Elizabeth Holmes, the founder of Theranos, always had a passion for innovation from an early age. Despite failing to create a time machine during her childhood, Holmes went on to introduce a blood testing device called “Edison” at the age of 19, with the hope of revolutionizing medical technology. The device claimed to be capable of running 200 different types of tests from just a few drops of blood. Holmes quickly became known as the female Steve Jobs, with media outlets like Forbes, Fortune, and The New York Times comparing her to the charismatic and determined leader. By 2014, Theranos was valued at $10 billion, and Holmes, based on her determination and convincing power, was Silicon Valley’s youngest self-made female billionaire with a net worth of $5 billion. However, at that time, Theranos had yet to produce a working product or service, despite the promises and claims made by Holmes.
Elizabeth Holmes was born on February 3, 1984, in Washington DC, America. Her mother, Noel Holmes, was a Congressional committee staffer, and her father, Christian Holmes, was the vice president of Enron, the company responsible for one of the top ten corporate scams in modern business history. The family moved from Washington to Houston during Elizabeth’s childhood due to Christian Holmes’ employment. Elizabeth has had a fascination with innovation since childhood, starting with trying to invent a time machine at just 7 years old. Apart from studying in high school, she also earned some income by selling C++ Compiler software. Her desire to become a billionaire was strong from an early age. In 2001, Elizabeth’s father lost his job due to the financial fraud of Enron, and the family faced financial instability, which only strengthened 17-year-old Elizabeth’s determination to succeed. The following year, she enrolled at Stanford University to pursue a degree in electrical and chemical engineering. As a freshman, Elizabeth’s knowledge of Mandarin gave her a chance to attend Stanford University’s summer program in Beijing. It was there that Elizabeth met Sunny Balwani, a Pakistani immigrant who would later play one of the most important roles in her venture, Theranos. During the Beijing trip, there was a SARS-Cov-1 outbreak in Asia, and Elizabeth contracted the disease, which led to a fear of injections during treatment.
Elizabeth, after returning from her trip to Beijing, was driven by her fear of injections to invent technology that would eliminate the need for injections. During her freshman year, she attended a seminar by Professor Channing Robertson on the future prospects of advanced drug delivery devices, and decided to join his research. Initially, Professor Robertson tried to discourage Elizabeth by saying that the research was too advanced. However, Elizabeth’s determination prevailed, and she eventually got the chance to work on the project as an assistant to a Ph.D. student named Shaunak Roy. While working on the project, Elizabeth designed a prototype of a wearable patch that would provide both diagnosis and medication for the patient.
In 2003, at the age of 19, Elizabeth showed Robertson the patent application for this device and offered to do business with him. However, Robertson did not give approval at the beginning, and another Stanford professor, Dr. Phyllis Gardner, was asked to verify the feasibility of the new invention. Dr. Gardner acknowledged Elizabeth’s wearable patch idea as unique, but not scientifically viable. This was because it would not be possible to store the amount of medication a patient actually needs in such a small wearable patch.
Elizabeth’s unwavering confidence in her idea drove her to try several times to convince Dr. Gardner, but unfortunately, her attempts were unsuccessful. Despite this setback, Elizabeth was determined to make her idea a reality. She decided to build a new device that could run 200 blood tests simultaneously with just a few drops of blood droplets. Although the idea was highly forward-thinking, many were skeptical about its feasibility. However, Elizabeth remained confident and believed in her idea. In 2003, at the age of 19, Elizabeth convinced her parents to invest their savings for university tuition fees in her blood-testing start-up called Real-Time Cures. Her advisor for the start-up was Professor Channing Robertson. Later that year, the company changed its name from the words “therapy” and “diagnosis” to Theranos Inc. Shaunak Roy also joined Theranos in May 2004. The initial funding for the company came from Tim Draper, the father of Elizabeth’s friend, and Victor Palmieri, a friend of Elizabeth’s father. Despite being a university dropout, Elizabeth managed to raise approximately $7 (6.9) million in funding for her company by the end of 2003. The company’s valuation stood at approximately $30 million at that time. Theranos, founded by Elizabeth Holmes, developed a prototype device called Theranos 1.0 in 2005.
However, most of the employees hired to work on the prototype were inexperienced engineers and dermatologists. Experienced medical engineers tried to convince Elizabeth that this technology was impossible, as it claimed to perform 200 blood tests at once with just a few drops of blood. Elizabeth, stubborn about her vision, initially fired several employees, including Theranos’ CFO, Henry Mosley. The engineering team worked hard to get Theranos 1.0 up and running as a workable prototype, but the prototype was never able to successfully test run. Despite this setback, Elizabeth used up all of her initial funding in the R&D of the prototype. Theranos was able to secure licensing deals for Theranos 1.0 with several pharmaceutical firms. However, none were willing to sign a deal with Theranos without a workable prototype. To find an outsider investor, Professor Channing Robertson, an advisor of Theranos, advised Elizabeth. Elizabeth started meeting with various investors and pitched to them that the device could diagnose everything from cholesterol to cancer with just a few drops of blood. She also performed blood tests on patients at a cancer hospital in Nashville using the Theranos 1.0 device to convince investors. Despite numerous test runs, the Theranos 1.0 prototype was never able to successfully provide accurate test results. However, after one of those test runs with patients’ blood from Nashville, the prototype provided successful results.
After the success of Theranos 1.0, Elizabeth Holmes decided to raise funds again. However, despite trying all night before the pitch, Theranos couldn’t demonstrate successful results for the product. Elizabeth was determined to secure the investment, so with the help of Shaunak Roy, she manipulated the presentation by showing only the previous successful result to the investors. The investors were impressed by the technology, working prototypes, Elizabeth’s vision, and confidence in the company. In the Series B round, a total of $43.2 million was raised from various investors, including Don Lucas, Larry Ellison, media tycoon Rupert Murdoch, and one of America’s richest families, The Waltons. The company’s valuation reached about $200 million due to this funding. However, Elizabeth accepted the funds on the condition that Theranos would not disclose its technology and would accept its decisions as final in the interests of the company.
Elizabeth Holmes was obsessed with maintaining secrecy. Visitors to Theranos’ headquarters had to sign non-disclosure agreements before entering the building, and company security guards escorted them every step of the way, even to the washrooms. Despite her aggressiveness, Theranos 1.0 was failing. In 2007, Elizabeth hired a new engineer who developed a new prototype called Edison in September. Elizabeth fired Theranos 1.0 engineers over the new prototype Edison. She also hired former Apple designers to create the product’s look and feel. Despite spending investors’ funds, neither Theranos 1.0 nor Edison could deliver proper output, and many board members started questioning Elizabeth’s capabilities. In 2008, they decided to remove her from the post of CEO. However, Elizabeth’s persuasive ability was so strong that after a two-hour meeting with the board, she convinced them to let her remain CEO. To prevent future conflicts with the board, Elizabeth convinced her boyfriend, Ramesh Sunny Balwani, to become a board member in 2009. He was appointed COO, despite having no prior experience in medicine. Neither Elizabeth nor Sunny disclosed their romantic relationship to anyone in the company. During another fundraising round in 2010, Theranos’ valuation reached $1 billion.
In the USA, FDA certification is mandatory for any new product launch related to food, drugs, or medicine. However, obtaining FDA certification can be a challenging process. This was the case for Theranos, a company that faced numerous hurdles in their pursuit of FDA certification. In an attempt to bypass FDA regulations and certification, Elizabeth, the founder of Theranos, planned to onboard prominent individuals in the political arena of the USA as board members or investors of Theranos. As a result, in 2011, former U.S. Secretary of State, George Shultz, joined Theranos’ board of directors. In addition to George Shultz, other prominent individuals such as retired Marine Corps Gen. Jim Mattis and former Secretary of State Henry Kissinger also joined Theranos’ board. The intention behind this move was to leverage their political influence and connections to expedite the FDA certification process for Theranos’ products.
In early 2012, a trial run of Theranos was conducted at Safeway’s employee health clinic. However, there was a flaw, discovered by Safeway’s CMO. Despite not having a fully workable device, Theranos was constantly signing deals with various organizations. Later that year, the company signed a deal with Walgreens, the second-largest pharmacy store in the USA. At the same time, Elizabeth approached Lieutenant Colonel David Shoemaker to use Theranos’ device in the US military. However, when Shoemaker raised concerns about Theranos’ regulatory status with the FDA, the Centers for Medicare and Medicaid Services (CMS) ran a surprise inspection. During the inspection, Sunny Balwani told regulators that the development of Theranos’ device was still ongoing. Meanwhile, Elizabeth launched the company’s new device 4s in September 2013. However, several scientists in Theranos informed Elizabeth that their new model was not yet ready.
In February 2014, Partner Fund Management invested in Theranos, a company co-founded by Elizabeth Holmes, which resulted in its valuation reaching $9 billion. Elizabeth’s net worth also increased to approximately $5 billion, leading media outlets such as Forbes, Fortune, and The New York Times to feature her as the youngest self-made female billionaire. This was attributed to Elizabeth’s determination, clear vision, and ability to attract investors to Theranos. Furthermore, international media outlets began referring to her as Silicon Valley’s female Steve Jobs, which further boosted investor interest in the company. Theranos’ deal with Walgreens was also positively impacted, allowing it to perform 1.5 million blood tests using its own devices in 40 Walgreens stores in Arizona alone. Elizabeth Holmes even shared the same TED Talks interview panel with personalities such as Bill Clinton and Jack Ma.
Former US secretary of treasury and labor under President Richard Nixon and board member at Theranos, George Shultz’s grandson Tyler Shultz used to work at Theranos. Due to being a former employee at the company, he observed various irregularities, misreporting, and quality control issues with Theranos’ Edison device for eight months. In 2014, he sent an email to CEO Elizabeth Holmes detailing his concerns. However, instead of addressing his concerns, Elizabeth forwarded Tyler’s email to Sunny Balwani and replied, “If Tyler wasn’t George Shultz’s grandson, his email might not have been replied to.” Tyler was even asked to send an apology email to everyone, which left him feeling humiliated. He quit his job at Theranos the same day and informed his grandfather about the incident. Despite Tyler’s efforts to expose the company’s wrongdoing, George Shultz, blinded by his faith in Elizabeth, distrusted his grandson and told him to keep quiet. With no other option, Tyler contacted the public-health lab in New York and accused Theranos of manipulating the proficiency testing process. He also worked as a confidential source with reporters from various journals to expose Theranos’ scams to the public. As a result, an article was published in the Wall Street Journal in October of that year, revealing that Theranos used traditional blood testing devices instead of their own devices. Subsequently, an FDA investigation was launched, which found significant inaccuracies in Theranos’ operations.
Despite achieving FDA approval for Theranos’ device to test for herpes simplex 1 virus in 2015, Elizabeth Holmes faced a series of setbacks that ultimately led to the downfall of the company. A professor at Stanford University, John Ioannidis, published an article in the Journal of the American Medical Association claiming that there was no peer-reviewed research of Theranos in the medical research literature. Additionally, a professor at the University of Toronto, Eleftherios Diamandis, claimed that most of the company’s technology capabilities had been exaggerated. Further scrutiny revealed that the Edison analyzer could only run one test at a time and produced inconsistent results. Walgreens and Capital BlueCross suspended their partnership with Theranos and filed a lawsuit against the company.
In response to the public questioning the company’s credibility, Elizabeth invited then-Vice President Joe Biden to visit the Theranos headquarters. However, Elizabeth and Sunny presented a fake laboratory instead of the company’s real laboratory. Despite the increasing evidence of Theranos’ deception, Elizabeth remained optimistic about her invention and never admitted her mistakes. In March 2016, the Centers for Medicare and Medicaid Services (CMS) ordered Holmes and Sunny to cease operations for two years. Patients also filed lawsuits against the company, and if the US regulatory body conducted a second inspection, Theranos would have failed to meet their requirements. In an attempt to save the company, Elizabeth fired Sunny from the company and claimed their personal relationship was finished. However, the lies of the company ultimately caught up with them, leading to the downfall of Theranos.
In 2018, Elizabeth Holmes and Sunny Balwani were sued by the SEC for fraud, resulting in a $500,000 fine for Elizabeth, the return of $18.9 million worth of shares she held in Theranos, and the loss of all financial voting control of the company. The company began to go bankrupt as investors withdrew their shares, and Theranos was eventually forced to cease operations. Multiple lawsuits were filed against them in June of the same year.
The trial process was scheduled to begin in 2020, but due to the COVID-19 pandemic and Elizabeth’s pregnancy, it was postponed. Later, when Elizabeth filed a complaint of sexual and emotional abuse against Sunny, the two cases began to be processed separately. In January 2022, Elizabeth finally pleaded guilty to wire fraud and conspiracy to commit wire fraud and was directly convicted of four of the eleven charges against Theranos. She was sentenced to more than 11 years in prison on November 18, 2022.
Currently, Sunny’s case is ongoing in court, and if convicted, he could face up to 20 years in prison.
Leave a Comment