I had only been vaguely aware of the Elizabeth Holmes saga until recently. My impression from all the magazine covers had been that the celebrated Silicon Valley startup foundrix had invented some
revolutionary disruptive new method for testing blood and made the Forbes 400 off her invention.
Back in 2014, this high tech startup’s board of directors was … remarkable. From Fortune:
Little known and privately held, Theranos has assembled what may be, in terms of public service, the most illustrious board in U.S. corporate history. It includes three former U.S. cabinet secretaries, two former U.S. senators, a retired Navy admiral and a retired Marine Corps general.
In 2011, explains company founder Elizabeth Holmes, she realized that changing the way health care is delivered in this country would require the help of great strategists.
That July she finagled an introduction to George Shultz (above), the former Secretary of State, Treasury, and Labor, at Stanford’s Hoover Institution. Shultz had held four cabinet-level positions, counting his stint as director of the Office of Management and Budget, and had also been president of engineering giant Bechtel Group and a director at biopharmaceutical company Gilead Sciences. …
Schultz, Holmes, the late Lee Kwan Yew
Three years later nearly all the other outside directors on Theranos’s board are people who were introduced to the company through Shultz, now 93. They are former Secretary of Defense Bill Perry, former Secretary of State and National Security Adviser Henry Kissinger, former U.S. Senators Sam Nunn and Bill Frist (a heart-transplant surgeon), retired U.S. Navy Adm. Gary Roughead, retired U.S. Marine Corp Gen. James Mattis, former Wells Fargo CEO and chairman Dick Kovacevich, and former Bechtel Group CEO Riley Bechtel.
Why isn’t Prince Bandar on her board?
This sounds a lot like that Strategic Advisory Board for Genie Oil and Gas, which is drilling in the Golan Heights: Dick Cheney, Rupert Murdoch, Bill Richardson, Mary Landrieu, Lord Rothschild, Jim Woolsey, and Larry Summers.
This sounds like a good data mining project for moneyballing investors: which famous name on boards is most often associated with firms with something to hide? Can you detect patterns of board membership that have predictive value?
Maybe statistics would suggest that adding superlawyer David Boies to your Board isn’t a good sign?
David Boies – Director
David Boies is the Chairman of Boies, Schiller & Flexner LLP, an internationally recognized trial lawyer, legal advisor and counselor to boards of directors. Mr. Boies served as Special Trial Counsel for the United States Department of Justice in its antitrust suit against Microsoft; lead counsel for former Vice-President Al Gore in connection with litigation relating to the 2000 Florida vote count; and as co-lead counsel for the plaintiffs in Perry v. Brown, which established for the first time the federal constitutional right for gay and lesbian citizens to marry.
From the WSJ just after Christmas:
At Theranos, Many Strategies and Snags
Elizabeth Holmes’s blood-testing ambition has long collided with technological problems
By John Carreyrou
The night before a big meeting with a Swiss drug company in 2008, Theranos Inc. founder Elizabeth Holmes and a colleague sat in a Zurich hotel, sticking their fingers with a lancet.
They drew drops of their own blood to try the company’s testing machine, but the devices wouldn’t work, says someone familiar with the incident. Sometimes the results were obviously too high. Sometimes they were too low. Sometimes the machines spit out only an error message.
After two hours, the colleague called it quits, leaving Ms. Holmes still squeezing blood from her fingers to test it again.
Ever since she launched Theranos in 2003 when she was 19 years old and dropped out of Stanford University, Ms. Holmes has been driven by ambition that is big even by Silicon Valley standards. Instead of a smartphone app to hail a car or order food, she wants to revolutionize health care with a vast range of diagnostic tests run with a few drops of finger-pricked blood.
Now 31, Ms. Holmes has emphasized a variety of strategies—a hand-held device, tests for drugmakers, drugstore clinics—while trying to turn her dream into a business. She often has collided with technological problems, according to interviews with more than 20 former Theranos employees, company emails and complaints filed with federal regulators.
In Switzerland, she went ahead and pricked her finger in front of a group of Novartis AG executives at the meeting the next day, testing for a protein that measures inflammation, says the person familiar with the incident.
All three of her Theranos devices flickered with error messages, the person says. Ms. Holmes was unfazed, blamed a minor technical glitch and continued to pitch the vast potential of her technology.
At the WSJDLive 2015 conference, Theranos founder and CEO Elizabeth Holmes discusses her company’s proprietary technologies, the FDA’s inspection of its facilities and the assertion that Theranos was too quick to market its products.
Ms. Holmes and several current or former Theranos directors declined interview requests. A spokeswoman for Theranos, Brooke Buchanan, says Ms. Holmes recalls only one machine with an error message, because someone tripped over the cord. A second machine ran perfectly, and the third wasn’t used, the spokeswoman says. A Novartis spokeswoman wouldn’t comment.
Since a Wall Street Journal article in October, Ms. Holmes has defended the Palo Alto, Calif., company’s laboratory work and promised to publish data proving the accuracy of its more than 240 tests, ranging from pregnancy to diabetes.
She said earlier this month that customer volume was higher than ever. The company has said it performed millions of tests, with highly positive feedback.
For now, though, Theranos has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the small proprietary vials called “nanotainers.” As a result, Theranos is using traditional lab machines for most of its tests.
But it turns out that back in 2003 she only came up with the idea that it would be awesome to invent some revolutionary new method for testing blood that wouldn’t require a big needle. (Getting rich off a replacement for the needle isn’t a wholly original idea, either. In the 2000 movie Boiler Room, a fictionalized version of The Wolf of Wall Street shenanigans, the boys are pushing a penny stock firm said to have invented a replacement for the hypodermic needle.)
The various devices that Theranos’s engineers have come up with since then evidently haven’t worked well enough to get FDA approval, so Theranos has apparently been using its large sums of investor money to have the blood tests it does at drug stores processed the old-fashioned way. (And / or deliver not very reliable results.)
This kind of fake-it-until-you-make-it strategy is hardly unknown. I suspect numerous successful companies went through just such a ploy of promising a revolutionary cheaper technology and then delivering on contracts using an expensive old fashioned technology until making the new tech work.
Of course, so did lots of ultimately unsuccessful companies.
It’s also not uncommon in Silicon Valley for entrepreneurs who are funded for their original idea to get repurposed into working on something else when the original idea proves a dud, but the investors still like the founders’ personalities.
Obviously, she’s good at impressing important men. That’s a remunerative skill, even without being an inventor. The interesting question is why didn’t she get redirected away from a field, biotechnology, in which she had no particular technical skills to one in which her abundant people skills would be useful?
But perhaps the Elizabeth Holmes’ reality distortion field was so strong that all the venture capitalists and famous board members backing her never noticed that she actually wasn’t a genius biotech inventor? Or did it have something to do with everybody who was anybody getting too invested in the idea that it was time for Silicon Valley to have a female Steve Jobs (she wears black turtlenecks like Jobs) to notice?
P.S., Back in October, Holmes was named to the Board of Trustees of the Center for Strategic & International Studies:
CSIS Names 9 New Members to its Board of Trustees
OCT 1, 2015
WASHINGTON, October 1, 2015—The Center for Strategic and International Studies (CSIS) is pleased to announce that Erskine Bowles [Clinton Administration chief of staff], William Daley [Obama chief of staff], Stanley Druckenmiller [formerly Soros Management Fund], Martin Edelman [real estate legal rainmaker active in Persian Gulf gigadeals], Elizabeth Holmes, Ronald Kirk [black mayor of Dallas, US Trade Rep], Leon Panetta [got Osama as CIA boss, then Sec of Def], Bob Schieffer [Face the Nation], and Frances Townsend [chair of Homeland Security Council under Bush] have joined the CSIS Board of Trustees.