Lies and exaggerations are likely to result in the worst sort of exit from your startup.
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Just released, Bad Blood: Secrets and Lies in a Silicon Valley Startup, focuses on Theranos, a blood-testing startup once valued at $9 billion, and Elizabeth Holmes, the CEO whose demanding nature made her both intimidating and widely respected. Wall Street Journal investigative reporter John Carreyrou has been reporting on fraud within the company for the past several years, but his latest book — which contains more than 150 interviews, including conversations with more than 60 former Theranos employees — digs even deeper.
Related: 6 Lessons Entrepreneurs Can Learn From the Fall of Theranos
Whether you’re curious about the downfall of one of Silicon Valley’s most promising startups or you’re looking for a story to inspire your own journey in entrepreneurship, I highly recommend the read. In the meantime, I’ll cover some key revelations disclosed in the book, so you can satisfy that curiosity and learn something new about the entrepreneurial experience.
The story so far.
The full story dates back years, but here’s the short version. Holmes, along with former company president Ramesh Balwani, was able to raise more than $700 million in funding due to a series of fraudulent or exaggerated claims about the company’s capabilities. Theranos’s main goal was to create a blood test that could test a single drop of human blood for a variety of different qualities, far cheaper than the competition could.
After getting a tip — and a strange gut feeling — Carreyrou followed up with an anonymous contact within the company, learning that the startup cheated on proficiency tests and may have knowingly provided false data to patients. After a series of investigations, Theranos labs were closed in 2016, and earlier this year Holmes settled a lawsuit with the SEC, focusing on charges of fraud, including overstated revenue.
Related: How a $9 Billion Startup Deceived Silicon Valley
The book delves deeper than the surface-level story, however, examining Theranos’s rise and fall from multiple perspectives. These are just a few of the most interesting anecdotes I’ve discovered:
- Holmes was obsessed with Steve Jobs. Holmes seemed to have an obsession with Apple and its founder in particular. She hired ex-Apple employees, referred to her solution as the “iPod of healthcare” and even started dressing like Jobs, complete with a black turtleneck.
- Most lab tests were done using commercially available equipment. Bad Blood also confirms that the small samples of blood taken by Theranos were diluted heavily, leading to inaccurate or unreliable results. Most of the tests run by Theranos were done using commercially available lab equipment or were sent to other professional facilities.
- Holmes attempted to prevent the WSJ story from getting out. When she found out that Carreyrou was launching an investigation of Theranos, Holmes reached out to Rupert Murdoch, whose holdings include the Wall Street Journal. She attempted to persuade him that the information in the story was false, but Murdoch insisted that he “trusted the paper’s editors to handle the matter fairly.”
- Holmes staged a fake lab to impress Joe Biden. Back in 2015, before the controversy heated up, then-vice president Biden visited a Theranos lab, eventually stating how impressed he was with the technology and the company. In Bad Blood, it was revealed that Holmes, along with employees, staged a fake lab environment to maintain the ruse.
- Theranos demanded loyalty and created a paranoid environment to get it. Holmes and Balwani demanded absolute loyalty from their workers and made threats to anyone who dared lose that loyalty. Balwani, at one point, called an all-hands meeting to say, “anyone not prepared to show complete devotion and unmitigated loyalty to the company should get the f— out.” Many employees reported feeling like they were being watched, suspecting that the IT team was monitoring their computer activity and noting suspicious friend requests on Facebook, orchestrated by Holmes to learn more about employees’ social media activities. Ultimately, and understandably, this led to a paranoid, tense workplace environment.
Related: Culture Makes or Breaks a Company When Crisis Hits
Key lessons for entrepreneurs.
So what can you, as an entrepreneur, take away from this?
- Lies and exaggerations aren’t worth it. Theranos was built on many lies, from the capabilities of its lab equipment to its annual revenue. It’s the latest in a long line of stories that illustrate why lies and exaggerations aren’t worth it. Stick to making claims that you can objectively prove.
- Culture makes a difference. Employees were ready to turn on Holmes and Theranos — and more than willing to be interviewed for Bad Blood. That’s because the work culture was demanding, harsh and uncomfortable. Had employees felt safe enough to voice their opinions, perhaps the company could have taken a different path.
- Dig for more information in your investments. If you’re planning to partner with another business or invest in a new startup, do your homework. Theranos achieved unrestrained growth because no one, including multimillion-dollar investors, bothered to double check to ensure their claims were accurate.
Is Theranos the natural result of our startup culture, or a rare deviation from the typical entrepreneur’s path? Either way, Bad Blood tells a compelling story, and one worth reading, regardless of your current position or profession.