Well, there is practically no shortage of start-ups. This is the Era of Crowd Funded Companies where we can never be even sure that if a Start-up will really exist in the long run. One such Start-up was Theranos, the biggest startup scam.
While Companies such as Kickstarter help worthy start-ups to grow, the viability, in the long run, is questionable. Only a few of the start-ups such as Uber, Oyo, Tesla and Airbnb succeed in finally delivering their product and completely Revolutionizing their respective industries.
Now for the Health and Pharmaceutical Industry one of Such Companies was Theranos. Not to be confused with Thanos. Theranos. Well thinking now, this comparison kind of makes sense. Snap your Fingers and Billions of Dollars disappeared.
Foundation of Theranos
Theranos was found in 2004 by Elizabeth Holmes, a 19-year-old Stanford dropout, who convinced her parents to invest the College money into her start-up. Well I wish I could have parents like her.
Theranos’ original name was Real-Time cures, but due to some reason, they did not find it Startup-y enough and the name was replaced with THERANOS, a combination of Therapy and Diagnosis.
Theranos was founded with the goal of running multiple blood tests with a Blood Sample with an extremely small sample of 25-30 microlitres. Roughly, it is about a thousand times less as compared to the traditional vitals required.
Why was Theranos potentially a good idea?
Well, who likes to get their Blood drawn from their body?
So, anyone who hears this for the first time would be all-in for that, right?
Well, at least, I am all-in. If not you.
Naturally, it grabbed the attention of Venture capitalists and Theranos was onto something big.
The Technology behind the Theranos
Theranos utilized a technology it called Lab on a Chip.
It claimed that the readings from a single drop of blood could be sent wirelessly to Theranos’ proprietary testing machine, The Edison.
The Edison as Theranos claimed was capable of running multiple tests at a time. Now, just like freedom 251, one of their Selling Point was costs. Theranos claimed that since all the tests were done Simultaneously, they could be done at a fraction of cost as compared to the traditional tests.
The Launch of the Theranos Scam
After a Decade of Testing and raising VC money, Theranos was publicised in 2013 with its Website, open for all.
Theranos partnered with Walgreens to put its machine in every corner possible in the US. Theranos also became a Lab work provider for a number of insurers including Capital Bluecross and AmeriHealth Caritas.
Not only this, they were awarded the Bio-Science company of the year By AZBio. An Icing on the Cooking Cake. At that time Theranos was worth 9 Billion Dollars which was more than Uber as well as Airbnb.
There was a problem. The Edison machine didn’t actually work. In fact, Theranos never Submitted it’s technology to any publishers for Peer Reviews. When asked about the Functioning of the machine, Holmes would give very vague answers, The start of Amiss.
The Fall of Theranos
Things Fell apart for Theranos after a 2015 wall-street journal article that questioned the authenticity of Theranos, which made the SEC to step in and finally investigate.
Only 1% of the results from Theranos were accurate and they had been using commercially available blood testing machines all along in the name of the Edison. The Theranos scam was growing.
Theranos used to show its revenue of about $100 million, when in reality it was about a thousand times less, with an annual revenue of only 100,000 dollars. Just to be clear here, that was revenue and not profit.
As a result, By the end of 2015, they were losing about 8-9 million dollars a month.
Quite Expensive in replacing the traditional Blood Sample Machines, Eh?
So how did Holmes go with a product that did not even exist?
Well the answer to this is much simpler than it looks- Refinancing. Holmes used money from other VC funds to Buyout older and more impatient investors.
Some investors were willing to wait because Theranos (in theory) had the potential to create a breakthrough good enough to shake up the entire health care system and make Venture capitalists a ton of money in the process.
Holmes also made sure to keep the technology in-house to prevent and cover the Theranos Scam that her company was pulling.
A sweet way to cover a Big Scam and also keep that VC money in her hands.