CEO of Theranos, Elizabeth Holmes, was convicted on four counts, including fraud, and is awaiting her final sentence in September. Theranos was a unicorn company with an enterprise value of US$ 9 billion. How did this happen?
Since childhood, Elizabeth Holmes was very ambitious. From a young age, she planned to use her ideas to amass a fortune. She was accepted to Stanford University on a Presidential Scholarship and dropped out after two years to start her own business. Her story echoes that of other global IT company CEOs, such as Steve Jobs and Mark Zuckerberg.
This young woman, who had no expertise in chemistry, presented a vision 'to live a safe life from disease by making everyone get blood tests at a reasonable price and in a convenient way.' She persuaded Stanford University professors and researchers to start a blood-testing startup: Theranos.
A demonstration day was set up to show the prototype device to a global pharmaceutical company. CEO Holmes arrived in Switzerland with her employees, carrying an error-prone prototype diagnostic device.
Ultimately, she manipulated the test results to convince investors that diseases could be diagnosed with nothing more than a small amount of blood. This startup began to attract millions of dollars in investment; this was the beginning of the Theranos fraud.
11 years later, Holmes made a bold promise to put to market a portable device that could diagnose more than 250 diseases with a single drop of blood. Surprisingly, investors believed this! The enterprise value of this company subsequently rose to US$ 9 billion, and the total assets of Holmes reached US$ 4.5 billion.
Why did nobody suspect the authenticity of this new technology? You will understand if you look at the board members and investors list. The list includes a former Secretary of State, Defense Minister, media tycoon, and global IT entrepreneur.
Global business media not only featured CEO Holmes as a cover story but also praised her a global changemaker developing a technological breakthrough.
Her looks and charisma deceived investors and board members. In the fallout from the scandal, their reputations were tarnished, and they incurred substantial financial losses.
Holmes always wore a black turtleneck in imitation of Steve Jobs and had dyed blonde hair, reminding people of a successful female CEO.
Although Theranos was a bio venture company, it adopted the image of a Silicon Valley IT company. Additionally, Holmes did not hesitate to use illegal means in management.
Her lack of morality led to the collapse of the company and the loss of many jobs. If the Theranos lab had been inspected once thoroughly before deciding on investment and partnership, no one would have gotten caught in this scam.
The greed of people who believed in what they wanted to think and saw what they wanted to see eventually led to such a catastrophe.
Fortunately, the truth was finally revealed due to honest people who took risks and ethical journalism. I hope startups running their businesses honestly will not be punished by these scam companies.
“Do not invest in a startup just because it looks promising; please verify the business model or technology.”
Sarah Dongmi Choi / Senior Manager /Chungbuk Center for Creative Economy and Innovation