ANALYSIS: The Impact of the Theranos ruling on tech startups of the future
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Imagine a world where you could test for anything between cholesterol levels or antibodies, with a single drop of blood, in an instant.
In 2014, Theranos, and its founder Elizabeth Holmes, were prepared to lead the medical industry into a new era. Dubbed the “iPod of healthcare,” Theranos planned to release technology that would forever change blood sampling. Theranos claimed it was able to run hundreds of tests on a single drop of blood, and at a lower price than conventional systems, making the entire system more efficient.
Compared to the technology at the time, which required large amounts of blood, and could only test for a couple factors at a time, it was sold as miracle technology.
Theranos was founded in 2003 by Elizabeth Holmes at age 19, while she was still attending Stanford University, although she quickly dropped out to pursue Theranos full time. The core of her breakthrough at Theranos was their Edison machines, which were the machines that were claimed to run over 100 tests on a single drop of blood.
The company received massive support in its opening years, starting out in a basement back in 2004, to being valued at $9 billion in 2014.
However, Theranos was not the silver bullet for healthcare it promised to be. Looking back, many experts have realized that the idea of running hundreds of tests on a single drop of blood is impossible. “There just aren’t enough molecules there,” stated Paul Yager, a diagnostics developer and researcher at the University of Washington in Seattle in an interview with Nature.
In 2015, John Carreyrou of the Wall Street Journal released an article that opened the floodgates against Theranos. The article stated that Theranos’s Edison machines were only being used for 15 of the 260 tests that Theranos offered, as they were unfit to run the rest consistently. Theranos employees were instead told to use machines purchased from other companies to run tests. The article came alongside several FDA tests that found Theranos’s testing to be very inaccurate, adding to the public turn against Theranos.
Finally, in 2018 Elizabeth Holmes and Theranos were charged with “massive fraud,” with Theranos going defunct in September of that year. As of December 2021, she has been convicted of four of the 11 charges against her, and is facing the possibility of nine years in prison.
The shadow cast by Theranos will cover the future of the public tech sector for a while. Once touted as the future of the medical industry, it is a stark reminder that not everything can be trusted. From now on, medical tech startups will face far more scrutiny, and most likely be pressured to share their data to be peer-reviewed.
However, even the cautionary tale of Theranos will not dampen the entrepreneurial spirit of the tech industry for long. Much of the tech sector thrives on creating exciting ideas, and overselling for the hope of investment. Investors on the other hand, while they might keep Theranos in mind, will continue to take gambles, hoping to get lucky.
Theranos was not only a threat to the bank account of investors, but more importantly jeopardized the health of many unsuspecting patients. There exists a complacent feeling within the tech sector, one that makes the sector very unwilling to change. While to many on the outside, Theranos remains a reminder about betting on miracles, within the tech sector’s echo chamber, it seems not much has been learned.