Tuesday, June 07, 2016

It used to be good to be Elizabeth Holmes (didn’t it?)

Yesterday, Pink Slip wrote about the list of the wealthiest women, self-made edition, in the U.S. Conspicuous for her absence was Elizabeth Holmes. Last year, Holmes, with a net worth of $4.5 billion, was on top of the pack. Today, she’s worth something closer to, well, zero.

Even by wunderkind standards, Holmes – who is all of 32 – is a wunderkind.

When she was nine years old, Holmes wrote in a letter to her father saying, “What I really want out of life is to discover something new, something that mankind didn’t know was possible to do.” When Holmes was 9, her family moved to Houston and then China, where she started a business selling C++ compilers to Chinese universities. (This according to Wikipedia.)

Hmmm. When I was 9 years old, I was writing letters to my cousin Ellen saying things like “our new baby cries a lot, but she’s really cute.” That was when I wasn’t newspaper clippings into my Ted Williams scrapbook. Or entering Big Brother Bob Emery’s Curlicue Contest. (With my fabulous Crayola rendering of a guy wrapped in bandages, sitting in a wheelchair, I was one of the prize winners.) So it’s not as if I were completely lacking in genius. Perhaps if I’d had the opportunity to live in China, rather than idling the hours digging a sandbox hole to it, I’d have started a business selling the 1959 equivalent of a C++ compiler. Nah….

Back to Holmes, fast forward a decade, and in 2003 she was onto that “something that mankind didn’t know was possible to do.” That something was a blood-testing device (dubbed Edison) that could work off of a finger-stick’s worth of blood, rather than those multiple vials that the phlebotomist draws when you need your blood tested. Based on her invention, Holmes was able to raise $700M+ in venture. Her company, Theranos, was valued at $9B.  

Since then, Theranos has been hit with allegations that its tests are inaccurate and is being investigated by an alphabet soup of federal agencies. That, plus new information indicating Theranos’ annual revenues are less than $100 million, has led FORBES to come up with a new, lower estimate of Theranos’ value. (Source: Forbes)

That valuation is less than one-tenth of that $9B, and, at $800M, pretty darned close to the $724M that Theranos raised. Given the way the company is structured,Holmes hefty share of common stock would take back seat to those holding preferred shares in the event of a company liquidation. Not that this is necessarily going to happen, but that’s the scenario in which Holmes is worth nothing.

It’s entirely possible that Theranos will stage a comeback, and that the promise of being able to run dozens of tests from one drop of blood will be realized. The company will end up being worth $9B – or more – and Holmes will be back on top of the heap. And Holmes will win a Noble Prize. Or something.


The company has told the Centers for Medicare and Medicaid Services that it has issued tens of thousands of corrected blood-test reports to doctors and patients, voiding some results and revising others, according to the person familiar with the matter.

That means some patients received erroneous results that might have thrown off health decisions made with their doctors. (Source: WSJ)

This sure doesn’t sound good. Among the fallout from all this: relationships with Walgreen’s (their source of sales) and Siemens (technology partnership) are on the ropes.

So, at the moment, things aren’t looking so good for Theranos. While some are claiming that this is all a plot by the incumbent blood labs and equipment makers who are afraid of Theranos the Disrupter, and that a lot of the animus being directed at Holmes is because she’s a striking, young blonde, others are claiming that there is no special device – that the entire enterprise has been nothing other than an emperor’s-new-clothes fraud from the outset. And that Holmes should be in jail.

I don’t have a dog in this hunt. Whatever’s going to happen with Theranos and Holmes is going to happen to Theranos and Holmes. Maybe she actually is a genius. Maybe her only real genius is for self-promotion and “image.” (Like Steve Jobs, she only wears black turtlenecks.) Whatever happens, it can’t feel good to have gone from being the richest self-made woman in America to someone worth zero.

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