This case is about the rise and fall of Theranos Inc. (Theranos), a private company founded by Elizabeth Holmes to revolutionize the blood-testing industry. Holmes dreamed of a world where blood tests for hundreds of diseases and medical conditions could be easily and relatively painlessly completed with just a simple prick of a finger and a few drops of blood. In the fall of 2003, at age 19, she dropped out of Stanford University to found her new business. She was successful in attracting a blue-chip list of investors who provided the company with approximately $900 million in funding at a valuation that ultimately reached almost $10 billion. She also convinced powerful government and business leaders such as George Shultz and Henry Kissinger to join her board of directors. And the company was able to build partnerships with Walgreens Boots Alliance, Inc. (Walgreens), and Safeway Inc. (Safeway) to utilize the Theranos Edison device on customers in drugstores. All of this led Holmes to become the youngest self-made female billionaire in the world. But all of this was built on a device that produced unreliable results and a practice of testing blood using third-party devices and passing off the results as Theranos's own. When employees start revealing Theranos's problems to reporters, the house of cards Holmes built began to collapse, and she could no longer carry on the attitude of "fake it till you make it."
The case addresses a wide range of business topics including venture capital investment, entrepreneurship, business ethics, board governance, private company valuation, and failure. It is appropriate for use in a first- or second-year MBA course as well as an undergraduate business school elective that addresses venture capital, entrepreneurship, or ethics. It has been taught in a module covering failure in venture capital within the “Venture Capital Leadership” course at the University of Virginia Darden School of Business, as well as in graduate and undergraduate classes in ethics and venture capital at another university.
