Updated: Jul 16, 2020
Silicon Valley is known as the heart of innovation and high technology, home to a number of successful companies including Facebook, Spotify, Netflix, Apple and 23andMe.
But all that glitters is not always gold.
Silicon Valley is also home to secrets and scandals.
One of the biggest scandals to date is the story of Theranos, a company that was supposed to revolutionise the healthcare industry and instead became a cautionary tale for biotech start-ups, companies and investors.
The story begins with 19-year-old, Stanford drop-out Elizabeth Holmes. She had been described by her family and friends as an entrepreneurial genius comparable to the likes of Steve Jobs and Mark Zuckerberg.
Like many start-up founders, Holmes started her idea in a basement. After a lot of hard work and networking, she founded her company “Theranos” in 2003, at which point she had already managed to raise over US $700 million from venture capitalists and private investors.
Holmes’ idea was a revolutionary blood- testing device that only needed a few drops of blood from a pin prick finger test to provide a wealth of information on the spot in just a matter of minutes. She named the device “The Edison”.
The Edison would be able to carry out CBCs (Complete Blood Count), STD tests, drug tests, among many others. It overcame the need for intravenous blood draws (phlebotomy) and the need to send off blood samples to a lab and wait a few days to get the results.
In 2013, Theranos was introduced to the public, worth $9 billion. It ran a partnership with Walgreens, the second-largest pharmacy chain in the US and began offering tests across the states of California and Arizona.
In 2014, Holmes was named the youngest self-made billionaire in the world by US magazine Forbes.
© Forbes September 2015 issue
But, underneath Theranos' soaring reputation and praise, was an air of secrecy, manipulation and deception.
Holmes kept Theranos’ device hidden behind closed doors, away from the public, employees and investors. Unless you worked on the technology or your name was Elizabeth Holmes, there was no way to see the device with your own eyes.
In fact, Holmes attracted and convinced investors and accepted their money with the condition that she wouldn’t have to tell or show how her device worked.
In 2016, Holmes and her team finally presented their technology at the annual meeting of the American Association for Clinical Chemistry but did not present any data supporting their claims (New York Times).
The only data ever made available was based on blood drawn from the arm the old-fashioned way and tested in secret labs. None of the blood drawn in Walgreens Pharmacies was taken from a patients finger nor was it tested on site.
So Holmes' claim of "fast accurate results from a finger prick" was never supported by real data.
"The way Theranos is operating is like trying to build a bus while you're driving the bus. Someone is going to get killed." - Former Theranos employee (1)
The situation eventually became more dire when the pharmacies and clinics chosen to test the device began opening up and complaining about the Edison’s inaccurate lab results.
Healthy patients were being misdiagnosed as having strokes or tumors, and patients with serious medical conditions were being misdiagnosed as healthy.
One woman ended up getting a CT scan and 2 MRIs costing over $3, 000 only to find out there was nothing wrong with her.
When Doctors tried to complain, Theranos never responded.
Exposing the truth
In October 2015, a journalist called John Carreyrou started publishing investigative articles on Theranos. That same month, the FDA got involved, accusing Theranos of not meeting the government regulatory and transparency guidelines.
Shortly after, the truth came out: Theranos’ device didn’t actually work and all their claims were lies.
In 2016, Theranos was banned from all pharmacies after hundreds of thousands of Theranos tests had to be voided and after a number of patients filed lawsuits alleging consumer fraud and medical battery.
By late 2017, Theranos had used up nearly all of its capital on legal expenses and had shrunk from 800 to 130 employees.
The end for Theranos came in 2018. Holmes and Theranos’ president were charged with fraud, and conspiracy to commit fraud. That same year, Theranos was shut down.
Elizabeth Holmes now faces 20 years in prison (her trial is set to begin this summer 2020).
The future: Anti-Theranos
Recently, an Israeli startup called Sight Diagnostics received initial clearance by the US Food and Drug Administration (FDA). It has been dubbed the “Anti-Theranos”
Like Theranos, it is a blood testing system that can carry out a full blood analysis with just a few drops of blood from a fingerprick.
But unlike Theranos, Sight Diagnostics has shared its results in peer-reviewed journals and complied with regulatory requirements.
Check out their website here:
What are the most important things to look out for when trusting a biotech startup?
Look for real, honest data
Understand the technology
Listen to the professionals
Be suspicious of "vaporware" (a product or service which is advertised and/or being developed, but never released)
(1) Carreyrou, J. (2018). Bad blood: Secrets and lies in a Silicon Valley startup.
(2) Danziger, C. (2020, May). Theranos promised the future of Medtech, but it was all a lie [Blog]. Retrieved 2020, from https://techaeris.com/2020/05/12/theranos-promised-the-future-of-medtech-but-it-was-all-a-lie/
(3) Ricky, B., (2019, December). Dubbed ‘Anti-Theranos,’ An Israeli Startup Is Delivering On Blood Test Device With Results In Minutes [Blog]. Retrieved 2020, from <https://nocamels.com/2019/12/anti-theranos-israeli-startup-sight-blood-test-device-results-minutes/>