Elizabeth Holmes

Photo by Max Morse for TechCrunch.

Birthname	Elizabeth Ann Holmes
Date of Birth	February 3, 1984
Birth Place	Washington D.C. US
Nationality	American
Occupation	Entrepenuer
Biography	Founder and Former CEO of defunct health tech company Theranos

Elizabeth Holmes is an American entrepreneur and founder of Theranos, a now-defunct blood testing company that promised to revolutionize blood testing by running thousands of lab test on a single drop of blood. In 2014, Theranos was valued at $9 billion, and Holmes was named one of the 400 richest people in America by Forbes. By 2018, however, the company was forced to cease all operations, the massive inaccuracies of their blood testing devices exposed. Theranos’s net worth plummeted to zero, and Holmes was charged with fraud and conspiracy, set to go to trial in August 2020. Starting the company at the age of just nineteen, Holmes was once a praised for her success as a female, self-made billionaire in the male-dominated world of Silicon Valley startups. Public opinion of Holmes after Thernos’s many deceptions were exposed was split into two main camps: those who believed she knowingly deceived investors and endangered patients, and those who believed she was blinded by her own ambition. Regardless, the rise and fall of Elizabeth Holmes and Theranos has prompted a discussion the nature of startups and the ethics of innovation in Silicon Valley.

Early Life

Holmes was born in Washington D.C. on February 3, 1984, to parents Noel and Christian Holmes, her mother a Congressional committee staffer and her father working for energy company Enron then eventually working for government agency USAID. Her parents’ connections would later prove crucial in helping Holmes secure her first investors in Theranos.

Her work ethic, competitive nature, and business savvy started from an early age. At nine years old, she told relatives that when she grew up, she wanted to be a billionaire. A straight-A student in high school, she started her first business selling C++ compilers to universities in China.

Founding Theranos

In 2002, during her time at Stanford, Holmes approached Dr. Phyllis Gardner, a professor of medicine, with an early idea for an invention: an arm patch that can detect infection and deliver antibiotics to the bloodstream in a matter of seconds. Dr. Gardner advised her that the invention was physically and medically impossible. Rather than accept defeat, Holmes pursued the invention with guidance from engineering and business advisors. One of these advisors, Channing Robertson, would eventually leave his tenured professor at Stanford’s school of engineering to join the executive board of Theranos.

Within a year of Holmes’s encounter with Dr. Gardner, she would drop out of Stanford to found Theranos at the age of nineteen. Holmes chose the name “Theranos” to be a combination of the terms “therapy” and “diagnosis.” The company would operate under a veil of secrecy, Holmes described as “stealth mode” for a decade. The company didn’t even have a website until 2013.

The Rise of Theranos

The Pitch

In 2014, Theranos entered the public eye. Holmes gave a TedTalk explaining the company's mission:

"We see a world in which every person has access to actionable health information at the time it matters, a world in which no one ever has to say 'if only I'd known sooner,' a world in which no one ever has to say goodbye too soon." - Elizabeth Holmes, TEDMED 2014

The talk challenged the healthcare system, the high costs of lab tests, the many pains of traditional phlebotomy, and inaccessibility of one own health information. Holmes claimed that Theranos can solve all of those problems because they can run any combination of comprehensive laboratory tests from a few drops of blood from a finger prick for less than half the cost Medicare reimbursed laboratory tests. On a large scale, the promise of Theranos was a "decentralized infrastructure with the oversight and analytics of a centralized pathology framework."

Funding

Many investors, including powerful figures like former secretaries of state, Henry Kissinger and Howard Schultz, found Holmes and her pitch extremely compelling. By the end of 2004, at only 19 years old, Holmes had raised $6 million in venture capital for the company, and by 2010, that number reached $92 million.

By the end of 2014, Theranos raised $400 million in equity sales and was valued at $9 billion, making Holmes the youngest female self-made billionaire and among the 400 richest people in America according to Forbes. Her childhood ambitions of billionaire status were materializing into reality.

The Edison

Absent from Holmes's conversations with investors and in her media appearances was any mention of how Theranos was able to run accurate lab tests on a such a small blood sample.

Walgreen Wellness Centers

In 2014, Theranos struck a deal with Walgreens

Fraud Exposed

The medical community questioned the validity of the blood tests, without any evidence of the technology’s success posted in peer-reviewed medical journals.

After a damning 2015 Wall Street Journal article accusing Theranos of rigging their tests to get better results, the company was investigated by the Centers for Medicare and Medicaid Services who found that Theranos’s Newark, California lab did not meet industry standards and jeopardized patient health. This prompted a downward spiral for Theranos as major investors started to pull out of the company.

In March 2018, Theranos was charged by the U.S. Securities and Exchange Commission with massive fraud for “exaggerated or … false statements about the company’s technology, business, and financial performance.” Shortly after, a grand jury indicted Holmes on eleven counts of fraud and conspiracy. ⁶

In September that year, Theranos officially ceased operations and closed. Holmes’s trial is scheduled for August 4, 2020.²

Ethical Implications

Discussions around the Theranos scandal and Elizabeth Holmes tend to focus on what the whole ordeal reveals about the nature of startups in Silicon Valley. Holmes was able to gain billions in capital investment, not based on evidence that her technology worked, but based on her ability to convince investors that it would work. One's chance of success as a startup in Silicon Valley is not based on the quality or even reality of your innovation but on your ability to sell it.

It's interesting to consider at what point Theranos become an unethical pursuit. Holmes likely started out with good intentions, but it seems like somewhere during her ten years of stealth mode, she realized she had raised hundreds of millions of dollars to create an impossible product. Rather than cut her losses and return them to investors, Holmes forged ahead, choosing money over ethics, continue to defraud investors, until her bluff was finally called.

References

1. https://www.forbes.com/sites/michelatindera/2018/03/14/elizabeth-holmes-and-theranos-charged-with-massive-fraud-by-sec/#6129469b61d9

2. https://www.cnn.com/2019/06/28/tech/theranos-elizabeth-holmes-trial-date/index.html

3. https://fortune.com/2014/06/12/theranos-blood-holmes/

4. https://www.businessinsider.com/theranos-founder-ceo-elizabeth-holmes-life-story-bio-2018-4#holmes-had-an-intense-competitive-streak-from-a-young-age-she-often-played-monopoly-with-her-younger-brother-and-cousin-and-she-would-insist-on-playing-until-the-end-collecting-the-houses-and-hotels-until-she-won-if-holmes-was-losing-she-would-often-storm-off-more-than-once-she-ran-directly-through-a-screen-on-the-door-4

5. https://www.businesswire.com/news/home/20130909005578/en/Theranos-Selects-Walgreens-Long-Term-Partner-Offer-New

6. https://www.refinery29.com/en-us/2019/01/222855/theranos-scandal-timeline-what-happened-elizabeth-holmes-documentary