An attractive blonde, Elizabeth Holmes, arrived for a pre-trial trial with her pregnant belly. Don’t know? So sit back and read a story that is really worth paying attention to. And no, the film won’t be about her. One has already been filmed. Although so far it has only been a documentary capturing one of the strangest business stories of the past two decades.
Elizabeth Holmes was at its center, who now faces really heavy penalties for various frauds. She found herself in search of investigators for her work at Theranos, which she founded to revolutionize healthcare. She had a vision she followed shortly after graduating from the prestigious Stanford University. She had a vision that many scientific capacities told her was pointless and impossible to achieve. It had a vision to which a number of investors contributed really high amounts. She had a vision … and her story shows the best and the worst of the logic of the startup scene.
Dad from Enron
As is often the case with the biggest celebrities of the startup scene, Elizabeth Holmes came from a very well-off family. Although in this story, everything is a bit half true, half fiction. But still: her father was the vice president of one of the most important American companies. And the company was called Enron. Yes, the Enron, which ended infamously after 2000 after a spectacular scam broke out. The Enron who, if I’m not mistaken, popularized the term “creative accounting.” Elizabeth’s mother again worked in the US Congress. So she had access to the big world from both sides, both in politics and in business.
Holmes was born in 1984 and very soon began to show above average. Already in high school, she fell under the spell of computers, and here she also started her first business, when she started selling C ++ compilers to Chinese universities. The parents let their daughter study Mandarin Chinese, then she started studying her at a summer course in Stanford. This university, which has long been considered one of the ten best universities in the world, then also joined to specialize in chemical engineering. That was 2002. But she left school two years later because she already knew what she wanted to achieve in life. She already knew her vision.
Just a drop of blood
The idea, which Elizabeth Holmes worked on for several years and which will probably end up in prison, is really groundbreaking, almost ingenious. Based on state-of-the-art technology and the ability to analyze large data, she wanted to get all the diagnostic information that could ever be obtained from blood from just a drop of blood. That is, including diagnoses for which it is necessary to take a significantly larger sample from the patient. In her heyday, Holmes herself liked to say that her groundbreaking innovation was to help her overcome her own needle phobia. And also the so-called “democratize health care”.
When she presented her idea to her then-professor of medicine, Phyllis Gardner, she told her that she thought it just couldn’t work. However, Holmes stood up for her idea (quite logically at the time) and went to Dean Channing Robertson, who supported her in her visions.
So Holmes set up a company, which she renamed Theranos a year later after English words for therapy and diagnosis. Robertson became a member of the supervisory board and introduced Holmes to investors in healthcare innovation companies.
And so began the real fairy tale. The company earned $ 6 million in 2004, but six years later raised $ 92 million from investors. There was great interest in the company, so in 2011 Holmes met with former Foreign Minister George Shultz, who became a prominent figure in Theranos.
To put it simply, the Holmes project became an absolutely hot commodity that everyone was interested in. From today’s point of view, one thing seems logical: Holmes never officially talked about Theranos and its miraculous technology, did not give a single interview and the company did not issue a single press release until 2013. There was a whisper among investors and people invested in Theranos. a little dazed by the fact that they got to this possibility at all.
In addition, the project had very exclusive coverage from various celebrities of the political and business world. The fame of Theranos (and Holmes) thus wrapped up like a snowball that rolled and stuck over more and more investors.
Billionaire not from a shack
The years 2013 to 2015 must have been an incredible ride for Holmes. Her company became more widely known thanks to a contract with the Walgreens pharmacy chain, which was to establish blood collection centers for Theranos.
And a real carousel started. The most prestigious magazines began to put Holmes on their cover, giving one interview after another, in which she presented her miraculous technology that would change healthcare. At that time, only a woman in her thirties earned nicknames such as Silicon Valley’s Greatest Talent and Richest Self-Made-Woman. The second title was awarded to Holmes by Forbes magazine, which estimated its assets at $ 9 billion in 2014, when it won $ 400 million from investors in various rounds of financing.
From today’s point of view, this may seem absurd, perhaps even ridiculous, and a large number of magazines later apologized for this touch. However, in their defense, it must be added that Holmes’ name was attached to dozens of patents around the world at the time. And Theranos’ miraculous technology has acted as a reality, or at least the potential for truly changing healthcare around the world.
More and more influential people trusted this, as well as medical facilities, which concluded contracts with Theranos for the use of his technologies. In short, at that time everything seemed real.
The power of journalism
But everything was to change quite soon. And John Carreyrou, a Wall Street Journal journalist, takes the lead in the story. In 2015, he embarked on a several-month investigation based on a tip from a former Theranos employee. The case was actually simple: Theranos’ technology didn’t work, with a drop of blood still unable to find many more diagnoses than before, but Holmes didn’t want to, or couldn’t admit, and continued her research as if a breakthrough were literally within reach.
Carreyrou’s search was really thorough, he had a number of internal documents, testimonies from former and current employees. Holmes was so nervous. She contacted billionaire Rupert Murdoch, to whose media empire the Wall Street Journal belonged at the time, and who was also a major investor in Theranos with an investment of $ 125 million. She asked to stop Carreyrou’s efforts. However, Murdoch refused, saying he trusted his editors. Holmes then tried to prevent extradition through legal means, but even that did not fall on fertile ground.
The article was actually published in October 2015 and caused a shock in many families. The findings were overwhelming. Perhaps worst of all, according to the article, Theranos used freely available devices made by third parties for testing. So no miraculous technologies (called the Edison apparatus) probably exist, or their development is far from final. The material further proved that Holmes portrays the real situation in front of investors and the public much more optimistically, consciously confusing investors and representatives of public institutions, which then order Theranos products.
Naturally, Holmes officially denied the allegations, but the authorities received suspicions and launched their own investigations.
The end of the dream
Falling to the bottom was probably inevitable. In January 2016, Holmes received a call from a government agency overseeing medical facilities to explain Theranos and correct the serious misconduct the agency found during an inspection of a California laboratory. The offenses concerned workers, processes and technology. Theranos had not been able to rectify the problems by March, so the agency proposed to Holmes a two-year ban on running any medical organization. Holems, who then enjoyed celebrity status, reacted in her own way: she appeared on the prestigious The Today Show and said that she was “devastated, that the agency failed to respond in time.”
Shortly afterwards, the whole house of cards called Theranos gradually began to fall apart. Holmes actually received a two-year ban, Walgreens terminated the testing center agreement, and the US Medical Device Approval Authority banned use in one of Theranos’ key products. By the way, business magazines have, of course, changed the value of Holmes’ assets from billions to zero.
And the legal battles also began. The state of Arizona sued Theranos for 1.5 million blood tests, resulting in a fine of nearly $ 5 million. Holmes became interested in the FBI and later in the US Securities and Exchange Commission, with Theranos allegedly luring $ 700 million from investors to develop a non-existent product. Recall here that Holmes was not alone in this, frequent co-defendants were Ramesh Balwani, Theranosu COO and her life partner.
Theranos had almost a thousand employees at the height of its fame, but gradually, within a few months of the scandal, everyone was fired, and officially Theranos expires on September 4, 2018.
As early as mid-2018, Holmes and Balwani were charged with a number of crimes, the most serious of which were fraud and criminal organization. The trial was scheduled to begin in August 2020, but due to the covidu-19 pandemic, the start of the trial with Holmes was postponed to August this year, with Balwani appearing before the jury next year.
But pre-trial procedures are already under way (selection of jurors …) and Holmes is busy again. But it should also be busy around the principles of the startup scene, where there are very often similar bets on uncertainty, painting reality pink, which could at one point be called a scam. After all, it is quite interesting that in 2017, 99 percent of investors gave up the opportunity to sue Theranos in the future and received the company’s shares for it. In short, they accepted responsibility for believing the wrong vision.
At the same time, it is worth wondering from what moment Theranos was just a senseless shed and not a potentially groundbreaking enterprise. Wasn’t his crash just the result of a lack of funds and time? Is the idea of analyzing trace amounts of blood and getting all diagnoses such an absurd idea? And isn’t it just as absurd to measure your ECG with a watch? You see, and yet millions of people around the world do it. Of course, this should not be any apologetics of Holmes’s behavior, just a reminder that great visions simply seem pointless in the beginning. But of course, we don’t have to turn people hundreds of millions of dollars at once because of them.
Source: E15.cz by www.e15.cz.
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