Theranos

What did it do?

Theranos was a blood-testing company that claimed it could run a large number of tests quickly and cheaply from a few drops of blood taken from a fingertip. It promised to transform the laboratory industry with compact devices of its own design and opened testing sites in Walgreens stores.

Why did it shut down?

The company's devices could not reliably perform most of the tests it promised. When reporting by The Wall Street Journal called the technology into question in 2015, regulators and business partners moved in. CMS sanctions, the end of the Walgreens partnership and a string of lawsuits shut off its sources of revenue. In 2018 the SEC charged the company and two of its top executives with misleading investors; the company was dissolved the same year. In January 2022 a jury found founder Elizabeth Holmes guilty of defrauding investors; the US Court of Appeals for the Ninth Circuit upheld the verdict in February 2025.

The story

In 2003 Elizabeth Holmes, a 19-year-old who had dropped out of chemical engineering at Stanford, founded Theranos with the promise of a future in which a single drop of blood from a fingertip could be used to run a large number of tests. The idea was to make the blood test, one of the most ordinary yet most common procedures in healthcare, cheap, quick and painless. The promise soon won over investors, a dazzling board that included former cabinet secretaries, and major retail chains.

The company raised more than USD 700 million and reached a valuation of around USD 9 billion in 2013 and 2014. Testing sites opened in Walgreens stores, and Holmes became one of the favourite faces on magazine covers. Behind the scenes, however, the company's own devices could not reliably perform most of the tests it promised, and some tests were being run on standard machines made by other manufacturers.

The breaking point came in 2015. Reporting by The Wall Street Journal's John Carreyrou, based on interviews with former employees, brought into the open that the technology did not work as claimed. The regulators followed: CMS, the federal agency that oversees laboratories, imposed sanctions, the Walgreens partnership ended, and lawsuits came one after another. In October 2016 the company announced it was closing its laboratories and testing centres and would lay off around 40 per cent of its staff.

In 2018 the US Securities and Exchange Commission (SEC) charged Theranos, Holmes and former company president Sunny Balwani with misleading investors. In September 2018 the company announced that it had failed to find a buyer and would hand its remaining assets to creditors. In the criminal case, a jury found Holmes guilty on four counts in January 2022, and in November 2022 the court sentenced her to 11 years and 3 months in prison. The US Court of Appeals for the Ninth Circuit upheld the conviction and sentence in February 2025. Balwani, for his part, was convicted on all 12 counts against him in July 2022.

The Theranos story shows how covering an unfinished product with a dazzling narrative can turn into disaster in fields that touch human health. A high valuation, famous names and media attention were no substitute for independent verification. Investors and partners accepted secrecy as a justification without seeing a working product with their own eyes, and that allowed the problems to go unnoticed from outside for years.

Lessons for founders

• In regulated fields such as healthcare, scaling a product without opening it to independent verification exposes the company to a risk it cannot bear.
• Famous investors and a glittering board are no substitute for technical scrutiny; have your product tested by outsiders.
• If a culture of secrecy silences the warnings coming from your team, problems blow up outside instead of being solved inside.

Sources

1. Theranos (Wikipedia)
2. Theranos, CEO Holmes, and Former President Balwani Charged With Massive Fraud (U.S. Securities and Exchange Commission, 2018-03-14)
3. Elizabeth Holmes sentenced to 11 years in Theranos fraud case (NBC News, 2022-11-18)
4. US court upholds Theranos founder Elizabeth Holmes's conviction (The Guardian, 2025-02-24)
5. https://www.wikidata.org/wiki/Q16956307
6. Wikipedia (Turkish)
7. Wikipedia (English)

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