Theranos — Most audacious scams in startup history

5 min readAug 20, 2022

Back in 2003, Elizabeth Holmes was barely 20, when she dropped out of Stanford University to launch Theranos — a proprietary technology for an analyzer that promised to conduct multiple blood tests with a single drop. Investors shelled out USD 400 million. At its peak, the company was valued at USD 9 billion.

Then it all came crashing down. The shortcomings and inaccuracies of Theranos’s technology were exposed, along with the role Holmes played in covering it all up. Theranos and Holmes were charged with massive fraud, and the company was forced to close its labs and testing centers.

This is how Holmes went from precocious child to ambitious Stanford dropout to embattled startup CEO.

Holmes was born in Washington DC to Noel, who worked as a foreign policy and defense aide, and Christian Holmes, who served as vice president of energy company Enron at the time of its scandalous downfall.

The family later moved to Houston, where Holmes excelled at a private school. She was a bright, studious child. A story Holmes often told was how she drew detailed illustrations for a time machine when she was just seven years old.

Since childhood, Holmes had an entrepreneur mindset. At high school, Holmes was a straight-A student and even started a business selling software that translated computer code to schools in China. She also began lessons in Mandarin, which later enabled her to spend a summer interning in Singapore.

Holmes initially wanted to pursue a career in medicine, following in the footsteps of her great-great-grandfather, who was a surgeon. This plan was thwarted before it had even begun due to Holmes’ deep-set fear of needles. Instead, she studied chemical engineering at Stanford University.

As a sophomore, she went to one of her professors, Channing Robertson, and said: “Let’s start a company”. With Robertson’s support, Holmes started her company, which she first called Real-Time Cures and later renamed Theranos — a portmanteau of therapy and diagnosis. Robertson became her mentor and a voluntary director of the company.

By the next semester, she had dropped out of Stanford altogether, working on Theranos in the basement of a college house. Theranos’s business model was based around the idea that it ran blood tests using proprietary technology that required only pinprick in your finger and a small amount of blood to perform more than 240 diagnostic tests. Within a few minutes, hundreds of blood analyses would take place, detecting antigens in the blood, hormone levels and even some cancers.

With this novel idea, Holmes raised venture capital money for Theranos from prominent investors like Tim Draper, Larry Ellison and more. To date, Theranos raised more than USD 400 million. All funding was given on the condition that Theranos did not have to reveal how the technology worked.

That obsession with secrecy extended to every aspect of Theranos. For the first decade Holmes spent building her company, Theranos operated in stealth mode. She even took three of her former employees to court, claiming they had misused the trade secrets.

As Theranos started to rake in millions of funding, Holmes became the subject of media attention. She graced the covers of Fortune and Forbes, gave a TED Talk, and spoke on panels with Bill Clinton and Alibaba’s Jack Ma.

Soon, the company began securing outside partnerships. Capital Blue Cross and Cleveland Clinic signed on to offer Theranos tests to their patients, and Walgreens made a deal to open Theranos testing centers within their stores.

At one point, Holmes was the world’s youngest female self-made female billionaire with a net-worth of around USD 4.5 billion and Theranos was Silicon Valley’s unicorn startups.

Around the same time, questions were being raised about Theranos’s technology. Ian Gibbons — chief scientist at Theranos and one of the company’s first hires — warned Holmes that the tests weren’t ready for the public and there were inaccuracies in the technology. Outside scientists began voicing their concerns.

By August 2015, the FDA began investigating Theranos, and regulators from the government body that oversees laboratories found “major inaccuracies” in their testing.

Things finally began to unravel in later half of 2015. Thanks to one reporter — John Carreyrou. The Wall Street Journal piece revealed that the Edison, the machine that conducted all tests, was only being used for 15 of the 240 tests Theranos advertised. Results were highly inaccurate and unreliable: they were given to real patients with real health conditions. As for the many tests that couldn’t be done with the Edison, Theranos simply used standard machines made by the likes of industry-leader Siemens. To bypass the equipment’s requirements, which were not compatible with Theranos’ blood samples, employees were instructed to hack the machines and dilute samples.

When regulators or investors came to visit Theranos’ offices, they were duped. They would lock the proprietary Edison machines and did not show them to the regulators. All these tests were done on a standard machines.

By 2016, the FDA, Centers for Medicare & Medicaid Services, and SEC were all looking into Theranos.

In July 2016, Holmes was banned from the lab-testing industry for two years. By October, Theranos had shut down lab operations and wellness centers.

Now, the lies have come to the fore. In 2018, both Holmes and Theranos were sued by the US Securities and Exchange Commission for “massive fraud”. By June of that year, Holmes was ousted as CEO of Theranos, while a grand jury indicted both Holmes and her COO Balwani for having “engaged in a multimillion-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients”.

Since inception of Theranos, Holmes managed to pull the wool over (almost) everyone’s eyes: seasoned politicians, incredibly successful investors, the tech elite and the media. Her audacious capacity to lie was almost unfathomable. Perhaps she was motivated by a desire to help people but, when looking at Holmes’ history, it seems her grandiose self-image and ambition to become a legend drove her above all else. If she had taken the advice of others and created a less toxic, more fruitful environment at Theranos, perhaps Holmes could have come closer to achieving her goals. Instead, she created a legacy of an entirely different kind.

You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

― Abraham Lincoln





Entrepreneur. A bibliophile with passion to write inspirational stories on selfmade millionaires.