The Theranos Startup Story: From $9 Billion to $0 With Criminal Charges

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Welcome to success story, the mostuseful podcast in the world, I'm your host Scott D, clary. The success Torypodcast is part of the hub spot podcast network. The help spot podcast numberis the audio destination for business professionals, who seek the besteducation and inspiration on how to grow a business, hup spot podcast,never coasts, act as on the mand mentors to entrepreneurs start up andscale ups through practical tips and inspirational stories, listen, learnand grow with a hob spot podcast network at hub spot com s podcastnetwork. Today I am going to break down the story of Tharone. You've heard itin the news you've heard about Elizabeth Holmes, you've heard aboutthe incredible growth and all the scandal now you're going to hear itfrom me. We're going to start off with the origin story, we're going to speakabout how they grew so quickly and then the rise and then the fall, the deceitand everything that's still ongoing and all the things that are still unfolding,even as this podcast episode airs. This is normally a business case study thatleads into a growth story. But...

...realistically, this is the story ofTheros that went from nine billion dollars to a zero dollar valuation andcriminal charges from nine billion dollars to zerodollars with criminal charges. And if you don't know the story, I'm happythat I'm the first one bringing it to you, but is a good chance that if youare involved in tech or you have been paying ten of the news and you've heardthe the name Elizabeth Holmes, you would have heard the Thario storybefore because it's still ongoing. So it's not even done yet, but let's bringyou up to speed. So where does Theron ose start? Where does this story start?This idea this concept? Well, the dramatic improvements in medicine overthe past hundred years, or so have been some of the most defining factors inmodern civilization will use to be life threatening diseases are now mild,annoyances that we only wait out because of modern medicine.UNDIAGNOSABLE diseases back hundreds of...

...years ago are now identifiable becauseof modern techniques and testing. This is a story of Tarana, a company thatclaimed to be on the forefront on the bleeding edge of modern medicine. Theyclaimed to be able to revolutionize how blood testing is done, but we will seehow the company grew, how it ultimately crumbled and how now it is in a massiveamount of legal trouble will most notably the founders in a massiveamount of legal trouble because of some of the claims that they made. So howdid Terno Begin? Well? Imagine if you are taking a blood test, generaldiagnose. The standard practice is to take multiple draws of blood toaccomplish several tests. There knows, however, offered an alternative to this.As a health tech company, Varanos claimed to be able to conduct amultitude of tests with only a few drops of blood. Only using a few dropsof blood means a more efficient health care system, one that is cheaper andfaster. This was all said to be possible through fair on Os'sproprietary technology through fair...

...noses, invention quote unquote: AirQuotes Invention the Edison up to two hundred tests can be performed usingonly a few drops of blood. A break through like this had incredibleimplications for how health care is accomplished globally. So, with such animpressive piece of technology into the hood, of course, they grew quickly. So,within a relatively short period of time, derinoe blew up expanded with thecompany's claims. A lot of people had their eyes on the potential of theirnose. There were practical applications and financial opportunities that peoplewanted to achieve with Taranus. But how did this all start? L, let's talk aboutthe founder Elizabeth homes, so back in two thousand and three Elizabeth Holmeswas taking up a degree in chemical engineering at Stanford University.Eventually, in that same year, she dropped out of Stanford to pursue heridea of new ways of doing blood tests. Holmes was a founder of the start upreal time cures. This start up eventually became Faranno, as we knowit today, while serving as CEO for...

...therenot's Holmes was well known forher charisma image and Aura, she was an incredibly personable likable person.Homes proved to be crucial for how Taranis grew. She was the one thatchampioned and evangelized the vision she had, the Steve Jobs. ESK START UPfounder allure. It was through her commanding presence. She took Theron'sforward, it's how she evangelized a product, how she raised money, how shemade people believe the claims she was serving as both the face and the leaderfor Tharon's, and because she was so confident in her vision and she hadsuch an aura around her. She raised a lot of money from a lot of significantpeople. She knew that approaching. The right people would lead to the rightinvestors, the right money and, of course, ultimately, the growth of hervision and her company. So Elizabeth Holmes Approached Different VentureCapitalist to fund her vision for...

Theron Os. A key point here is thathomes approached venture capitalists that were not well versed in medicaltechnology or health technology. FARNES got around six million dollars infunding by late, two thousand and four, the promise of a revolutionary way ofdoing blood work, enticed different entities to partner up with their nosat homes. Besides, the original aventure capital funds, which fundedTharone, others helped Darino grew to a top valuation of nine billion dollars.Partners included safe way and Walgreens plus, of course, otherfunding firms, venture firms, angels stake holders. This was enormous andshe did this by bringing in dumb money and building in quote unquote stealthmode. Tharon Os was secretive. Holmes was secretive not only with thetechnology, but also how the company work as it was on the industry. Theyworked in, what's called a stealth mode. This means that they do not generallypublicize their findings or research or...

...have many press releases associated. Itwas just this growing entity that couldn't stop couldn't be slowed down.This enabled therenow to inquire more and more partners to expand itselfwithout explaining what they were actually working on and because theywere validated by some of these really impressive investors early on, eventhough they weren't health tech, investors or medical tech investors,they were still impressive investors. This sort of got the ball rolling andit started to snow ball to to an extent by claiming tharone could not sayexactly how their blood testing works, because it was a quote. Unquote. Tradesecret partners got into agreements where they basically just took derinoeand Elizabeth Holmes. Word at face value by claiming to haverevolutionized how blood testing was done. Darna's brought something new tothe table using Edison. Dare nose would have made traditional blood testingcompletely obsolete. This was a big deal. This would have carved a newpractice in the health care. Industry test would not only be cheaper, butthey would also be automatically...

...processed more accurate and portable.This attracted a lot of attention from media hype, investors, businesspartners, but as Terno grew rapidly, multiple people became skeptical aboutthe company. For example, a Stanford professor publicly raised suspicionsabout their nosis claim, because there were no peer of viewed articles, butthere are noses technology and health sciences. This was a highly unusualpractice. However, a turning point for Thar Onos was when journalist John Car,you published his article about Taranus and Elizabeth Holmes. In this articlehe published that Tharon ouse was not using his technology for theirdemonstrations. Instead, normal blood test testing technologies andtechniques were used just under the guise of being something new. There wasnever any innovated technology that actually worked, and the supposedEdison was never even real. Though taironas tried to defend itself, thedamage is already done. Other people within the company spoke out on therosfalse claims. The exposure of thernee...

...lies about the technology, Severa Tiewith Wall Greens and safe way, plus Thairout received repercussions fromthe FDA, the SEC and multiple investor lawsuits. Eventually, in two thousandand eighteen, they dissolved after years of legal trouble from evaluationreaching up to nine billion dollars. There no drop to being worth basicallynothing. In that same year, Elizabeth Holmes and Er Co, O Ramesh Sunny Baluna,were charged by the US Attorney's Office for the Northern District ofCalifornia. Several accusations and charges were made throughout the yearsand, most recently in February, two thousand and twenty one holmes wasaccused by federal investigators of destroying evidence during the lastdays of Farnow. So what can we learn from this story? The lies the deceit,the rise, the fall, some of their progress, some of their momentum, butalso the fact that it was built on a fake product. So far, Anos did somethings that we can learn from also did a lot of things that we should avoid.So what should we pick up from the story? The first is that bringingsomething to the table is crucial, so...

...there nos provided somethingrevolutionary in their industry. If they didn't try and push the bar, therewould be no attracting any customers partners, investors, so you do have toshow up and push the bar slightly. However, you kind of have to back it upwith the real product. Secondly, how you present yourself as importantElizabeth homes, let their anos as its face and CEO with a certain presence.Chrisma an maginary will help with how people approach and think of you to thepoint where apparently she did it so well that she didn't even need to havea working product. So imagine how powerful her personality could be witha company that actually delivered. The third thing we should learn from theTAIRONA story is you should always choose carefully who you approach forYour Business. Elizabeth homes got millions in funding early on bychoosing people who did not understand the health technology industry. Wellnow this is an interesting lesson because she chose people that allowedher to raise money easier. Can you raise money easier from people thatdon't understand your industry if you sell it potentially B, but I'm going toargue that it's better to raise money...

...from people that understand yourindustry intimately so that they can actually help you when Shit hits theFan verses, trying to raise dumb money so learn that you can choose differentkinds of people to raise money for your company if you're an entrepreneur, butI would strongly suggest you default the people that could be a little bitharder to raise money from, but they can provide more value, but the mostimportant lesson it of all. These lessons is to back up your claims thatyou make you can make all the claims in the world and their knots and Elizabethhomes continuously made false claims about a technology and what it couldoffer the world don't make claims that you can't follow up on it's going toback fire in your face later on. The bottom line is that far anos was acompany that grew quickly because of the value its claims created. A new wayof doing blood tests meant drastic change for the health care industry.However, false promises lies, deceit, let the farinous losing everything ithad built up by claiming something to...

...differentiate your business fromcompetitors is crucial. Making claims you cannot follow up on will only harmyour business. In the long term, there are nos relied on false claims tocreate value once its lies were exposed, everything was destroyed. How taranisgrew its business, how it lost everything is something that allbusinesses and companies should learn from as they try and build somethingthat can grow incredibly quickly, but do it from a place of Ethics.

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