Theranos sold a revolution: preventative healthcare in every pharmacy, made possible with a single finger prick.
Hundreds of tests, faster and cheaper than anything in a hospital. For a decade, that story alone turned Holmes into a paper billionaire and Theranos into Silicon Valley’s golden child.
The inconvenient truth?
Running those tests from a drop of blood wasn’t possible. Dilution errors, unworkable chemistry, a premise that collapsed on contact with reality.
But that didn’t slow Holmes down.
She slipped on a black turtleneck, dropped her voice an octave and sold the aura of the next Steve Jobs. Add in some fake labs and rigged demos, and she had orchestrated a brand Silicon Valley was desperate to believe in.
Investors bought into the mirage. Patients paid for it in real time.
Holmes is now serving an 11-year sentence for fraud. And yet, her partner Billy Evans has just raised $20m for a new blood-testing startup with a prototype that looks suspiciously like the last one.
So what went wrong the first time - and why are investors already lining up for round two? I’m dissecting the post-mortem below:
How “one drop of blood” ballooned into a $9bn lie
Why investors kept wiring money long after the red flags
What broke first: the tech, the trust or the investors’ credibility
The fine line between persuasion and fraud
Let’s peel back the layers of the billion-dollar pitch
For early believers, Theranos didn’t look like a scam. It looked like high-stakes play that ticked every Silicon Valley box.
The promise was intoxicating: a single drop of blood replacing the needles, tubes and lab delays people had resigned themselves to. It dangled the idea of real-time health insight: cancer caught in stage one, infections treated on the spot, chronic conditions managed before they spiralled.
If it worked, diagnostics would leave hospitals and land in every pharmacy in America. Preventative healthcare at scale. But Theranos didn’t raise $700M on vision alone. It engineered belief - layer by layer - until doubt had nowhere to land.
Layer 1: Optics
Investors got the grand tour: lab coats, blinking machines, tightly choreographed demos. Everything rehearsed, everything controlled. Doubt never stood a chance when every scene was staged to look like progress.
And it worked because optics are powerful. Most investors don’t run the tests themselves; they read the room. White coats signal science, prototypes signal progress and a polished script signals competence. Put them together and you get the illusion of inevitability.
Modern echo? 11X. The AI SDR startup flashed eight-figure ARR inside two years - except most of the contracts were cancellable and not even live. On paper, it looked explosive. In reality, it was just theatre with spreadsheets instead of lab coats.
Different industry, same trick: dress up momentum before the substance exists.
Layer 2: Culture
Inside Theranos, doubt was dangerous. Staff were siloed, concerns went nowhere and anyone who pushed too hard met lawyers at the door. Scientific reality never had a path to the boardroom.
Outside, the culture of fear worked just as well. Whistleblowers were threatened into silence, investors were dazzled with half-truths and the show rolled on. Secrecy wasn’t a by-product - it was the business model.
Layer 3: Myth
Holmes herself was the pitch deck. The uniform black turtleneck echoed Steve Jobs at the exact moment Apple had become the template for world-changing innovation. Investors thought they’d found his heir.
The dropout-turned-founder narrative sealed it: a Stanford prodigy too busy changing the world to finish her degree. Media outlets lapped it up. Forbes covers. Endless interviews. She was billed as Silicon Valley’s next visionary.
And timing worked in her favour. The Valley wanted a female icon to headline the movement. Holmes fit the casting call: the deliberately lowered voice to sound more authoritative, the 20-hour workdays, the sweeping mission of “democratising healthcare”.
Layer 4: Connections
Holmes filled her board with power names designed to dazzle: Kissinger, Shultz, Murdoch, Draper. Doubt didn’t stand a chance against that kind of roster.
If America’s elite were backing this, who was going to question it? Once a few heavyweight names signed on, the herd effect did the rest.
No one wanted to be the fund that called bullshit. Prestige became a proxy for due diligence.
Layer 5: Incentives
The money machinery made this inevitable. VCs are judged on swinging for unicorns with other people’s cash. They expect 99 of 100 bets to fail. That normalises recklessness, and frames fraud as a rounding error.
→ Ask hard questions, you kill the deal.
→ Kill too many deals, you kill your career.
Better to let FOMO make the call and hope you’re gone before the implosion. In that context, Holmes wasn’t just a fraud; she was a feature of the system.
Layer 6: The Feedback Loop
Once Theranos was branded a “hot startup”, popularity snowballed. Momentum itself became the proof. The bigger the valuation climbed, the safer it felt to pile in.
Everyone assumed someone else had asked the awkward questions. In reality, no one did. Instead, projections and buzz filled the void. Numbers that lived only in spreadsheets were treated as fact.
That’s how the loop worked: hype created confidence, confidence attracted more capital, and the capital was then cited as validation. A circular reference mistaken for progress.
Backing that last point, someone left me a line on my LinkedIn post:
Or in other words: due diligence outsourced to wishful thinking, fuelled by herd mentality.
Personally, I’d like to think I’d have asked a few more questions before joining the stampede.
When reality intruded
Beneath the PR, there was nothing. No working product. No scientific route that could have delivered what Holmes promised.
Hundreds of tests from a single finger-prick sample? Dilution errors alone made the idea laughable. Any half-serious diligence would have exposed it as fantasy. It took a Wall Street Journal exposé in 2015 to do what years of investor meetings hadn’t: show it was all smoke and mirrors, not science.
And yet investors bought in. Because as I’ve said before, master storytellers don’t sell products - they sell dreams people are desperate to believe.
Patients carried the real cost. Faulty results handed out false cancer diagnoses, missed serious conditions, even told women they were pregnant when they weren’t. Some began treatments they didn’t need; others skipped ones they did. Lives were disrupted so investors could keep chasing the illusion of “world-changing innovation”.
Investors paid too, though not in the way they frame it. Yes, millions were torched. But the bigger hit was reputational. Murdoch, DeVos, Kissinger, Shultz - names once dropped for gravitas suddenly read like a bad LinkedIn flex. They claimed to be duped. In reality, they waved the red flags away because missing the hot ticket felt worse than losing money.
Holmes and Balwani ended up with fraud convictions and prison sentences. The case is now a business school staple; a blunt reminder that in biotech, slogans don’t cut it. Show the data, or don’t bother.
And yet here we are again. Holmes is behind bars, but her partner Billy Evans just raised $20m for Haemanthus: a blood-testing startup with a device that looks uncomfortably like Theranos’ Edison box.
Investors are already lining up, armed with the same justifications:
“AI is better now.”
“Spectroscopy has improved.”
“It’s just pets for now.”
The cycle looks familiar. Too familiar.
At the end of the day, investors aren’t machines. They’re people - some sharp, some not, some just having a bad quarter - and they’re every bit as vulnerable to wishful thinking as the rest of us.
The lessons once the smoke cleared
I’m not at all suggesting you copy Holmes’ tactics, but there’s something in seeing how far persuasion can take you - and how fast credibility collapses when it’s empty.
A) Capital raising ≠ a business
A term sheet is NOT validation. It’s just evidence you can tell a good story. Without a real product and market fit, the runway ends the same way Theranos did: straight into the wall. Case in point: WeWork. Neumann turned “community-adjusted EBITDA” into a meme, but all the billions in the world couldn’t fix a model that bled cash on every lease.
B) “Fake it till you make it” has limits.
In SaaS, you can get away with a half-built feature. In healthcare, the stakes are blood tests, diagnoses and people’s lives. Confidence without capability is dangerous. It’s been done before: Stem cell “clinics” boom
And it’s hardly a new trick. Remember the U.S. stem cell “clinic” boom? Startups promised miracle cures for everything from arthritis to MS. Patients paid thousands for treatments that weren’t proven, safe or regulated - some ended up with infections, blindness or lawsuits instead.
Most of those clinics were eventually shut down or sued out of existence, leaving patients burned twice: first financially, then medically.
C) Transparency beats prestige
Big names on your board won’t cover missing data. Holmes had Kissinger. You don’t need Kissinger. You need proof - peer-reviewed results, transparent testing, regulatory filings. That’s what endures.
Even in mainstream tech, FTX showed this: celebrity backers and Super Bowl ads didn’t matter when no one could produce audited financials.
D) Culture is part of the product
Look at OYO, which billed itself as the world’s fastest-growing hotel chain in India. In reality, it was inflating bookings, stiffing partners and grinding staff into dust. Growth hacked the headlines, but culture hacked the company.
That’s the point with Theranos too: a company where people can’t speak up is already heading for collapse. If employees feel safe flagging cracks, you fix them early. If not, you’re just plastering over a crater and hoping no one falls in.
E) Narrative only buys time
A compelling story can open doors, but without substance, it closes them faster. By all means, sell the dream - but make sure you can back it with receipts.
Just ask Juicero. Founder Doug Evans, like Holmes, also cast himself as the next Steve Jobs. He raised $120M for a $400 Wi-Fi juicer… until people realised you could squeeze the sachets by hand. Overnight, the “future of juice” became a punchline.
A reminder → A story can grab attention, but only proof keeps it.
Tom Wolfe saw this coming…
Tom Wolfe is my favourite author, not least because he could turn the messiest mix of politics, race and money into page-turning satire. The Bonfire of the Vanities skewered Wall Street greed against the backdrop of New York’s racial and political fault lines. The Electric Kool-Aid Acid Test chronicled the counterculture with the same sharp eye.
His theme was consistent: prestige, image and status games always beat reality… until they don’t.
That’s why Holmes feels like one of his characters written into the wrong decade. The turtleneck. The lowered voice. The myth of the Stanford dropout saving the world. She was Silicon Valley’s “Master of the Universe”, but her bonds were blood tests.
The parallel that sticks with me: Wolfe showed how the system doesn’t just tolerate spectacle, it rewards it - right up until it burns the house down. Theranos was that bonfire, only this time it lit up the labs instead of the trading floor.
It’s why at FundOnion we strip away the spectacle and make SME finance about facts, not theatre.
If you do one thing this week, do this:
In your next pitch meeting, board review or internal strategy call, ask for one piece of hard evidence behind a key claim.
It’s the simplest due diligence filter you’ve got. Strip every pitch back to proof.
What shows this works? Where’s the evidence?
And listen carefully to the reply: if it’s vague, punted into the future or hidden behind “we can’t share that yet”, treat it as a red flag.
The part where we land this plane
Theranos is the extreme case - fraud dressed as the miracle of modern medicine - but the mechanics that let it happen are anything but rare.
FOMO, herd mentality, weak diligence: they’re still in circulation today. The kind of deal people back because their mate from golf swears “he’s in too”. Behind the wreckage is the reminder founders can’t ignore: capital raising isn’t proof of a business. It’s persuasion. Stories open doors, but substance keeps them open.
If you’d like to talk about how to build investor confidence without slipping into over-promise, hit reply. Worth a chat before your pitch becomes tomorrow’s case study.
Till next time,
James