers for your ad campaigns and research your competitors’ strategies across social media channels. It’s created for marketers by marketers with the mission to make influencers a transparent and accessible user acquisition channel.

🎧 Things You Should Listen To: How to Live a Life of Grit and Grace With Amberly Lago, Speaker, Author and Podcaster

This week I sat down with Amberly Lago (@amberlylago) on the Success Story Podcast (@successstorypod). Amberly Lago is a best-selling author, speaker, podcast host, and health coach. She started her speaking career after her life was deeply altered and her world was completely changed in May 2010.

While riding her motorcycle in Woodland Hills, CA, she was hit by an SUV and thrown thirty feet down a busy street. Her right leg took the brunt of the impact and was crushed almost beyond repair. Amberly’s life story of astounding resilience has inspired a revolutionary lesson she offers to the world.

📚 Things You Should Read: Start With Why by Simon Sinek

This book is a classic, which I first discovered when I listened to Simon Sinek’s Ted Talk by the same name. This book aims to answer a very simple question….

“Why are some people and organizations more innovative, more influential, and more profitable than others? Why do some command greater loyalty from customers and employees alike? Even among the successful, why are so few able to repeat their success over and over?”

If you enjoy Simon Sinek, and have read Leaders Eat Last or seen him in some of his many interviews or talks, you’ll definitely enjoy this book.

The book is based on the premise of most people know what they do for a living and how they do it, but very few know why.

The secret to unlocking excellence is starting with the “why”.

🧠 Scott’s Thoughts

1. “Be humble. You may be wrong.”

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2. “Stay healthy, both physically and mentally. It’s an effectiveness multiplier.”

(Tweet This)

3. “Lessons from Netflix:

-Investing in your own output is a better strategy than renting someone elses

-If you’re going to alienate old customers, make sure you have enough to offer new ones

-There’s always new ways to tell classic stories”

(Tweet This)

💡 Other Thoughts

1. On Attitude

"You can not always control circumstances, but you can control your own thoughts."

— Charles Popplestown

(Tweet This)

2. On Passion

"You have to be burning with an idea, or a problem, or a wrong that you want to right. If you're not passionate enough from the start, you'll never stick it out."

— Steve Jobs

(Tweet This)


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