Theranos: The Limits of the ‘Fake It till You Make It’
‘The principle of “fake it till you make it” originates from positive thinking. It suggests that by emulating a guise of confidence and competence, a person can realise those qualities in reality and achieve the results they are looking for. Many startup founders have flocked to the hub of technological innovation with the hopes of changing the world by creating another Google or Apple. However, it happens that some founders are overly confident and fail to deliver on their promises.’
Theranos Corporation was once touted as a breakthrough health technology company, reaching its peak in 2013 and 2014 with a reported valuation of over USD9 billion, having raised more than USD700 million from venture capitalists and private investors. The revolutionary idea: a finger prick blood test is all that it takes to run a broad range of medical tests, and the results to be provided within minutes.
The corporation was founded and led by Elizabeth Holmes. The Stanford University dropout styled herself as a female Steve Jobs and was a Silicon Valley darling at her peak. The company’s board of directors was decorated with a star-studded cast comprising three former cabinet secretaries, two former senators and retired military brass which gave Theranos the much-needed fame and credibility to attract investors.
However, Theranos’ glory days came to an end when a Wall Street Journal exposé called its claims into question, alleging that the company was not using its proprietary technology for most of the tests it offered. That was only the first of many other skeletons in Theranos’ closets. Before the exposé, few brave individuals had attempted to bring to light its faulty technology – but they were slapped with threats and terminations.
The Theranos scandal has now become one of the prime examples of what would happen when an organisation lacks good governance, leadership, and proper internal controls. With the revelations of malpractices occurring behind closed doors, one might wonder why and how this has happened under the watch of the Theranos board. Why didn’t the board pick up on the numerous waving red flags across all fronts and the fatal flaws that were in plain sight? The case is also a clear reminder to anyone wanting to invest in the life sciences sector of the importance of due diligence, especially where traditional biotech investors stayed clear in the case of Theranos.