Theranos: How to Blow $9 Billion in 6 Months


“The minute you have a back-up plan, you’ve admitted you’re not going to succeed.” – Theranos CEO and founder Elizabeth Holmes

Tomorrow will be six months to the day since the Wall Street Journal’s John Carreyrou broke the news that all is not well at Theranos, the $9 billion Silicon Valley unicorn founded by Stanford dropout Elizabeth Holmes at 19. For the once-celebrated entrepreneurial icon, things have not gone well, to say the least.

Earlier this week, the Journal revealed the latest in a long string of blockbuster revelations, that federal regulators are close to revoking the license of the company’s California lab and banning Holmes and Theranos president Sunny Balwani from running or owning any lab for two years.

The company could appeal, but would not likely prevail. The data’s pretty damning and the writing’s on the wall. The company’s supposedly breakthrough technology simply doesn’t work. And Theranos has done just about everything it possibly could to shoot itself in the foot. If I didn’t know any better, I’d think that was the plan all along.

The question is, how could this have happened? How could such a highly valued startup on its way to upending the $76 billion laboratory diagnostics industry by replacing test tubes of blood drawn from a vein with a few drops from a finger stick fall so far so fast? And how could Holmes’ star, which shone so brightly, fall practically overnight. 

If you had to find a way to destroy a brand and blow a $9 billion valuation, you’d be hard pressed to come up with a better plan than the one Holmes has pursued since October 16, 2015. If you had just six months to kill Theranos, this is how you’d do it: 

When an investigative journalist from the Wall Street Journal calls to tell you he’s got credible sources saying bad things about your company on the record and wants to chat about it, assume he’s not really serious. Keep stonewalling him and hope he finds something more exciting to write about.

When the story finally breaks, and it’s a front-page blockbuster that casts serious doubt on the efficacy and accuracy of your technology, claim that it’s “inaccurate, misleading and defamatory” and that the allegations are “grounded in baseless assertions by disgruntled former employees and industry incumbents.”

Post long rambling rants on your website that deny everything the two-time Pulitzer Prize winning investigative reporter wrote because he’s simply flat out wrong. Attack him as being out to get you from the start. Call your posts “Theranos Facts” without actually stating any facts that can be verified by an objective third party.

Express your outrage to a TV personality, decrying that, “This is what happens when you work to change things. First they think you’re crazy. Then they fight you. And then all of a sudden you change the world.” Act shocked and appalled that “the Journal would publish something like this …”

Compulsively proclaim “unparalleled transparency” while being completely opaque. Use impressive numbers with lots of zeros when talking about how many tests you’ve run, patients you’ve served, and pages of data you’ve submitted to the media while providing zero evidence of the accuracy of your tests.

Threaten the widow of your former chief scientist with legal trouble after learning that she spoke to the Journal and said that her husband, who coauthored 23 patents during eight years with the company, repeatedly told her before he committed suicide that, “nothing was working.”

Suggest that you voluntarily filed for FDA approval because it’s the highest standard. Watch as an FDA investigation concludes that your proprietary nanotainer is an unapproved medical device and approves the use of your proprietary technology for just one of the more than 240 blood tests you offer. Act as if that was all part of the plan.

Ensure that none of the investors who pumped more than $750 million into your company are actually on your board of directors. Instead, stack the board with insiders and retired big-name politicians and administrators who have no real vested interest in the company.

Claim that you haven’t submitted your proprietary technology for peer-review by independent third parties or medical journals because you have to protect the family jewels from evil competitors. But when push comes to shove, say you’ll do it. Really soon. Really. But never actually do it.

Announce plenty of partnerships with big-name healthcare providers like the Cleveland Clinic and San Francisco-based Dignity Health. Never mind that not one of those relationships ever gets off the ground.

Go dark when it’s revealed that Safeway is abandoning plans to open Theranos wellness centers in 800 supermarkets, even after spending $350 million on the initiative. Mum’s the word when Walgreen’s halts expansion of your relationship and searches desperately for a way to distance itself from a growing scandal.

When the Centers for Medicare and Medicaid Services (CMS) investigate and find “serious deficiencies” that post “immediate jeopardy to patient health and safety” at your California Lab, brush it off as minor issues you’ve coincidentally already corrected, but actually haven’t.

Make sure you’re nowhere to be found when researchers at Mount Sinai show that your cholesterol test results are way off and a scathing 121-page CMS report reveals that your proprietary Edison tester yields unacceptably inaccurate and erratic results on a whole bunch of blood tests.

After a dozen years of development, hiring more than a thousand employees, and burning through ungodly amounts of cash, Holmes’ plan was apparently to make an enormous splash, go live on real people, and hope nobody notices that the stuff doesn’t work. At least that’s how it seems to me.

And when the media got wind of it, she went into denial, avoidance and attack mode.

Holmes recently told a group of Stanford graduate business students that, “The minute you have a back-up plan, you've admitted you’re not going to succeed.” That may be good advice if you’re writing an app, but when human beings are counting on you for an accurate diagnosis, it’s delusional.