The story of Theranos, a biomedical startup founded by Elizabeth Holmes that went bankrupt after a journalistic investigation showed that its products didn’t work, is one of the most significant in the U.S. tech industry.
Holmes was convicted of scam by a California federal court. She was found guilty for lying to Theranos investors and now she faces a maximum of 20 years in prison and fines of up to $250,000.
Theranos, founded in 2003, had become one of Silicon Valley’s most promising startups within a few years. Holmes raised several hundred million dollars in investment in just a few years with the promise that she would invent a machine capable of performing more than 240 different blood tests by taking just a drop of blood from patients.
In the first years of activity, Holmes forced Theranos to operate in “stealth mode”, that is, in hidden mode. It is a fairly common thing in Silicon Valley for startups that are developing a high-potential product: working in secret, without advertising themselves outside.
After nearly ten years they decided it was time for Theranos to start operating and to make her business known, even though her analytics system was not really working yet. Holmes was an entrepreneurial model: she won various awards including the “Women of the Year Award” from Glamor magazine.
In August 2015, the FDA opened an investigation into Theranos because many of the patient blood test results were wrong as to be dangerous for patients. In October of the same year, it became known to the public through the publication of Carreyrou’s article in the Wall Street Journal, that Theranos’ technology was not working and that the company had secretly bought commercial analytics machines for the most part of the tests it offered. Also, they pointed out that the company didn’t include prominent biotech experts on its board.
The FDA has revoked Theranos’ license to operate a laboratory in California due to unsafe practices and imposed a $ 10,000 fine.
Theranos went from a valuation of around $ 9 billion to zero in just a year and finally, in 2018 it closed permanently.
Are there any lessons to learn from this story? Here our suggestions for young innovators:
- Make data-driven decision: even if the management could convice everybody about the innovation of your product/service, be sure to have data evidence to support your thesis and don’t be afraid to show them when it’s time.
- Create a transparent and trusting working environment: collaboration, communication and trust should always be at the center of your table.
- Fail fast or you will fail big: try to avoid the Theranos’s stealth mode and start the process of “build, measure, learn”