Doing Business | Innovations

September 05, 2018

Theranos is finally shutting down

Investors have lost nearly $1 billion in the company

It may have been surprising to hear that blood-testing startup Theranos was technically still around, even though it was a fraud that put people in real danger. But per an email chief executive officer David Taylor sent to shareholders, Theranos will finally close.

Taylor starts the email by saying that he “write[s] with difficult news about the future of the company,” though it is hard to believe that any shareholder would be blindsided by this development. Taylor, who is also general counsel, became CEO after previous CEO and founder Elizabeth Holmes was indicted for fraud by federal prosecutors. When the founder of the company is facing criminal charges and potentially 20 years in prison, the “difficult” news should at least be expected.

Theranos will formally dissolve, and it will pay its creditors in cash, according to The Wall Street Journal. Most employees already had their last day. Theranos had tried to sell itself, but no one was interested in a disgraced company that lost its investors nearly $1 billion. Technically, the nail in the coffin was that Theranos breached a contract related to a loan with Fortress Investment Group. But clearly, its troubles began a long time ago.

Theranos was once a darling of Silicon Valley and biotech, a unicorn worth $9 billion. It promised a painless, accurate, “groundbreaking” method of testing blood. Founder Elizabeth Holmes, a Stanford dropout, was a wunderkind and the subject of fanfare despite explaining the company’s technology as such: “A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.” (The same New Yorker profile also painted her as almost unbearably hardworking — someone who “no longer devotes time to novels or friends, doesn’t date, doesn’t own a television, and hasn’t taken a vacation in ten years.” And who doesn’t love a young female monk?)

Under scrutiny from The Wall Street Journal, everything fell apart. The technology did not work, and Theranos pushed its failed technology on major companies like Walgreens. Now, Theranos is an example of hubris, sloppy reporting, and too-credulous investors. Holmes’ net worth is now zero. The world would like to believe that Theranos was a wake-up call, but as many have said: it probably won’t be.

Text by The Verge
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