What 3 Lessons Entrepreneurs can learn from Demise of Theranos

3 Lessons Entrepreneurs can Learn From Theranos Failure

Theranos was on top of the world in 2014. Elizabeth Holmes, aged 19, created the firm, which was touted as a game-changing venture that will transform the blood testing market. The biotech startup was valued at $9 billion, with investors including Rupert Murdoch and Tim Draper, and was praised as a technology visionary. In September 2014, Holmes named one of the richest women in America by Forbes, with a net worth of $4.5 billion.

Nevertheless, the organization had collapsed by March of 2018: its founder and CEO, Elizabeth Holmes, was charged on wire fraud charges, and the company was forced to disband. In 2021 a criminal trial was launched and by January 2022, Holmes was found guilty on four of 11 federal charges.

While the Theranos case is extreme, there are three key lessons that all entrepreneurs can take away from the company's downfall.

1. Don’t promise what you can’t deliver

Elizabeth Holmes claimed that only a few drops of blood could yield results for over 200 different blood tests using Theranos' technology. Yet it turned out that the technology wasn't functional, as reported by the Wall Street Journal. In fact, the FDA in the United States forbade the business from utilizing its technology for blood testing because it was so inaccurate. 

For Entrepreneurs, it's critical that if you promise something to your clients, be sure you can follow through and deliver on those claims. Otherwise, you will lose their confidence, your brand ruined and highly likely will end up closing shop.

2. Don’t forget the basics

In its drive to transform the blood-testing market, Theranos neglected to execute the fundamentals correctly. It, for example, did not evaluate its technology with third-party specialists, did not get FDA permission for its testing, and did not adhere to established clinical practices. As a result, the company's technology could never live up to the promise, and its demise was unavoidable.

3. Be transparent

Theranos was engaged in controversy in part due to its lack of openness. The corporation kept its technology and how it was utilized under wraps. This resulted in claims of fraud and mistrust from investors, employees, regulatory agencies, and consumers.

Former Theranos workers claim that multiple warning flags indicating something was amiss with the firm were disregarded. Employees, for example, expressed worries about a lack of transparency, a chaotic work atmosphere, and technologies that did not operate as stated. Instead of addressing these concerns, Theranos' leadership just ignored them. The business was also fined by the United States Food and Drug Administration (FDA) for allegedly utilizing unauthorized technology to conduct blood testing.

As an entrepreneur, it's important to be open and honest about your business. If you're facing challenges, be upfront about them. And if you make a mistake, admit it and take steps to fix it. Transparency builds trust and can help you weather difficult times.