Theranos Founder and CEO Elisabeth Holmes has been one of the hottest news topics for the better part of last month. Once hailed “as the world’s youngest self-made female billionaire” on Forbes magazine, the 37-year-old is now on trial for fleecing investors of millions of dollars after convincing them to back a technology that didn’t really work.
If found guilty of the 12 charges of fraud filed against her, Ms Holmes will face up to 20 years in prison.
But how did it get this bad? It was only 7 years ago that Theranos was on top of the world after having to go through very successful funding rounds and gaining a valuation of just about 9 billion dollars.
Elisabeth Holmes has always aimed high. Having been raised by bureaucrats on Capitol Hill who were said to have been “very interested in status” and “lived for connections”, Elisabeth had no choice but to be successful, at all costs.
It was however her grandfather’s successful career as the founder Fleischmann’s Yeast, a company that changed America’s bread industry, that would be instrumental in her career path. At age nine she had already decided to be an entrepreneur. She wrote a letter to her father saying that what she really wanted out of life is to discover something new, something that mankind didn’t know was possible to do.
After getting to prestigious Stanford University in 2002 to study chemical engineering, Elisabeth was fast to come up with an idea for a patch that was supposed to scan the wearer for infections and release the necessary antibiotics.
However, Dr Phyllis Gardner, an expert in clinical pharmacology at Stanford, detailed her discussion with Holmes about the idea. She told her that it “wouldn’t work.”
Dr, Gardner says that Ms Elisabeth Holmes “just stared through me.”
“And she just seemed absolutely confident of her own brilliance. She wasn’t interested in my expertise and it was upsetting.”
This was perhaps one of the first signs of Holmes’ persistence and complete belief in the idea despite clear warnings that it wouldn’t work.
It is however this self-belief or rather self-delusion that would be key to her meteoric rise to a billion-dollar entrepreneur.
The Next Steve Jobs
Her ‘revolutionary’ ideas would lead her to drop out of Stanford at the tender age of just 19 to launch Theranos.
Armed with an idea that could have potentially changed the way people diagnosed and treated diseases, Holmes was able to gain the backing of some of the most powerful people in America. Her investors included impressive names such as media Tycoon Rupert Mudoch, US Treasury Secretary George Schultz and America’s richest family the Waltons.
With such power came credibility and this was perhaps how she was able to get by without having a working proven prototype to show.
Dr Jeffrey Flier, then the Dean of Harvard Medical School, met Elisabeth for lunch in 2015 to discuss the idea. Speaking to the BBC he said:
“I knew she’d had this brilliant idea and that she had managed to
convince all these investors and scientists,”
“She was self-assured, but when I asked her several questions about
her technology she didn’t look like she understood. It seemed a bit odd but I
didn’t come away thinking it was a fraud.”
It is Holmes’ self-assurance that was enough to even convince Dr. Flier to invite her to join the medical school’s Board of Fellows, a move that he would later regret. She was eventually removed when the scandal broke out.
After riding high on the hype for the better part of the 2000s, Theranos began to unravel after a whistleblower raised some serious concerns about their flagship device, the Edison. This was followed by a number of damning exposes about the product claiming that the results generated by Edison device were unreliable and that Theranos had instead been using commercially available machines for testing in house.
A bunch of lawsuits followed resulting in US regulators banning Ms Holmes from operating her device for two years.
This was in 2016, two years later, Theranos was dissolved.
Elisabeth would be arrested later that year, along with Theranos’s former chief operating officer Mr Balwani, on charges of wire fraud and conspiracy to commit wire fraud. This was despite having already settled civil charges from financial regulators for fraudulently raising $700m from investors
She was however released on bail in 2019 and later married William Evans, the heir to the Evans Hotel Group chain of hotels with whom they have a son. It is unclear whether her status as a mother will be influential at all in the case.
Elisabeth Holmes is currently battling in the Los Angeles court. According to the court’s filings, the defence claims that Mr. Balwani had allegedly been abusing her emotionally and psychologically for years. This abuse would likely have made her unable to make rational decisions and therefore unable to deceive anyone.
Mr. Balwani has however refuted the claims and will be tried separately next year.
This case is one of the most highly watched cases in recent years and currently involves more than 140 potential witnesses.
Holmes story has also been the subject of numerous books, documentaries and podcasts all of whom I’m sure will be keen to see the outcome of the case.