Elizabeth Holmes: how 'the Millennial Madoff' built a $9 billion business on bogus technology

At 19 years old, Elizabeth Holmes dropped out of her degree in chemical engineering at Stanford University, and used her remaining tuition money to found a technology company focused on consumer healthcare. By the age of 31, she had become the youngest female self-made billionaire in America. Her company, Theranos, was valued at $9 billion, with a raft of high-profile investors, including Rupert Murdoch, who had sunk $125 million into the start-up, Dick DeVos (whose family founded cosmetics giant Amway) and his wife, Betsy (the current US Secretary of Education), and two former secretaries of state, Henry Kissinger and Eric Shultz.

Holmes’s lifestyle befitted that of the prodigious young entrepreneur she portrayed: she flew everywhere by private jet, flanked by security staff, and employed a personal publicist on a retainer of $25,000 – a small sum, perhaps, to pay for the phalanx of high-profile magazine covers she was featured on, including Forbes, Fortune and T, the New York Times’s style magazine.

By June 2016, however, Theranos and Holmes were valued at zero. The claims she had made for her "invention", the Edison – a blood-testing machine heralded as a revolution in healthcare – were exposed as lies and her entire company as an elaborate scam, conducted on a colossal scale.

Young, attractive, charismatic and apparently deeply committed, Holmes built a powerful mythology that proved irresistible to the investor community. Much of that mythology, however, was made up of bizarre behaviours. She wore the same outfit every day – black trousers and black polo neck jumper, a la Apple creator Steve Jobs ("Steve Jobs cosplay" as one observer quipped) – claimed to sleep for only four hours a night, and to live in an apartment so spartan that her fridge contained nothing but bottled water; she ate all her meals at the lab, she claimed. She allegedly lowered her everyday speaking voice – apparently to project gravitas – so dramatically that it no longer sounded female, and she bought a huskie, which she brought to the Theranos offices every day, but which, she told everyone, was not a dog but a wolf. So colourful and compelling is the Silicon Valley saga that there’s a Hollywood film in the pipeline, written and directed by Adam McKay (The Big Short, Vice) with Jennifer Lawrence cast as Holmes.

Before that, however, the story of Holmes and her dramatic rise and fall has been turned into an HBO documentary, The Inventor, airing next week on Sky Atlantic, and directed and produced by Alex Gibney, who has made his name documenting deception, with his Oscar-nominated film, Enron: The Smartest Guys In the Room, The Armstrong Lie (about disgraced cyclist Lance Armstrong) and Going Clear: Scientology and the Prison of Belief.

"She created an image for herself that attracted a lot of money," says Gibney of Holmes, when we meet in a hotel room in Los Angeles, ahead of the film’s US premiere. "But it was an image that was not based upon any tangible sense of value."

To put it bluntly, the machine she had invented – the Edison – didn’t work. Sold as a quicker, cheaper and less painful way to take and test patients’ blood, the machine was apparently capable of carrying out a whole array of laboratory tests – up to 200 – using just a few drops of blood drawn from a fingerprick.

As Holmes frequently repeated, the Edison, which was the size of a modestly-sized office printer, would put highly affordable, totally transparent information about people’s health in the hands of the patients themselves – an empowering idea in the US where the healthcare system remains unaffordable and inaccessible for many millions.

"She was a very compelling storyteller," notes Gibney. She brokered agreements with health insurance giants such as Capital BlueCross and the Cleveland Clinic to use Theranos technology, and had a deal with Walgreens – the US pharmacy giant owned by the same parent company as Boots – to conduct in-store testing on the Edison.

The problem was, the staff in her laboratory in Newark, California – who were receiving the Walgreens samples (and samples from other trials) – were performing only 15 of the 240 tests it offered on the Edison machine; the rest were being done on industry-standard machines, this even while Holmes was seeking FDA approval to test for infectious diseases such as hepatitis C, syphilis and even Ebola.

When inspectors came to the site, staff would falsify results. Unsurprisingly, it became a workplace beset by paranoia, secrecy, and strict NDAs.

Some who felt uncomfortable with the deception began to leave, including Tyler Shultz (grandson of investor and board member George Shultz) and Erika Chung, both of whom would become whistleblowers and who feature in Gibney’s documentary.

Another former employee leaked 75 hours of in-house footage, filmed at Holmes’ direction, to Gibney.

"She was obsessed with creating a mythic story for herself,’" he says. "She thought: if only a camera had been in the garage with Woz [Steve Wozniak, co-founder of Apple] and Jobs back in the day… this is my garage, so we should film this stuff." And he draws parallels with the recent Fyre festival documentaries, which also featured extensive in-house footage. "These people are so consumed with self-regard that they are filming their own biography as it’s happening; they don’t see that the downfall is coming."

Perhaps the most shocking aspect of The Inventor, however, is the enormous investments Holmes elicited from powerful, high-profile figures, whom one would imagine would do due diligence (or have staff to do due diligence for them). "Rupert Murdoch invested $125 million in Theranos, and never looked at an audited financial statement," says Gibney. "We like to think that business is a rational calculation of risk and reward – but a lot of it is about the gut. It is just about people saying: trust me. There is a whiff of the casino about some of the investing in Silicon Valley."

Chung, whistleblower and former Theranos employee, also believes there is a shortfall between the capital sloshing around Silicon Valley and available to invest, and the firms available to be invested in. "Good entrepreneurs are harder to come by than access to capital," she says. "And there is a real fear of missing out. Every VC wants an AirBnB on their portfolio, and the loss on making a bad investment is not as bad as missing out on that 100X company [a company whose stock price will increase 100-fold] that you could have put on your portfolio.

"So Silicon Valley has taken what they call a ‘founder-friendly approach’, which means that they don’t do due diligence," she says. "They don’t dig into these companies as much as they should, because they’re scared of that founder deciding to go with another investor or VC firm."

In 2015, after two years of dogged research by journalist John Carreyrou, the Wall Street Journal published an extensive investigation into Theranos, and the company’s house of cards began to rapidly tumble. An emergency inspection by regulatory authorities found the results of blood tests to be wildly inaccurate, and revoked the lab’s licence. But Holmes battled on for some time, claiming she was shocked by the revelations and was committed to correcting their errors; she attempted a comeback with an apparently new machine, the "mini-lab". In 2018, however, Theranos was dissolved and Holmes and her COO, Sunny Balwani, were charged with nine counts of fraud. If found guilty, they could each face up to 20 years in prison.

However, Gibney doesn’t agree with those who call Holmes, who is set to appear in court for a status hearing on April 22, “the Millennial Madoff”.

"I really don’t think she was like Bernie Madoff,” he says. “I don’t think she thought: I’ll run a scam and I’ll just make a shitload of money. I think she believed in what she was doing, and she just felt she needed enough 'runway' to ultimately get there." Indeed, the Edison was so named after the iconic inventor’s mantra of perseverance:"I have not failed. I have just found 10,000 ways that won’t work."

At present, Holmes is living in a luxury apartment in San Francisco, with her "wolf", and her fiancé – the heir to a hospitality firm, a decade her junior, who has a tech start-up involving self-driving cars. Holmes is, apparently, also attempting to set up another company, and has been courting investors in California.

"While Americans like to say we don’t trust things as a matter of course, I think our character is actually to be extremely trusting," says Gibney. "Blind faith seems to be a real component – that's one of the things that got Donald Trump into the White House – and the Theranos tale is a cautionary tale that we should, yes, have trust but also verify.

"You would have thought that Walgreens would have said, 'You know, we really want to look inside the box that we're eventually going to put in every one of our drugstores all across the nation and the world,'" he says. "But they so desperately wanted to believe that they did not look inside the box."

The Inventor: Out for Blood in Silicon Valley will be shown on Sky Atlantic on Monday at 9pm