Rise and fall of the startup that promised to revolutionize health testing

Rise and fall of the startup that promised to revolutionize health testing

The parable of Theranos, the company that promised to perform diagnostic tests with a single drop of blood. In the United States the founder Elizabeth Holmes goes to trial

Elizabeth Holmes, founder and former CEO of the startup Theranos (Yichuan Cao / NurPhoto / Getty Images) Ten years without ever reaching the “go to market”. Now the parable of Theranos, a startup born in 2003, capable of raising 700 million dollars in investments and reaching a valuation of 9 billion, risks ending in the worst way, with the trial for fraud that opens today, 31 August in San Jose, California. After four years and a motherhood, the foundress Elizabeth Holmes, who declares herself innocent, finds herself in prison: she risks up to twenty years in prison.

Until the last drop of blood

Crasi between the words "therapy" and "diagnosis", the company founded by 37-year-old Holmes promised to perform diagnostic tests everywhere - supermarkets, pharmacies, shopping centers - with a single drop of blood and without the need for needles thanks to a machine innovative and small in size. A few moments to get the results, from cancer to HIV. The revolutionary technology had projected the American entrepreneur, clear eyes always wide open and a deep voice (on which there is some doubt it was a pose), in the Olympus of billionaires not yet thirty years old, like the patron of Facebook Mark Zuckerberg and a few others. br>
But, right from the start, the engineering problems proved to be largely unattainable for the staff, who worked locked up in a gigantic and inaccessible headquarters in Palo Alto, with very complicated security procedures to guarantee privacy and bodyguard with broad shoulders and an order earring placed to defend the entrances.

Terror seems to hover behind the friendly-looking windows of a pharaonic seat in full Silicon Valley style, distilled in horse doses by Holmes herself and former companion Ramesh "Sunny" Balwani, twenty years old more. Balwani, a successful ex startupper with a millionaire exit already behind him, was hired in 2009 to head the operations of Theranos and, later, president of the company.

The corporate culture imposed by the couple was simple , former employees said: those who disagreed or questioned ethical questions - legitimate, in the case of health - were silenced. Departments could not communicate with each other, internal email boxes were checked, and even conversations between colleagues were frowned upon. Layoffs, of course, were the order of the day.

The first doubts

In the early 2000s Holmes was a celebrity who went from radio to television to newspaper covers. From presentation to presentation, his allure conquered leading investors, who were content with short pitches and a few slides before signing substantial checks based on word of mouth and hype.

The first capital came thanks to contacts family members. Oracle founder Larry Ellison and international finance greats such as the Walton family of Walmart ($ 150 million), Rupert Murdoch (125), the Mexican billionaire Carlos Slim, the Italian John Elkann with Exor followed. There was also politics: extremely well-known figures such as Henry Kissinger and former Secretary of State of the Reagan administration George Schultz, one of the main actors in the détente, played a role. One of the first whisteblowers will be her son.

Holmes had managed to create a perfect box: but the container was empty. The disaster came to light thanks to two former employees who told what they had seen and to the investigation of journalist John Carreyrou, at the time in force at the Wall Street Journal, a newspaper controlled by Rupert Murdoch. The publisher, despite the pressure received, chose not to intervene by blocking the story: he lost a lot of money, but preserved the integrity of the newspaper.

The castle would collapse shortly thereafter: Carreyrou discovered that the tests of Theranos were carried out with normal machines by diluting the drop of blood taken from the patients, which was then sent to traditional laboratories to be processed. In the few cases where the Theranos system was used, the results were unreliable.

The defensive strategy

In 2018 Holmes reached an agreement with the SEC (the US authority that controls the markets), then closing the company. Today the trial for fraud against the public and investors opens for her, from which over two hundred jurors have already been excluded for incompatibility. Given the notoriety of the former billionaire, in order to take part in the trial they had to fill out a 20-page questionnaire, and exclude even having seen the entrepreneur's TED Talk. The founder and Balwani will face separate proceedings, an unusual decision that will allow the former couple to accuse each other without ever coming to a confrontation. Both plead not guilty.

Holmes' defensive strategy, the US media reported, could be to simply present himself as the public face of the company, whose management would be left entirely to Balwani. Not only that: "Sunny" would have been an abusive partner, and the relationship, in some preliminary statements, was defined as characterized by an "abusive pattern and coercive control".

The startup system under trial

In the event of a conviction, Holmes may be one of the few to pay in an environment, that of Silicon Valley, in which few have wondered how a 19-year-old with only a couple of biology courses behind her and no college degree had was able to set up a billionaire biomedical startup. Whatever happens, notes the New York Times, there is already one consequence: young entrepreneurs in the sector who apply for funds today are often asked if they know the history of Theranos. Although they have nothing to do with Holmes's parable.

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