Theranos: How Did a $9 Billion Health Tech Startup End Up DOA?

by Ernesto Dal Bó and Guo Xu
01 Feb 2021

Stanford University drop-out Elizabeth Holmes hoped to disrupt the traditional $75 billion blood-testing business with only one drop from a finger prick instead of several vials of blood. The revolutionary claim of Theranos’ founder was that her groundbreaking technology enabled a full range of laboratory tests from a tiny sample. The Silicon Valley company, founded in 2003, assembled a powerful board and high-profile investors, becoming a media darling valued at $9 billion. By 2018, federal prosecutors filed criminal charges alleging Holmes had defrauded investors and misled doctors and patients. The health technology company crashed from unicorn status leaving questions about what factors silenced doubters and enticed high-profile investors.

Learning Objectives

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1. Consider the consequences of unbridled pursuit of entrepreneurial success in highly innovative areas, and the role of moral values as a defense against corporate fraud; 2. Establish a contrast with less dynamic, and therefore also more transparent and better regulated spheres of activity in which the invisible hand may be expected to work well, and where moral values may be less critical; 3. Separate the tendency to moralize and blame individuals from the analysis of structural factors; 4. Incorporate structural factors such as the pressures acting on entrepreneurs, and their concomitant need to demand loyalty. Conversely, understand the depressed incentives for other internal stakeholders to uphold standards, and the difficulty of external stakeholders to scrutinize claims about fast-evolving, proprietary innovations.

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Details

Pub Date: February 1, 2021

Discipline: Ethics

Subjects: Innovation, Health Care, Ethics, Technology

Product #: B5968-PDF-ENG

Industry: Technology, Health Care

Geography: Silicon Valley

Length: 6 page(s)