You can grasp everything big and small in the venture capital circle
Tencent Venture | ID：qqchuangye
"Crazy to copy Jobs, she faces 4 counts and 20 years in prison."
Author / Du Chen
Edited / Vicky Xiao
Before the halo was punctured, the story of blood testing startup Theranos had become mythical in Silicon Valley:
Elizabeth Holmes, the "prodigy" in the biological sciences, dropped out of Stanford to start a company, and won the image of a "replica Jobs" in a black turtleneck sweater + jeans, and won the support of top VCs, and the company was valued at nearly 10 billion US dollars in its heyday...
However, just in 2015, after a report from the Wall Street Journal tore a hole in the company's body, all the lies in it completely broke the dike...
From ignoring to sophistry, from publicly responding to questions, to hiding in hiding — from 2015 onwards, Holmes spent what may have been the worst 6 years of her life. At the end of last year, after weaving this outright lie, she finally sat in the dock of the federal court in San Jose, California, and was overwhelmed by the prosecution's questioning and the jury's gaze.
Last week, Theranos' fraud finally came to an end.
After more than three months of trial and seven days of deliberations, the jury finally handed down a verdict: Holmes had committed at least four counts of investor fraud.
If convicted, Holmes could face up to 20 years in prison.
1
The "epic" level hides the sky and crosses the sea
After 7 days and a total of 45 hours of deliberation, the jury members in this case finally released the verdict to the court.
Of the total 11 counts facing Elizabeth Holmes, the jury found her guilty of four counts, three counts of telecommunications fraud and one count of conspiracy to commit telecommunications fraud.
The corresponding fraud offences are aimed at both shareholders and potential investors of Theranos.
Therefore, Holmes deliberately concealed the details of his company's products and technical loopholes from investors on the grounds of "trade secrets" and other reasons, and defrauded investments - at least these acts are real crimes.
Among the remaining fraud charges are Investors and Users/Consumers of Theranos. The jury either unanimously found Holmes innocent on charges of fraud against consumers or could not agree.
Theranos' technical vulnerabilities and operational irregularities have caused a number of accidents involving ordinary users/consumers in the past.
For example, Erin Tompkins, a female user living in Arizona, told the court that he took blood from Theranos' device at the local Walgreen supermarket many years ago and returned a positive HIV result, but was finally confirmed to be a "false positive" that tested incorrectly, causing serious mental damage and certain property damage to the user (for example, the user later underwent multiple HIV antibody tests that were not covered by health insurance).
Another case, also in Arizona, came on a pregnancy test provided by Theranos. At the time, the test showed that consumer Brittany Gould had a decline in the secretion of pregnancy-related hormones (hCG) and that the embryos might have been miscarried, causing a great mental blow to it. Fortunately, the consumer went to another institution a few days later to test, showed that the hCG value was normal, and eventually gave birth to a healthy baby.
A spokesperson for the Federal Attorney's Office for the Northern District of California said at the trial: "The guilty verdict in this case demonstrates Holmes' guilt in this massive investor fraud case, and she must now face a sentence for her crime." ”
Holmes et al. claim that Theranos has revolutionary blood testing technology that can perform a variety of important medical tests with a small drop of blood at the fingertip, far superior to other blood testing technologies commonly found on the market in terms of efficiency, versatility, and invasiveness. Forbes magazine once named her the nation's youngest and richest self-made billionaire.
Elizabeth Holmes Image credit: The Associated Press
Specifically, during the founding and financing phase of Theranos, Holmes conspired with the company's COO and boyfriend Ramesh Balwani to deceive investors into investing in the company by falsely reporting Theranos' current financial situation and actual technical level.
As a result, Holmes and Balwani successfully defrauded a large number of top investors.
In fact, Theranos' lineup of investors and supporters is so strong that it is frightening that a Stanford university graduate is so good at marketing that even the makers of American social and business rules dare to cheat, and a deception is more than ten years, it is simply epic...
These big guys and their known investment amounts:
Media mogul Murdoch, founder of News Corp. and chairman and majority shareholder of FOX – $125 million;
Alice Walton, the current leader of the Wharton family behind the Walmart Group — $150 million, an investment recommended by her private lawyer;
Betsy DeVos (U.S. Education Secretary under Trump' presidency) belongs to the DeVos family — $100 million;
Robert Kraft, founder of food giant Kraft Group — $1 million;
Oracle founder Larry Ellison — The amount is unknown, rumored to be $20 million
Former U.S. Secretary of State Henry Kissinger – $3 million; his private lawyer also invested $6 million;
Jim Mattis, former U.S. Secretary of Defense — $85,000
Former U.S. Secretary of State, renowned master of international politics Henry Kissinger
Image source: Reuters
Moreover, Theranos' board of directors is also "full of masters": two former secretaries of state (Kissinger and George Schulz), two former secretaries of defense (Jim Matisse and William Perry), two former senators, former CEO of Wells Fargo, former director of the US Centers for Disease Control and Prevention, etc...
Other well-known institutional investors planted on Theranos include:
德丰杰(DFJ)、a16z、Cox、ATA Ventures、Partner Fund Management、Fortress Investment Group 等。
2
A 10-year-long hoax
While at Stanford, Elizabeth Holmes came up with the idea of developing a "Lab-on-a-chip," an ultra-small chip technology capable of handling tiny amounts of liquid, significantly reducing the cost of blood testing and making it more ubiquitous.
In 2003, Holmes, who was only 19 years old at the time, dropped out of Stanford University and used his parents' tuition fund to start Real-Time Cures. The name was not very popular, so she later changed it to the more submissive Theranos (Therapy+Diagnosis).
(It's worth mentioning that Holmes' father served as vice president of industry investment due diligence at Enron Enron.) And the name "Enron", presumably many readers and friends already know, because the company's financial fraud has become synonymous with corporate fraud... ）
Holmes himself admired Apple founder Jobs and thought he would be able to become a Silicon Valley mogul like Jobs.
In 2007, Jobs released the iPhone, and the image of the black turtleneck sweater was forever engraved in the history of technology. That same year, Ana Arriola, who had worked at Apple, joined Theranos as chief design officer and became Holmes's "image designer." Holmes had previously dressed in a very casual style, often wearing a wide sweater, and Arriola recommended to her the Issey Miyake black turtleneck sweater worn by Jobs. Because this new style of dress "can make someone feel like the person is focused on their own company, rather than what to wear today." ”
When she first met Holmes, Arriola was surprised that the man had a trait that bore a striking resemblance to that of her former boss, Steve Jobs; later, in an interview with ELLE magazine, she said that Holmes was always imitating others, which was "one hundred and twenty fakes." She had only been with Theranos for a year because she had sensed that Holmes couldn't deliver on her promises, and what the company team was doing was actually killing people.
Unfortunately, Theranos' top investors, who cut off stubble after stubble, didn't see the company's problems like Arriola did. They push themselves too hard to believe that Holmes is a trustworthy person, a rare founder of Silicon Valley, and the next Jobs.
In 2004, Theranos completed a $500,000 seed round, provided by Defonje, a well-known investment institution in Silicon Valley. Tim Draper, founder of Defonje, is well-known in Silicon Valley and one of Baidu's early investors. But in his twilight years, it seems that his vision has deteriorated, and until 2018, he was still defending Theranos, presumably saying that the siege of Holmes by the whole society is now a witch hunt, "taking down another icon".
In 2005, when Murdoch first met Holmes on his farm in California, he was startled by the young Stanford spinner: Murdoch himself had only one attendant, and Holmes brought a team of bodyguards with him... Murdoch asked her why she was fighting so much, to which she replied, "They (the bodyguards) asked for it." ”
In this way, Holmes succeeded in deceiving Murdoch. The newspaper giant led Theranos' Series A funding round with $5.8 million and raised $125 million in subsequent rounds.
(Later, knowing he couldn't get his investment back, Murdoch instead arranged for Theranos to buy back his shares for $1, because then he could use the loss on this investment to offset the taxes paid by other money-making portfolios...) ）
By 2007, Theranos had completed four rounds of financing totaling more than $30 million, valued at $200 million. But the company's valuation skyrockets still haven't stopped. Although the company's products had not yet been developed and put on the market on a large scale, more investors saw Murdoch and other business leaders standing behind Theranos and were more firmly convinced that the company was absolutely "genuine" in its own right.
More investors flock to Theranos. By 2010, Theranos had completed another $45 million investment, valued at $1 billion, officially entering the ranks of unicorns.
In 2013, the Wharton family also joined the ranks of investors, and Walgreens, a convenience store chain owned by the Walmart Group, signed a cooperation agreement with Theranos to highlight Theranos' blood test products in their stores.
In 2014, Theranos completed a $200 million PE financing round, with a valuation of up to $10 billion, and made Holmes, as the founder, CEO, chairman and half-owned, the "youngest self-made billionaire in the United States" approved by Forbes magazine. Theranos has also become a regular visitor to the annual best technological innovation awards by major Media outlets in the United States. Later, the company was also selected as a blood test service partner by AmeriHealth, Blue Cross and many other U.S. health insurance agencies.
The image of Elizabeth Holmes holding a pill on the cover of Forbes magazine became a classic in the history of technology. Of course, maybe this also means that she and Theranos will be finished sooner or later...
Meanwhile, criticism of Theranos' lack of transparency in academia and medicine has been going on for several years, prompting Veteran Wall Street Journal reporter John Carreyrou to investigate the company.
Soon, various users, industry insiders, and investors broke the news one after another.
Finally, in 2015, Carreyrou published a series of investigative reports, pointing out that the company's blood testing business was actually completely devoid of any high-tech research, and was conducted using other commercially available blood testing tools. The company has to insist on a small drop of blood to do the test, and it is far from meeting the actual test dosage requirements, resulting in a huge fluctuation in the accuracy of the test results.
Carreyrou's series of reports completely unveiled the skin of Theranos, so that greedy entrepreneurs and investors, follow the trend of the platform big guys, opportunistic lawyers, all revealed. After the news was reported, Theranos also suspended the fingertip blood test business.
Later, Carreyrou directly wrote these stories into a book "Bad Blood", which was immediately sold as soon as it was published, and completely triggered the public opinion to question and attack Theranos.
In 2016, the FDIC investigated Theranos' lab in Newark, California, which is actually the business center that handles blood tests, and immediately wrote a public letter to the company accusing it of posing a serious threat to patient health and safety. That summer, before the U.S. Department of Health and Human Services completely shut down Theranos, Walgreens and the on-the-cusp blood test company completed the mat and subsequently sued the company for breach of contract.
In those years, a number of authoritative regulatory authorities in the United States, including the Food and Drug Administration, the Health Insurance Center, the Securities and Exchange Commission, and local departments in California, Arizona and other states, have launched a comprehensive and dead-end investigation into Theranos.
In 2017, Holmes and her boyfriend tried to eliminate their liabilities to their shareholders through bankruptcy liquidation. The big ship was about to capsize.
However, in that year, there were investors who had the last glimmer of luck in Theranos... One of those investors was SoftBank, which borrowed $100 million from Theranos through its wholly-owned Fortress Investment Group to ease finances, collateralized by Theranos' patents, and was worth 4% of Theranos' shares.
Finally, in September 2018, Theranos officially announced the cessation of operations after a failed search for an acquirer, returning the remaining assets and cash to creditors. The closure of the company also means that the previous valuation of tens of billions of dollars has finally become 0.
(The story of SoftBank and Theranos goes on: Everyone knows that Theranos is still closed, and SoftBank simply took its patents, set up a shell company, turned into a patent xiaoqiang, and sued other companies for infringement of its patent rights in the past two years after the new crown ravaged...) ）
Every crime holms currently faces for fraud and conspiracy to commit fraud means up to 20 years in prison. However, at present, the case has not yet entered the sentencing stage, and it needs to wait for the outcome of the prosecution and defense transaction and the judge's ruling.
Holmes' boyfriend, Balwani, will be held on a separate date.
At this point, Theranos is close to the end of the fraud case, temporarily over. At present, the court has confirmed Holmes on four counts. In addition, the three counts that have not yet been decided will continue to be considered by the jury.
END
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