Theranos: The $9 Billion Illusion That Fooled Silicon Valley

Theranos was founded in 2003 by 19-year-old Stanford dropout Elizabeth Holmes. The company promised a revolutionary blood-testing technology—the "Edison" device—that could run hundreds of tests from a single finger prick of blood. By 2014, Theranos was valued at $9 billion, making Holmes the world's youngest self-made female billionaire.

The company raised over $1.4 billion from investors including Rupert Murdoch, the Walton family, and the DeVos family. Its board included former Secretaries of State George Shultz and Henry Kissinger, former Secretary of Defense James Mattis, and former Wells Fargo CEO Richard Kovacevich. None had significant medical or scientific expertise.

The problem: the technology didn't work. According to the Wall Street Journal's John Carreyrou, whose investigation exposed the company, Theranos was running most of its tests on modified commercial machines from Siemens and others—not on its own Edison device. The few tests run on Edison produced wildly inaccurate results. Patients received incorrect results for conditions including cancer, HIV, and miscarriages.

In 2015, the WSJ published its first exposé. By 2016, the Centers for Medicare & Medicaid Services banned Holmes from operating labs for two years. Walgreens, which had partnered with Theranos to put testing centers in its stores, terminated the relationship and sued. The SEC charged Holmes with "massive fraud" in 2018.

Theranos officially dissolved in September 2018. Holmes and COO Ramesh "Sunny" Balwani were both convicted of fraud. Holmes began serving an 11-year, 3-month prison sentence in May 2023.