When BIG Went Wrong: Theranos
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By Mark Moses
The seventh article in a 25-part series on history’s greatest business collapses—and the decisions that sealed their fate.
Part 7: Theranos — The Company That Bled Itself Dry
In 2014, Elizabeth Holmes was everywhere.
Forbes named her the youngest self-made female billionaire in history. Her company, Theranos, was valued at $9 billion. She had graced the covers of Fortune, Forbes, Inc., and T: The New York Times Style Magazine. She spoke at conferences alongside Bill Clinton and Jack Ma. Her board included Henry Kissinger, George Shultz, and two former Secretaries of Defense.
The pitch was revolutionary: a tiny device that could run hundreds of medical tests from a single drop of blood. No more needles. No more vials. Faster, cheaper, democratized healthcare.
There was just one problem.
It didn’t work.
The Company at Its Peak
Elizabeth Holmes dropped out of Stanford at 19 to start Theranos in 2003. Her vision was compelling: what if you could diagnose diseases from a pinprick of blood instead of drawing tubes of it? What if results came back in hours instead of days? What if testing was so cheap and accessible that people could monitor their health continuously?
The vision attracted believers. Holmes raised over $700 million from investors including Rupert Murdoch, the Walton family, Betsy DeVos, and major venture capital firms. She assembled a board that read like a Washington power directory—former Secretaries of State, Defense, and the Senate.
Holmes cultivated a mystique. She wore black turtlenecks in homage to Steve Jobs. She spoke in a notably deep voice. She projected absolute certainty. Employees who questioned the technology were fired. Journalists who asked hard questions were stonewalled or threatened with lawsuits.
By 2013, Theranos had partnered with Walgreens to put blood-testing centers in their stores. The rollout began in 2013 in Palo Alto and Phoenix. Real patients were getting real tests.
Internal reports and later testimony showed that senior leadership was aware of significant reliability issues.
The Decision Point
Prosecutors argued—and a jury ultimately agreed—that the core fraud at Theranos was simple: the technology didn’t do what Holmes claimed it could do.
The Edison—Theranos’s proprietary device—was supposed to run hundreds of tests from a finger prick. In reality, it could perform only a small fraction of those tests with any reliability. For most tests, Theranos secretly used traditional machines purchased from companies like Siemens, diluting the tiny blood samples to make them work—a process that compromised accuracy.
Decision 1: Launch before it worked. By 2013, Theranos had been in development for a decade and had yet to produce a reliable product. Holmes faced a choice: tell investors and partners that the technology needed more time, or launch anyway and figure it out later. She chose to launch. The Walgreens partnership went live with technology that Theranos’s own scientists knew was unreliable.
Decision 2: Hide the traditional machines. Rather than admit the Edison couldn’t do what was promised, Theranos ran most tests on commercially available equipment—hidden in a part of the lab that visitors weren’t allowed to see. The finger-prick innovation that justified the $9 billion valuation was largely theater.
Decision 3: Silence the scientists. When lab directors and scientists raised concerns about accuracy, they were ignored, sidelined, or pushed out. Ian Gibbons, Theranos’s chief scientist, tried to alert Holmes to problems with the technology. He was marginalized. In 2013, while under significant professional and legal stress related to company matters, Gibbons died by suicide.
Decision 4: Attack the journalists. When Wall Street Journal reporter John Carreyrou began investigating in 2015, Theranos responded with threats. The company hired David Boies—one of the most powerful lawyers in America—to intimidate sources and threaten the Journal with litigation. Holmes personally called Rupert Murdoch, who owned the Journal, to try to kill the story.
Decision 5: Double down until the end. Even after Carreyrou’s exposé was published in October 2015, Holmes denied everything. She appeared on television, gave interviews, and insisted the technology worked. She blamed the Journal. She blamed disgruntled employees. She blamed everyone except herself.
It took another three years for the company to finally dissolve.
Why They Got It Wrong
My firm has coached more than 2,000 CEOs. Theranos is the purest example I’ve seen of what happens when founder mythology replaces founder accountability.
The reality distortion field. Elizabeth Holmes was gifted at making people believe. Investors, board members, partners, employees—they wanted the vision to be true. Her certainty was so absolute that questioning her felt like questioning the future itself. When someone projects that level of conviction, it takes real courage to say “show me the data.”
A board built for prestige, not governance. Theranos’s board was stacked with famous names—but almost none of them had healthcare or technology expertise. Henry Kissinger knew geopolitics, not blood diagnostics. George Shultz knew diplomacy, not laboratory science. The board provided credibility and connections. It did not provide oversight.
Silicon Valley’s “fake it till you make it” culture. In software, launching an imperfect product and iterating is standard practice. In medical diagnostics, it’s dangerous. Holmes applied startup thinking to a domain where it didn’t belong. You can ship buggy code and patch it later. You can’t ship inaccurate blood tests and fix them after patients have made medical decisions based on false results.
Fear-based culture. Theranos employees signed aggressive NDAs and were threatened with lawsuits if they spoke up. The few who raised concerns internally were terminated. The message was clear: loyalty mattered more than truth. When you build a culture where dissent is dangerous, you guarantee that you’ll be the last to know when something is wrong.
The sunk cost trap. By the time the problems were undeniable, Holmes had raised hundreds of millions of dollars, built a famous brand, and promised the world a revolution. Admitting failure meant losing everything. So she kept going—hoping that somehow the technology would catch up to the promises. It never did.
What a Great CEO Would Have Done
The intervention point was 2010, maybe earlier—when it became clear that the Edison wasn’t going to work as promised.
A great CEO would have gone to the board and investors and said: “We’ve learned that our original approach has significant limitations. Here’s what we’ve discovered, here’s what we can actually do, and here’s the revised timeline and funding we need to get it right.”
That conversation is painful. It might have meant a down round, a smaller valuation, disappointed investors. But it would have been honest. And it would have preserved the option to build something real.
Instead, Holmes chose to protect the narrative. She prioritized the story over the science. And once you start lying about whether your product works, every subsequent decision becomes about protecting the lie rather than building the company.
A great CEO also builds a culture where scientists can say “this isn’t working” without fear. At Theranos, the culture made honesty career-ending. That’s not a bug—it’s a choice. Holmes created an environment where misrepresentation became embedded in the company’s survival strategy. She can’t then claim she didn’t know what was happening inside it.
The Lesson for Today’s Growth CEO
Theranos is a story about the distance between vision and reality—and what happens when you refuse to let that distance close naturally.
A few patterns that stay with me:
1. Your product has to actually work. This sounds obvious, but the pressure to ship, to hit milestones, to meet investor expectations can create incentives to cut corners. In some industries, imperfect is acceptable. In others—healthcare, safety, finance—it’s not. Know which world you’re in.
2. Expertise on the board matters. A board of famous names might help with fundraising, but it won’t help you avoid catastrophic mistakes. You need people who understand your domain deeply enough to ask hard questions. If your board can’t evaluate whether your core technology works, you don’t have governance—you have decoration.
3. Watch for cultures where bad news can’t travel. If your employees are afraid to tell you problems, you will be the last to know when something is broken. That’s not loyalty—it’s a setup for disaster. The health of your culture can be measured by how quickly problems reach leadership.
4. “Fake it till you make it” has limits. There’s a version of this that’s healthy—projecting confidence while you’re still building. And there’s a version that’s fraud—claiming capabilities you don’t have and may never have. The line between them is whether you’re deceiving yourself or deceiving others. Holmes crossed that line early and never looked back.
5. Vision without integrity is just manipulation. Holmes had a compelling vision. She was a talented storyteller. But none of it was grounded in truth. Vision is valuable only when it’s tethered to reality. Otherwise, it’s just a more sophisticated way to lie.
The Final Count
Theranos shut down in 2018. The $9 billion valuation went to zero. Investors lost over $600 million.
But the real damage wasn’t financial—it was medical. Patients received inaccurate test results and made healthcare decisions based on false information. Some were told they had conditions they didn’t have. Others were told they were healthy when they weren’t. The full scope of harm may never be known.
Elizabeth Holmes was convicted in January 2022 of four counts of wire fraud against investors. She was sentenced to more than 11 years in federal prison and ordered to pay $452 million in restitution. She reported to prison in May 2023.
Sunny Balwani, Holmes’s former boyfriend and Theranos’s COO, was convicted on 12 counts and sentenced to nearly 13 years.
The board members… have not faced the same legal consequences. George Shultz, who initially dismissed his own grandson’s warnings about the company’s problems, died in 2021.
Here’s what I keep coming back to: Elizabeth Holmes had real talent. She raised nearly a billion dollars, attracted some of the most powerful people in America to her board, and built a brand that inspired genuine excitement. If she had applied that talent to building something real—something that actually worked—she might have changed healthcare.
Instead, she chose the shortcut. She chose the story over the science. And the story, eventually, collapsed.
The technology never caught up to the promises. It never does.
Next week in Part 8: Bear Stearns—The First Domino
Mark Moses is the Founding Partner and Chairman of CEO Coaching International and author of Make BIG Happen. His firm has coached more than 2,000 CEOs and helped facilitate over 100 client exits totaling more than $25 billion.
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