Bad Blood: Secrets and Lies in a Silicon Valley Startup
This book is based on hundreds of interviews with more than 150 people, including more than sixty former Theranos employees. Most of the men and women who appear as characters in the narrative do so under their real names, but some asked that I shield their identities, either because they feared retribution from the company, worried that they might be swept up in the Justice Department’s ongoing criminal investigation, or wanted to guard their privacy. In the interest of getting the most complete and detailed rendering of the facts, I agreed to give these people pseudonyms. However, everything else I describe about them and their experiences is factual and true.
Any quotes I have used from emails or documents are verbatim and based on the documents themselves. When I have attributed quotes to characters in dialogues, those quotes are reconstructed from participants’ memories. Some chapters rely on records from legal proceedings, such as deposition testimony. When that’s the case, I have identified those records at length in the notes section at the end of the narrative.
In the process of writing this book, I reached out to all of the key figures in the Theranos saga and offered them the opportunity to comment on any allegations concerning them. Elizabeth Holmes, as is her right, declined my interview requests and chose not to cooperate with this account.
Tim Kemp had good news for his team.
The former IBM executive was in charge of bioinformatics at Theranos, a startup with a cutting-edge blood-testing system. The company had just completed its first big live demonstration for a pharmaceutical company. Elizabeth Holmes, Theranos’s twenty-two-year-old founder, had flown to Switzerland and shown off the system’s capabilities to executives at Novartis, the European drug giant.
“Elizabeth called me this morning,” Kemp wrote in an email to his fifteen-person team. “She expressed her thanks and said that, ‘it was perfect!’ She specifically asked me to thank you and let you all know her appreciation. She additionally mentioned that Novartis was so impressed that they have asked for a proposal and have expressed interest in a financial arrangement for a project. We did what we came to do!”
This was a pivotal moment for Theranos. The three-year-old startup had progressed from an ambitious idea Holmes had dreamed up in her Stanford dorm room to an actual product a huge multinational corporation was interested in using.
Word of the demo’s success made its way upstairs to the second floor, where senior executives’ offices were located.
One of those executives was Henry Mosley, Theranos’s chief financial officer. Mosley had joined Theranos eight months earlier, in March 2006. A rumpled dresser with piercing green eyes and a laid-back personality, he was a veteran of Silicon Valley’s technology scene. After growing up in the Washington, D.C., area and getting his MBA at the University of Utah, he’d come out to California in the late 1970s and never left. His first job was at chipmaker Intel, one of the Valley’s pioneers. He’d later gone on to run the finance departments of four different tech companies, taking two of them public. Theranos was far from his first rodeo.
What had drawn Mosley to Theranos was the talent and experience gathered around Elizabeth. She might be young, but she was surrounded by an all-star cast. The chairman of her board was Donald L. Lucas, the venture capitalist who had groomed billionaire software entrepreneur Larry Ellison and helped him take Oracle Corporation public in the mid-1980s. Lucas and Ellison had both put some of their own money into Theranos.
Another board member with a sterling reputation was Channing Robertson, the associate dean of Stanford’s School of Engineering. Robertson was one of the stars of the Stanford faculty. His expert testimony about the addictive properties of cigarettes had forced the tobacco industry to enter into a landmark $6.5 billion settlement with the state of Minnesota in the late 1990s. Based on the few interactions Mosley had had with him, it was clear Robertson thought the world of Elizabeth.
Theranos also had a strong management team. Kemp had spent thirty years at IBM. Diane Parks, Theranos’s chief commercial officer, had twenty-five years of experience at pharmaceutical and biotechnology companies. John Howard, the senior vice president for products, had overseen Panasonic’s chip-making subsidiary. It wasn’t often that you found executives of that caliber at a small startup.
It wasn’t just the board and the executive team that had sold Mosley on Theranos, though. The market it was going after was huge. Pharmaceutical companies spent tens of billions of dollars on clinical trials to test new drugs each year. If Theranos could make itself indispensable to them and capture a fraction of that spending, it could make a killing.
Elizabeth had asked him to put together some financial projections she could show investors. The first set of numbers he’d come up with hadn’t been to her liking, so he’d revised them upward. He was a little uncomfortable with the revised numbers, but he figured they were in the realm of the plausible if the company executed perfectly. Besides, the venture capitalists startups courted for funding knew that startup founders overstated these forecasts. It was part of the game. VCs even had a term for it: the hockey-stick forecast. It showed revenue stagnating for a few years and then magically shooting up in a straight line.
The one thing Mosley wasn’t sure he completely understood was how the Theranos technology worked. When prospective investors came by, he took them to see Shaunak Roy, Theranos’s cofounder. Shaunak had a Ph.D. in chemical engineering. He and Elizabeth had worked together in Robertson’s research lab at Stanford.
Shaunak would prick his finger and milk a few drops of blood from it. Then he would transfer the blood to a white plastic cartridge the size of a credit card. The cartridge would slot into a rectangular box the size of a toaster. The box was called a reader. It extracted a data signal from the cartridge and beamed it wirelessly to a server that analyzed the data and beamed back a result. That was the gist of it.
When Shaunak demonstrated the system to investors, he pointed them to a computer screen that showed the blood flowing through the cartridge inside the reader. Mosley didn’t really grasp the physics or chemistries at play. But that wasn’t his role. He was the finance guy. As long as the system showed a result, he was happy. And it always did.
1. A Purposeful Life
2. The Gluebot
3. Apple Envy
4. Goodbye East Paly
5. The Childhood Neighbor
7. Dr. J
8. The miniLab
9. The Wellness Play
10. “Who Is LTC Shoemaker?”
11. Lighting a Fuisz
12. Ian Gibbons
14. Going Live
16. The Grandson
18. The Hippocratic Oath
19. The Tip
20. The Ambush
21. Trade Secrets
22. La Mattanza
23. Damage Control
24. The Empress Has No Clothes
About the Author