Bad Blood: Secrets and Lies in a Silicon Valley Startup

by John Carreyrou

evangelizing was what successful startup founders did in Silicon Valley. You didn’t change the world by being cynical.

Well, there was a reason it always seemed to work, Shaunak said. The image on the computer screen showing the blood flowing through the cartridge and settling into the little wells was real. But you never knew whether you were going to get a result or not. So they’d recorded a result from one of the times it worked. It was that recorded result that was displayed at the end of each demo.

I bet that started fairly innocently, then went from there. Boiling frog.

Ellison might be one of the richest people in the world, with a net worth of some $25 billion, but he wasn’t necessarily the ideal role model. In Oracle’s early years, he had famously exaggerated his database software’s capabilities and shipped versions of it crawling with bugs. That’s not something you could do with a medical device.

TO BLOW OFF STEAM, Ed went out for beers with Shaunak on Friday evenings at a raucous sports bar called the Old Pro in Palo Alto.

My old hang. Weird!

She’d contracted out the case’s design to Yves Béhar, the Swiss-born industrial designer whose reputation in the Valley was second only to Apple’s Jony Ive. Béhar came up with an elegant black-and-white design that proved difficult to build. Tony Nugent and Dave Nelson spent countless hours molding sheet metal in an attempt to get it right.

Go Yves!

One of the stops was at Bebo, a social networking startup that was acquired by AOL a few weeks later for $850 million.

More weird...

He hid it by cutting and pasting articles from the ESPN website into empty emails so that, from afar, it looked like he was absorbed in work-related correspondence.

Ha

This indicated that Theranos’s test results were almost perfectly correlated with those of the conventional machines. In other words, its technology was as accurate as traditional testing. The rub was that much of the data in the charts wasn’t from the miniLab or even from the Edison. It was from other commercial blood analyzers Theranos had purchased, including one manufactured by a company located an hour north of Palo Alto called Bio-Rad.

Besides Theranos’s supposed scientific accomplishments, what helped win James and Grossman over was its board of directors. In addition to Shultz and Mattis, it now included former secretary of state Henry Kissinger, former secretary of defense William Perry, former Senate Arms Services Committee chairman Sam Nunn, and former navy admiral Gary Roughead. These were men with sterling, larger-than-life reputations who gave Theranos a stamp of legitimacy.

Elizabeth’s sudden fame wasn’t entirely her doing. Her emergence tapped into the public’s hunger to see a female entrepreneur break through in a technology world dominated by men. Women like Yahoo’s Marissa Mayer and Facebook’s Sheryl Sandberg had achieved a measure of renown in Silicon Valley, but they hadn’t created their own companies from scratch. In Elizabeth Holmes, the Valley had its first female billionaire tech founder.

To accommodate its swelling ranks, which now totaled more than five hundred,

Wow - she grew the company to 500 people and they didn't realize the core tech didn't work?

Negative Glassdoor reviews about the company weren’t unusual. Balwani made sure they were balanced out by a steady flow of fake positive reviews he ordered members of the HR department to write.

In March, a month after I had started digging into the company, Theranos had closed another round of funding. Unbeknownst to me, the lead investor was Rupert Murdoch, the Australian-born media mogul who controlled the Journal’s parent company, News Corporation. Of the more than $430 million Theranos had raised in this last round, $125 million had come from Murdoch. That made him the company’s biggest investor.

Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.

Most of the other investors opted against litigation, settling instead for a grant of extra shares in exchange for a promise not to sue. One notable exception was Rupert Murdoch. The media mogul sold his stock back to Theranos for one dollar so he could claim a big tax write-off on his other earnings. With a fortune estimated at $12 billion, Murdoch could afford to lose more than $100 million on a bad investment.

Smart!

The number of test results Theranos voided or corrected in California and Arizona eventually reached nearly 1 million. The harm done to patients from all those faulty tests is hard to determine.

(Mattis’s entanglement with Theranos proved no obstacle to his being confirmed as President Donald Trump’s secretary of defense).

I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford fifteen years ago. By all accounts, she had a vision that she genuinely believed in and threw herself into realizing. But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the “unicorn” boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.