The rise of Theranos captured the world’s imagination, promising nothing short of a healthcare revolution—all from just a few drops of blood. At the center of it all was Elizabeth Holmes, who masterfully crafted her public persona as a tenacious visionary and savvy leader. Celebrated on magazine covers and frequently compared to tech icons, she became the emblem of entrepreneurial success, famously rising to become America’s youngest self-made female billionaire.
The public thought Theranos was changing healthcare for good, but things were far different within the company. Under glowing magazines and Elizabeth Holmes’ charming smile, questions grew louder among those who worked directly with the systems and patient samples. People working with actual systems and patient samples felt deep concern. The ‘starry-eyed’ feeling new employees had turned to disappointment quickly. Inside that headquarters, reality began to really diverge.
Erika Cheung, a chemist from UC Berkeley, joined Theranos. She saw Elizabeth Holmes as a perfect role model at 22. Holmes seemed like a woman leader starting a biotech revolution. The goal of making healthcare easy and cheap appealed deeply. However, daily lab work didn’t match this nice idea. Within weeks she started feeling things ‘turn’ sour.
Erika first worked in research, where failure happens. But patient samples from Walgreens arrived later. Running quality tests before patient samples failed nonstop. She stayed up until 3 AM trying to make the controls work. They just weren’t consistently functioning how they should. This involved real patient data processed on systems that weren’t reliable.
Within Theranos, alarming practices were commonplace, with data deliberately deleted as ‘outliers’ to mask poor results, and untrained staff making critical decisions in the lab, all under pressure from upper management who prioritized speed and output over accuracy and safety, creating a dangerous environment for those aware of the risks.
Erika wasn’t alone in her growing concerns. Her close friend, Tyler Shultz, also an employee, was raising similar doubts. Tyler’s unique position came because of his grandfather, George Shultz. Mr. Shultz was an investor and respected board member for Holmes. This family link gave Tyler ways to voice his worries. He even ate Thanksgiving dinner one time with Elizabeth Holmes.
Tyler’s revelation of the issues to his grandfather, George Shultz, initially created significant family tension, as Shultz sided with Elizabeth Holmes over his grandson, leading to a painful and prolonged estrangement, with his grandfather only grasping the truth about seven months prior to this interview, and while they eventually shared dinner again, the dynamic had irrevocably changed, with Shultz viewing his support of Theranos as a final, arduous endeavor.
Outside the company, questions started growing. John Carreyrou, a WSJ reporter, looked past the glowing narrative. He thought the company being secret was very strange. Medical companies usually aren’t this way, he noted. Holmes could not explain her technology clearly when asked. Her answer about ‘chemistry’ was vague and unhelpful to him. This lack of openness led Carreyrou to investigate the lab methods closely.
The investigation by the Journal faced pushback right away. David Boies, a powerful lawyer on the board, visited their newsroom. He met with the editor too, trying to stop things, it seemed. But the Journal published Carreyrou’s article anyway on October 16, 2015. The headline said, ‘HOT STARTUP THERANOS HAS STRUGGLED WITH ITS BLOOD-TEST TECHNOLOGY.’ It said their tech was bad, and they used others’ machines mostly. This hit Silicon Valley hard; Holmes was a hero there.
After the article, things change fast inside headquarters. Holmes went into a conference room for two full days. Her inner circle, Balwani, lawyers, and crisis people joined her there. The room was like a ‘war room’ with old food and coffee cups. Most people stayed straight for 48 hours, leaving just briefly. Holmes listened to ideas, like finding scientists to defend them. But Theranos blocked scientists from publishing papers on their tech anyway.
With no science defense, Holmes went back to her story. She flew to Harvard for an appearance during this time. An interview on CNBC’s Mad Money was also set up. Holmes used a quote, like Steve Jobs often said. ‘This is what happens when you try to change things,’ she claimed. ‘First they think you’re crazy, then fight you, then you change the world.’ She didn’t directly answer if the article’s charge was true.
Back in Palo Alto, Holmes, accompanied by Balwani, addressed employees in the cafeteria, her signature low voice delivering a speech asserting their world-changing mission and dismissing the Journal’s reporting as inaccurate, a sentiment Balwani echoed, after which the atmosphere shifted dramatically as employees spontaneously began chanting vulgar slogans with increasing volume.
This chanting showed how much loyalty Holmes built inside. It also reflected Silicon Valley’s unique way of working. Narrative acts like a ‘lubricant’ there, helping things move. Business often seems like a big ‘confidence game.’ VCs, entrepreneurs, and tech media support each other constantly. Calling out problems isn’t usually in anyone’s best interest. The system helps ‘buoy one another’ up, they say.
Elizabeth Holmes fit into this valley dynamic perfectly. She arrived around 2003 with an ideal story. A young woman wanting to change the world, using blood testing. She acted like Steve Jobs often did with her clothes and work hours. This persona and story drew big investors like Tim Draper. Magazine covers and TV shows featured her face everywhere. Her popularity also met the Valley’s wish for a female hero.
The science behind her idea had big problems from day one. Stanford professors felt very skeptical about it. Phyllis Gardner, a medicine professor, said, ‘Your idea won’t work.’ Getting accurate tests from one finger prick is almost impossible. Cell breakdown and contamination make it very hard. Despite this expert feedback, Holmes stayed fully determined. She found one adviser, Channing Robertson, who supported her idea.
Holmes raised a lot of money, nearly $700 million total. She did this under strange conditions for investors. She didn’t have to tell them how her technology actually worked. She kept final say and total control over everything. This secrecy stopped some people from investing. But many others still gave her money anyway. Maybe the story or big money promised made them overlook this.
The cracks started showing thanks to whistleblowers and the Journal. The truth about failing tests and bad data came out. It showed the image didn’t match the real company inside. Management fought back hard against everyone. Tyler Shultz’s family issues proved how much pressure existed. The chanting against Carreyrou showed their strong refusal to see problems. Their carefully built story fell apart, leading to legal action later.
The legacy of Theranos continues to shape biotech and venture capital today. Investors have become far more cautious, often questioning whether a new startup could become “the next Theranos.” The case also heightened concerns about biases facing charismatic female founders. In response, whistleblowers like Erika Cheung and Tyler Shultz are working to prevent history from repeating—through initiatives such as Ethics in Entrepreneurship, which provides future innovators with the tools to integrate ethical thinking from the very beginning.
