In 2014, Theranos founder Elizabeth Holmes was hailed as the “next Steve Jobs.” Her company was valued at $9 billion, she was on the cover of Fortune magazine, and she was hailed as a visionary in the field of medical technology.
Elizabeth Holmes was the world’s youngest self-made female billionaire back in 2014. Her company, Theranos, was on the cusp of revolutionizing the medical industry with its innovative technology that could run multiple tests on a single drop of blood. But by 2018, the company was worthless and Holmes was facing federal fraud charges.
Here’s the story of how one of the most promising startups in Silicon Valley turned out to be a complete fraud.
The Rise of Theranos
How did a 19 year old Stanford dropout become one of America’s youngest self-made female billionaire entrepreneurs?
Elizabeth Holmes founded Theranos in 2003, drop out of Stanford University at age 19. She pitched her idea for a portable blood testing device to potential investors.
Theranos raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart’s Walton family and the billionaire family of former Secretary of Education Betsy DeVos. At its peak, Theranos was valued at $9 billion, making Holmes a billionaire on paper.
The Trouble Begins
But there were red flags from the very beginning. As early as 2004, former employees were raising concerns about Theranos’ technology, saying that it didn’t work as advertised.
In 2006, The Wall Street Journal published a damning article about the company, which said that Theranos’ technology was “unproven” and that its devices were inaccurate. Despite these concerns, Theranos continued to raise money from investors—and Holmes continued to market the company’s technology as a game-changer for the medical industry.
The Fall of Theranos
In 2015, Forbes revised Elizabeth Holmes’ net worth from $4.5 billion to zero after doubts were raised about Theranos’s technology.
The company came under further scrutiny after it was revealed that it was using conventional devices for most of its tests, not the innovative technology it had claimed to have developed. In 2018, Holmes settled with the SEC, agreeing to pay a $500,000 fine and give up control of Theranos.
The founder and former CEO of Theranos will be spending time behind bars for defrauding investors.
Today, Judge Edward Davila imposed a sentence of 11 years and three months in prison, with another three years of supervision after Holmes is released. The sentence also includes a fine of $400, or $100 for each count of fraud. Restitution will be set at a later date. Holmes was ordered to turn herself into custody on April 27, 2023. She is expected to appeal her conviction.
She also apologized to the employees, investors and patients of Theranos. “I’m so, so sorry. I gave everything I had to build our company and to save our company,” she said. “I regret my failings with every cell in my body.”
The story of Elizabeth Holmes and Theranos is a cautionary tale about the dangers of deception in business. By lying about the capabilities of her company’s technology, Holmes was able to raise millions of dollars and achieve a level of success that most people can only dream of. But eventually, the truth came out and her empire came crashing down. Today, she faces the very real possibility of spending many years behind bars.
