Startup Amplifies Its Operational Deceit

Bad Blood is the story of the rise-and-fall of Theranos, a Silicon Valley startup that was set on revolutionizing healthcare. As a case study, the book should become required reading in every business-school entrepreneur program. Theranos’ founder, Elizabeth Holmes, dropped out of Stanford to commercialize a portable blood-testing unit. Instead, she was indicted on fraud charges after bilking hundreds of millions from tech-tuned investors. Among those who had a touch point with Theranos were former Secretary of Education Betsy Voss and former Secretary of Defense James Mattis. Even large corporates like Walgreens and Safeway were lured by Holmes’ siren call.

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Bad Blood
Secrets and Lies in a Silicon Valley Startup
John Carreyrou

In less skillful hands, Bad Blood would be another story of a failed Silicon Valley startup, albeit on a grand scale. The journalist John Carreyrou does a masterful job of weaving the Theranos narrative into so much more. Investors will benefit by understanding the essential role of basic due diligence; founders will be confronted by the reality of how their business decisions impact the livelihood of others. And everyone gets a lesson in corporate governance: Boards of directors should be more than placeholders. Larger-than-life Elizabeth Holmes—once worth billions, now worth nothing—may be the central character, but the omission of her name and picture from the book’s front cover is a signal that the case study has broad reach for the entire startup community.

Bad Blood is a visceral read for venture-capital insiders. The archetypes who bring the story to life are well-known in business circles. There is the founder who wants to change the world; investors who have more money than they know what to do with; and lawyers who veer off-course in pursuit of their version of justice. Because this narrative relates to healthcare, you find regulators who are too underfunded to do their work correctly and in-house lab technicians who are undercut by startup management. In one of the book’s most poignant accounts, we learn that a chief scientist was driven to suicide. Those real-life characters are why this book is a must-read. Most professionals will know a handful of them. Meanwhile, the background on Elizabeth Holmes reduces her to a commercial curiosity, rather than an industry icon. Given the pain she inflicted on many in the pursuit of her gains, she deserves the harsh moniker, at minimum. The author argues that Holmes knew exactly what she was doing, rather than subject the reader to the indefensible notion that she was somehow victimized by circumstances.

In a world in which startups routinely fail, we run the risk that the Theranos saga will fall from commercial memory. Fortunately, Hollywood is doing its part in keeping the story alive. In 2016—even before the book was published—Legendary Pictures paid for the movie rights to the Carreyrou material. The production, however, was apparently mothballed by the pandemic standstill in feature movie projects. ■

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Image: Holmes sought to mitigate syringe anxiety among consumers and patients. Credit: Moovstock at Can Stock Photo.