Meet 'The Inventor' Elizabeth Holmes: The Woman Accused of Scamming Silicon Valley for $9 Billion

Elizabeth Holmes and the Theranos scandal: what to know about the $9 billion Silicon Valley scam

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Elizabeth Holmes. Photo: David Orrell/CNBC/NBCU Photo Bank via Getty Images

In the fall of 2014, Theranos CEO Elizabeth Holmes was named one of Forbes’s richest women in America and her start-up company valued at $9 billion. Around 20 months later Holmes’ net worth was estimated at $0 and she was charged with an “elaborate years-long” fraud having duped millions.

The rise and fall of the one-time Silicon Valley darling is the subject of HBO’s documentary The Inventor: Out for Blood in Silicon Valley, airing Monday night (March 18). Here are five things to know about Holmes and her elaborate scheme.

Holmes’s early beginnings

Holmes was born in Washington D.C. to father Christian Holmes, an Enron executive and mother Noel Anne Daoust, who worked as a Congressional committee staffer. The family later relocated to Houston, Texas where Holmes showed early signs of academic prowess. In her Fortune cover story she claimed she started her first tech company in high school, selling computer programming software to Chinese universities. She also showed an aptitude for Mandarin and attended Stanford University’s summer program for Mandarin.

Her short-lived career at Stanford

Holmes applied and was accepted to Stanford University in 2001, where she studied chemical engineering. Early on, she claims she started thinking bigger and about founding her own business. “At a relatively early age I began to believe that building a business was perhaps the greatest opportunity for making an impact,” she told Fortune. “Because it’s a tool for making a change in the world.”

After doing a summer stint at the Genome Institute of Singapore, where she was involved in work to develop systems to detect SARS, Holmes was inspired to develop her own systems and technology for detecting disease and she applied for her first patent.

She dropped out of Stanford the following semester, in 2003, to found Theranos.

Elizabeth Holmes
Elizabeth Holmes. HBO

Founding Theranos

Inspired by a lifelong fear of needles and having her blood drawn, Holmes sought to revolutionize the healthcare industry by developing a method of comprehensive testing from just a few drops of blood vs. several vials — standard practice in the medical field.

Holmes’s goals were clear and pure. And she was very convincing in her pitch — one of the first to hear it was her chemical engineering professor, Channing Robertson. Holmes initially approached him to help co-found what would be Theranos. Robertson told Forbes he was wowed by her mission and initiative.

“[She said] I want to create a whole new technology, and one that is aimed at helping humanity at all levels regardless of geography or ethnicity or age or gender,'” Robertson recalled, and later joined Theranos as a paid consultant and gave up his tenured position at Stanford to do so.

Elizabeth Holmes
Elizabeth Holmes. HBO

Her VIP circle of trust

In addition to Holmes’s passion for the company and her change-the-world ideals, one of Holmes’s greatest strengths, as described by former employees, board members, former teachers, etc. is her steely-eyed focus and her uniquely low speaking voice.

“She’s incredibly passionate,” former Theranos employee Anna Arriola said on “The Dropout” podcast. “She’s very energetic, very expressive with their hands and has a very unique, distinctive voice that you kind of just get drawn into what she is conveying and her conviction it really, really shines through,” she said.

Those tactics helped persuade a group of impressively high-profile individuals to join Holmes’s cause. In 2014 at the height of Holmes’s buzz and estimated wealth, the Theranos board included: former U.S. Secretary of State, Treasury, and Labor George Shultz; former Secretary of Defense Bill Perry; former Secretary of State and National Security Adviser Henry Kissinger; former U.S. Senators Sam Nunn and Bill Frist (a heart transplant surgeon), retired USN Admiral Gary Roughead, General James Mattis, former Wells Fargo CEO Richard Kovacevich and former Bechtel Group CEO Riley Bechtel.

In addition to those heavy-hitters, at the height of its Silicon Valley popularity Theranos had raised an estimated $724 million in funding from a who’s who of investors like Oracle’s Larry Ellison, and a rumored $100 million from Rupert Murdoch. These were historical numbers for a start-up. Holmes was gracing magazine covers, being invited to speak at major events and was named to the 2015 Time 100 — Holmes’s entry was written by Kissinger.

Flaws in the armor

While everyone agrees that Holmes talked an incredibly good game, and had clear, well-documented powers of persuasion (see: her board members) when all is said and done, the product she peddled never actually worked.

Wall Street Journal reporter John Carreyrou, who would go on to write a tell-all about Holmes and Theranos in his book Bad Blood: Secrets and Lies in a Silicon Valley Startup, was the first to expose the flaws in Theranos‘s company. In a nutshell, he concluded that the product Holmes was selling — a minimally-invasive blood test that could perform a variety of tests with minor amounts of blood on a machine she called The Edison– did not work and the company was using outside technology and other subterfuge to fake positive test results.

According to Carryrou’s research in Bad Blood, much of which comes from former employees and whistleblowers, Holmes allegedly trotted out The Edison to sales meetings and demonstrations and would have her employees back at Theranos help rig fake successful results which she later presented to wow investors.

What’s next?

Carreyrou’s 2015 article started a windfall of exposés and investigations into Holmes and the company, which led to the speedy downfall of the “inventor’s” $9 billion-dollar baby. The company’s bloated value was later estimated to be closer to $800 million, according to Forbes. Holmes’s personal net worth landed at $0, way down from the $4.5 billion — she had a 50% stake in the company (at the $9 billion evaluation).

In March 2018, Holmes and her former company president Sunny Balwani were charged with massive fraud by the Securities and Exchange Commission. Holmes and Balwani are charged with “raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance,” read the release from the SEC.

In June 2018, Holmes and Balwani were charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Holmes could have faced up to 20 years in prison. Holmes and Theranos settled with the SEC, while Balwani is awaiting trial in San Jose. Holmes will pay a $500,000 fine as part of the settlement arrangement and be barred from serving as a director or officer of a public company for 10 years. She has not admitted or denied wrongdoing in settling.

A movie adaptation of Holmes’s story is currently in the works with Adam McKay (Vice, The Big Short) attached to direct and Jennifer Lawrence to star.

The documentary, directed by Oscar winner Alex Gibney (Taxi to the Dark Side, Going Clear: Scientology and the Prison of Belief), airs tonight on HBO at 9 p.m.

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