Lessons from the fall of Elizabeth Holmes

August 05, 2019 12:13
Elizabeth Holmes, founder of blood-testing startup Theranos, saw her company rise to great heights and then fall apart. Photo: Bloomberg

A young girl decided to develop a blood-testing technology after watching a family member die of cancer.

She studied hard and went to Stanford University at 17. Two years later, she dropped out of college and started her own company.

The girl is Elizabeth Holmes, founder of blood-testing startup Theranos.

In 2015 the Wall Street Journal published an investigative story raising doubts about the company's blood-testing technology and its financial performance.

Within six months, the company fell apart and became practically worthless.

Holmes had possessed all the traits of successful entrepreneurs in Silicon Valley. The talented young girl had strong motivation and secured the support of a number of powerful men.

Former secretaries of state Henry Kissinger and George Shultz as well as former defense secretary William Perry were on the board of Theranos. Media tycoon Rupert Murdoch invested US$125 million in the company.

Sadly, the fairy-tale rise of Theranos did not have a happy ending. After a months-long investigation, Wall Street Journal’s John Carreyrou published a bombshell story alleging that Theranos's blood-testing device gave inaccurate results, and presenting other incriminating details.

The Securities and Exchange Commission then accused Holmes of engaging in an elaborate, years-long fraud in which she and her partner exaggerated or made false statements about the company’s technology, business, and financial performance.

Investigation by the Food and Drug Administration (FDA) showed that Theranos’s proprietary analyzer Edison was used only in 12 out of 250 tests, and none of those 12 tests gave accurate results.

I believe that Holmes had a strong passion to develop a revolutionary blood-testing technology at the beginning. However, when she failed in her attempts, she could not accept the truth. She was not able to handle failure.

In fact, Theranos’s research team suggested increasing the amount of blood used in the blood test, but Holmes rejected the idea. Instead, she decided to falsify the test results.

Even now, Holmes insists she has not done anything wrong. With the court’s ruling coming up soon, her story is in the news again.

This article appeared in the Hong Kong Economic Journal on Aug 2

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Information Technology Federation Chairman