'Bad Blood' Author: Theranos a Cautionary Tale for Silicon Valley

May 22, 2018

By Jacqueline Corba

The blood-testing start-up Theranos faces a federal criminal investigation. The SEC has called it a "massive fraud." And its founder, Elizabeth Holmes, once hailed as the next Steve Jobs, "is a pathological liar," according to the author of a new book about the company, once the most valuable private start-up in Silicon Valley.

In "Bad Blood: Secrets and Lies in a Silicon Valley Startup," author John Carreyrou, who first reported the company's struggles in October 2015, explains how Holmes fooled investors and the news media by surrounding herself with respected professionals who didn't know enough about science to question her fraudulent claims.

"One of her tricks was at every turn to surround herself and to get the support of someone who had credibility, someone who had a prestigious reputation," Carreyrou said Monday in an interview with Cheddar. "The fact that the board was made up of these older, aging statesmen who had no knowledge, no expertise whatsoever about laboratory science and who basically had no reason to be on this board. And so they had gobbled up whole what she told them."

Members of the Theranos board included former Secretaries of State George Shultz and Henry Kissinger; former Georgia Senator Sam Nunn; and former Secretary of Defense William Perry.

After working at Theranos for eight months, Shultz's grandson, Tyler Shultz, quit and became the whistleblower who shared his experience at Theranos with Carreyrou, a Wall Street Journal reporter.

"It was a story that was going to be a cautionary tale for the valley," said Carreyrou. "But it was also a story of patient endangerment."

Holmes is still the CEO of Theranos. But Carreyrou said the company will not be around much longer.

Once valued at $10 billion, it is now worthless after the company's signature blood-testing device failed to meet industry standards or the company's own requirements. Theranos announced two years ago that it was throwing out two years-worth of results from its Edison blood-testing device. The company faces numerous lawsuits from investors, and agreed to stay out of the blood-testing business for at least two years.

"I hope Silicon Valley draws a lesson from this story. Granting founders absolute power when they are that young," said Carreyrou. "I don't think is a great idea."

For full interview, click here.