"Selling a Promise": What Did Silicon Valley Learn from Theranos?

A charismatic young leader, billions of dollars in valuations and a technology that promised to change the world but failed to deliver: the meteoric rise and fantastic fall of the medical tech startup Theranos has been seen by many as an indictment of the hype-train attitude of Silicon Valley.

Nearly 20 years after Theranos’s launch, its CEO, Elizabeth Holmes, is headed to trial, charged with defrauding clients and investors. Silicon Valley is facing a public that’s wary of its methods and intentions – but the verdict is still out on whether startup culture has fundamentally changed.

“People are more sensitive to scams now – in some ways, there is a pre-Theranos Silicon Valley era and post-Theranos era,” said John Carreyrou, a journalist who has been covering Theranos for six years and now hosts a podcast on the trial. “But in many ways the boom has continued unabated. I’m not convinced there has been a true reckoning, yet.”

Theranos was founded in 2003 by a then 19-year-old Stanford University student, Elizabeth Holmes.

Holmes promised to upend the vast medical testing industry with a technology that could perform a range of health tests on just a small drop of blood. The company reached its pinnacle about 10 years later, valued at a staggering $10bn, before it all collapsed.

“The rise and fall of Theranos reflected a very particular moment in Silicon Valley history,” said Margaret O’Mara, a historian of the region who holds a professorship at the University of Washington.

At the time, the Silicon Valley tech bubble was obsessed with young founders, celebrating the success of startups with “humble beginnings” that managed to take over the world – Mark Zuckerberg from his dorm room, Jeff Bezos from his garage.

At the same time, some investors were increasingly frustrated that the valley’s output was concentrated on social platforms, seen by some as frivolous. As the investor Peter Thiel memorably said in 2013: “We wanted flying cars. Instead we got 140 characters.”

“Then we have Theranos, which was not making an app but selling a promise to transform healthcare,” O’Mara said. “Holmes was targeting an experience – blood testing – that is very familiar and not very pleasant. That was appealing to a lot of people.”

There was another draw to Holmes. As big names like Bezos, Zuckerberg and Bill Gates dominated the scene, women were largely left out of the narrative.

In other words, the time was ripe for a young, female tech leader to take center stage. “Here was a photogenic, telegenic young woman posing as the female Steve Jobs,” O’Mara said. “It was an incredibly alluring narrative that everyone wanted to believe.”