Once a Silicon Valley unicorn valued at $9 billion, blood-testing company Theranos, which claimed its technology capable of testing for a battery of diseases with a much smaller volume of blood and a much lower price than typically required, is finally shutting down. This comes 3 years after investigative journalist John Carreyrou’s series of articles questioning Theranos’ claims.

The company’s founder, Elizabeth Holmes, and its former president, Ramesh “Sunny” Balwani, have been indicted for wire fraud relating to claims made about the company. The two are accused of engaging in a “multi-million dollar scheme” to defraud investors, doctors and patients.

Theranos founder Elizabeth Holmes holding a nanotainer
Theranos founder Elizabeth Holmes holding a nanotainer. Photo: Jenny Hueston via The New Yorker.

Was this simply a one-off case where Holmes and Balwani were such skilled liars as to pull the wool over Silicon Valley’s eyes? Or did investors and the healthcare industry play a part in their own bewitchment, allowing themselves to remain blinded by the promise and hope of something evidently too good to be true?

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Capturing the Unicorn

When The New York Times reported the indictment in June this year, they described the prosecution of the technology startup as a “rarity in Silicon Valley”. That startup founders are not indicted for fraud or sued for their actions more often is less surprising than it ought to be–startup culture prioritises growth, which means that growth is sometimes obtained through questionable means and pitch decks are frequently filled with inflated numbers and misleading information.

Investors, especially those who are looking to capture the elusive unicorn, are wont to throw their dollars at any startup that shows the slightest hint of having developed disruptive technology. If the startup is part of the biomedical tech industry, is working on AR/VR or somehow makes use of AI in a significant part of their operations, chances are that funding will be much easier to come by.

It’s not just Silicon Valley

The obsession with certain types of technology startups is not limited to Silicon Valley either. Singapore has been doing its own push towards deep-tech startups in recent years.

Multiple programmes have been set up to encourage individuals to found their own deep-tech startups. Government-owned innovation platform SGInnovate, for an example, helps “launch, prove and scale” deep-tech startup technology. More recently launched is the NUS Graduation Research Innovation Programme (Grip), which will seed, incubate and launch up to 250 deep-tech startups.

The SGInnovate website
The SGInnovate website.

How many of these startups will end up like Theranos? More importantly, how can these startups can avoid going down the Theranos road?

I. Adding value to your customers should always be the priority

In his book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, written about Theranos and its downfall, investigative journalist John Carreyrou describes Holmes as someone who managed to charm others with her charisma, undying confidence in her company’s product and desire to change the world. Some of the people she convinced to back her startup included former United States Secretary of State Henry Kissinger and entertainment mogul Rupert Murdoch.

In the book’s epilogue, Carreyrou states about Holmes,

I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford fifteen years ago. By all accounts, she had a vision that she genuinely believed in and threw herself into realizing.

Holmes was nothing if not dedicated to pursuing her dream to revolutionise blood testing. But it is this same dedication that appears to have propelled her to eventually lie about her startup’s technology and its capabilities. Although the success of Theranos ought to have been closely linked to the success of its technology, at some point, Holmes appears to have decoupled the two aspects.

Deep-tech startup founders should ensure that adding value to consumers through their new technology always remains top priority. This should take precedence over increasing revenue or widening profit margins, especially if the new technology concerns human lives. If Holmes had kept this in mind, she would not have so readily pushed for the commercialisation of both the Edison and the miniLab even though both analysers were mere prototypes.

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II. Surround yourself with the best people in the industry…

It was well-known that most of the people on Theranos’s board at any point of time were not from the biomedical or tech industry. The choice of board members is likely to have been intentional—people who would not interfere with her vision for Theranos—given that Holmes also retained so much voting power throughout the lifespan of the startup that the board could never reach a quorum on any decision without her.

Henry Kissinger And Charlie Rose Mark The 70th Anniversary Of VE Day
Former US Secretary of State Henry Kissinger sat on the Theranos board. Photo: Steve Mack via Getty Images.

Instead of allowing the board to guide her, Holmes’s choices effectively rendered the board useless in helping her make sound decisions about the company and its direction. Young deep-tech startup owners in particular should consider that while it may be tempting to have all the power to decide what to do with your own company, it is best give yourself room to be persuaded by those who have more experience than you.

III. … then make sure you listen to them

To give Holmes some credit, despite having a puppet board, she did hire many capable individuals as part of her product development team over the years. But it’s not quite enough to simply hire the best people for the job—you have to make sure that you actually listen to what they have to say in their area of expertise.

Unfortunately, Holmes seldom took her engineers’ advice on the production process. For instance, she insisted on the small size of the blood analyser as the starting point of development, even when her engineers felt that it made more sense to put together a working prototype of all the necessary parts, then shrink it.

Holmes also questioned her employees’ loyalty to the company and, in some cases, fired them if they tried to suggest that the Edison, and later the miniLab, which were not yet producing accurate or reliable results, were not ready for commercial release.

While some measure of idealism is crucial if one wants to change the world with their technology, it is important also to let the people who work for you to ground your expectations.


Have something to say about what startups can learn from Theranos’s failure? Drop us a line at hello@upcode.media now!