This Monday, a US jury found Theranos founder Elizabeth Holmes guilty of fraud against her company’s investors – convicting her of four counts out of eleven.

Nearly two decades since the day it was founded, the biotech firm was touted to be the next best thing in blood tests – amassing a $10 billion valuation at its peak back in ‘13-’14.

Things are different now.

With a massive fall from grace taking place across the last few years, both Theranos and its founder are now biting the dust, with Holmes facing upto 80 years in prison, although the actual term will probably be much lower.

How did things get here, and how did one crucial lie turn a venture capitalist dream into a true Palo Alto nightmare? It’s a fascinating story of California startup-hustle culture, starry-eyed investors, and well… Stanford University graduates.

Here’s how it went down:

‘Real-Time Cures’ – How Theranos Was Formed

Like many stories that are part of California’s tech mythos, Holmes’ tale starts on the campus of Stanford University in the early 2000s. Signing up for a chemical engineering degree in 2002, she soon backed out in ‘03 to develop a company she originally called ‘Real-Time Cures’.

Quite a mouthful. She would soon realize that ‘Theranos’ – a portmanteau of ‘therapy’ and ‘diagnosis’, was the name she was looking for.

Theranos had a straightforward goal – to revolutionize phlebotomy. The medical term for blood-collecting, the practice has been central to the way modern medicine works – and is surprisingly tedious to manage. Not only do medical professionals have to deal with patients scared of needles and complex, time-consuming testing methods – it is also prohibitively expensive for large parts of society.

This is where we meet an interesting statement – one that would continue to be stated by Holmes for several years. In a nutshell, she would promise that Theranos would be able to use a tiny pinprick to handle a bevy of diagnostic tests. The machine, dubiously called ‘Edison’, would be used to screen regular folks for hundreds of diseases and disorders – with a degree of efficiency and painlessness that rivaled anything on the market.

“We wanted to make actionable health information accessible to people everywhere at the time it matters most,” said Holmes to Wired back in 2014. “That means two things: being able to detect conditions in time to do something about them and providing access to information that can empower people to improve their lives.”

At the very least, that’s what Holmes’ claim was – soon, everyone from high-profile investors to media outlets ate it all up.

Within years, Theranos would accrue $700 million from investors, and then reach $9 billion in valuation by 2014. America’s leading publications called Theranos a ‘game changer’, while she drummed up major healthcare partnerships with Capital Blue Cross and Cleveland Clinic. Rupert Murdoch of all people invested millions.

Holmes ended up in lifestyle magazines – perhaps it had something to do with her adoption of the Steve Jobs-esque black turtlenecks. Words like ‘genius’ and ‘revolutionary’ bookended several high-profile Ted Talks and photoshoots, in which Holmes’ seemed to revel.

Like Jobs, Holmes’ skills had more to do with marketing and persuasion rather than actual tech innovation – instead of iPods, however, Holmes was playing on a much more dangerous field.

How Did Theranos Go Under?

You know the old saying, ‘if it’s too good to be true, it probably isn’t?’

According to The Stanford Daily, the first person to doubt Holmes’ vision came surprisingly early in the form of Dr. Phyllis Gardner. Speaking to Business Insider, the Stanford Medical School professor shared how she turned down Holmes’ initial concepts, calling them ‘completely ridiculous’.

Undeterred, Holmes then went to Dean of Stanford’s School of Engineering, Channing Robertson. Robertson backed her up and ended up becoming a Theranos board member. Powerful Stanford alumni would follow – everyone from former US Secretary of State Henry Kissinger and Secretary of Education Betsy DeVos would come to invest in the project.

The major seed of dissent also came from within the University’s walls. This came in the form of an Journal of the American Medical Association medical paper that put Theranos under serious scrutiny. The paper, penned by Stanford’s Dr. John Ioannidis, asserted that Theranos had no peer-reviewed research to back its tech, and that Theranos was being untruthful about the accuracy of its technology, and instead prioritizing “products, services and profit.”

Naturally, a well-honed attack on 2015’s biotech darling kicked up a lot of dust. Ioannidis’ paper was followed by a thorough dismantling of Theranos’ technology by UoT’s Professor Eleftherios Diamandis. His report concluded that “most of the company’s claims are exaggerated,” a fact that would

Sensing danger, Holmes used her powerful backers to stage something of a PR exercise. Along with her ex-partner and COO Ramesh ‘Sunny’ Balwani, the pair constructed a fake lab, inviting then-US Vice President Joe Biden for a facility tour.

To put it mildly, it was too little too late.

The big expose finally made major waves through the ongoing work of John Carreyrou – a Wall Street Journal veteran with two Pulitzers to his name, both of which involved exposing American corporate scandals. It’s no surprise that following the medical journal publications, Carreyrou would smell blood. (Pun intended.)

The WSJ story is something of a masterstroke in modern investigative reportage. In under 3,000 words, Carreyrou calmly picks apart and exposes Theranos with one central claim – that the company was using traditional blood test gear and its ‘Edison’ devices were inaccurate, putting the lives of potential patients at risk.

Apart from this, it highlighted key skepticism from both former employees and medical experts – giving the general public (and Theranos’ investors) a serious cause for concern.

This was largely possible due to  interviews with four former employees, Theranos’ lawyer David Boies, American medical professionals, and most importantly, Tyler Schultz.

Schultz was an ex-employee of Theranos whose grandfather George P. Schultz, an ex-secretary of state and Theranos Director. The Stanford-affiliated whistleblower attempted to bring the company’s issues to upper management – failing this, he anonymously reported the company to the New York State Department of Health and openly spoke to Carreyrou.

Holmes and Balwani would attempt to fix this by using lawyers, reputation management firms and defensive statements, but by now, the federal government was involved. The US Food and Drug Administration (FDA) would launch investigations while previous partners would back out of business agreements.

Across the next few years, Theranos would be partially bought, sold, involved in no small number of shady corporate practices, and slowly crumble from within.

Reaching Court

The long saga finally reached its crescendo by March 2018, when US Securities and Exchange Commission charged Theranos, its CEO Elizabeth Holmes and former president Ramesh “Sunny” Balwani, claiming they had engaged in an “elaborate, years-long fraud” wherein they “deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood.”

Within months, everyone left at Theranos was gradually laid off, as the company’s equity tanked and began to dissolve. Covid-19 let Holmes’ case drag on until 3rd January 2022 – when she was finally charged for three counts of wire fraud and one count of conspiracy to commit wire fraud.

It goes to show you that SIlicon Valley is, sometimes, just as empty and vacuous as you can expect it to be. Under a veneer of circuitry and unicorn shares are a bunch of too-sweet promises – even if they’re written in blood.

In contrast, Holmes’ defense attorney Kevin Downey said the evidence did not show Holmes was motivated by a cash crunch at Theranos, but rather thought she was “building a technology that would change the world.”

“You know that at the first sign of trouble, crooks cash out,” but Holmes stayed, Downey said. “She went down with that ship when it went down.”

(Image Sources: Theranos, Sky Media)