If you dig up most startups’ past, you’ll see that many of them adopted a “fake it ‘till you make it” mindset. After all, at a time when successful pitching draws the line between who gets funding and who doesn’t, confidence is everything. However, the guilty verdict of Theranos’ Elizabeth Holmes might just change that. After facing 11 charges and being found guilty of four, the fate of the former CEO might just teach founders a crucial lesson.
The bloody end of Theranos: Elizabeth Holmes’ guilty verdict
After months of court trials in California, Theranos’ Elizabeth Holmes was convicted of defrauding investors on Jan. 3. According to prosecutors, Holmes lied that their tech could detect illness types from a few drops of blood.
Aside from fraud against investors, Holmes also got three wire fraud charges. The max prison term for the charges is 20 years each.
But let’s backtrack a bit and revisit the rise and fall of Theranos, Elizabeth Holmes’ startup that first took off in 2003. Holmes founded Real-Time Cures in Palo Alto to make healthcare available for all. At that time, Holmes said that because of her fear of needles, she came up with an idea to get vast amounts of data from a small amount of blood. Though experts said the process wasn’t possible, Holmes remained loyal to her vision and got backing from venture capitalists.
With only $6 million in funding in 2004, Holmes worked to raise $92 million in venture capital by the end of 2010. She also got the former secretary of state, George Shultz, to join the startup’s board of directors.
Despite the funding success, Holmes led the startup without a website or even press releases until 2013. During that time, the startup partnered with Walgreens for in-store blood sample centers. Two years later, Holmes had agreements with Capital BlueCross, Cleveland Clinic, and AmeriHealth Caritas to use their tech.
Everything was going well until John Carreyrou of The Wall Street Journal published a piece about the blood-testing device. Apparently, people from the medical field refuted the validity of the device. From 2016 onwards, the startup got warnings, bans, and suits because of faulty tech.
What it means for startups
The startup ecosystem thrives on creativity and being bold enough to pursue an idea, no matter how far-fetched. Added to that, many founders also believe that personal branding is part of the game when pitching to investors.
Upon Theranos’ downfall, Holmes’ personal branding seemed to have fallen apart piece by piece. For one, the founder previously said that her mom dressed her in black turtlenecks, thus explaining why she still wanted to sport them as an adult. On the other hand, a former colleague implied that Holmes was only copying Steve Jobs, whom Holmes admired.
Also, a colleague said that Holmes’ baritone voice isn’t authentic. A colleague recounted when Holmes expressed excitement over something at work and used her real tone by accident. Former professors also said Holmes had a higher-pitched voice, more typical of a woman her age. Some suggest that it was a way to make herself sound more authoritative.
Changing one’s voice and lying about wardrobe choices may seem harmless. On the other hand, some suggest that Holmes presented herself differently and that it’s all a lie. And for sure, the guilty verdict of Theranos’ Elizabeth Holmes is a crucial milestone that will make startup founders think twice about making false promises in the future.
Later this month, Theranos’ COO and president, Ramesh “Sunny” Balwani, will also stand trial, and the story is surely far from over.
