How Elizabeth Holmes Failed Her Start-Up, Theranos

 How Elizabeth Holmes Failed Her Start-Up, Theranos
Image courtesy of CNN.com

When 19-year old Elizabeth Holmes left Stanford University in 2003 to pursue her dream of creating a better and simpler method of testing blood samples, she did so with the encouragement of her engineering professor and several investors.

Ten years later, after a decade of research and millions of start-up dollars to finance the project, her Edison blood-testing system was introduced under the company name Theranos.

The media and Silicon Valley went wild. Investors came running with car loads of cash. When the dust had finally settled, the privately-held company had raised over $400 million in seed money and was valued at $9 billion dollars. Elizabeth Holmes’s personal net worth suddenly skyrocketed to nearly $4.5 billion dollars.

Holmes then went on the media circuit to explain how Edison works. Instead of having to collect vials of blood for testing, the Edison technician only had to prick a finger and takes a drop or two. The sample would then be forwarded to their lab and tested on their proprietary “Edison machines.”

That all changed in October of 2015 when the Wall Street Journal published an article that that cast doubts over the entire Edison project by accusing the company of failing to reveal faulty testing results. In essence, the article was accusing Theranos of fraud.

Holmes immediately went into a defensive mode, admitting some mistakes had been made but saying the basic system was still valid.

But the damage had already been done. The seeds of doubt had been cast. By the spring of 2016, her $4.5 billion net worth had been readjusted downward to $0.

Then the roof fell in on July 8 when federal regulators revoked its license for Theranos to operate a lab in California because of unsafe practices and banned founder Elizabeth Holmes from the blood-testing business for at least two years.

Holmes has only herself to blame for the dilemma. Her lack of oversight and daily hands-on involvement with the testing lab stunned many in the biomedical industry. And the failure to comply with requests to forward actual testing results to industry regulators falls directly back on her shoulders. Under her leadership, the lack of transparency eventually caught up with Theranos.

Theranos could appeal the sanctions to an administrative judge. That move would put the revocation on hold for a short time, but the odds of winning would be slim to none.

Or Ms. Holmes could simply to walk away from the company she built largely on her vibrant personality and begin anew in her quest for revolutionize blood tests.

But with possible criminal charges being investigated and multiple lawsuits probably headed her way, the heady days of 2014 for the media darling are over.

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