Bad Blood by John Carreyrou




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The story of Theranos is the Silicon Valley equivalent of the Enron scandal replete with bold claims, high valuations, defrauding of investors and terrible corporate governance. Theranos promised to revolutionize healthcare by painlessly performing hundreds of tests on a single drop of blood.

In 2015, Theranos was a unicorn valued at $9 billion. By 2018, the company shut down and Elizabeth faced a ten-year ban from serving as an officer of a public company. Theranos serves as a cautionary tale of what can go wrong with a ‘fake it till you make it’ approach to building a company.


  1. At the age of ten, Elizabeth Holmes was determined to become a billionaire entrepreneur, an ambition her parents strongly encouraged. To achieve this, she dreamt of designing technology that changed the lives of people.

  2. Elizabeth dropped out of Stanford to start Theranos. The vision was to build a portable device that would painlessly perform hundreds of tests on a few drops of blood.

  3. Steve Jobs was a huge inspiration for Elizabeth who called Theranos “the iPod of healthcare.” She began to imitate Jobs in her management style and even in wearing black turtlenecks every day to work. “Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.”

  4. Avie Tevanian, a board member, grew suspicious about Theranos. Revenue projections never materialized, documents for deals with pharma giants were not shown and there were consistent product delays. When Avie raised this with the board, Theranos threatened him with lawsuits and forced him to quit.

  5. When the board again received similar complaints, Elizabeth was asked to step down. However, she managed to win the board back, a difficult feat even for seasoned CEO's. “When you strike at the king, you must kill him.” In this case, the queen survived and the complainant was fired next week.

  6. Toxic Culture: Elizabeth indulged in nepotism by hiring her romantic partner Sunny Balwani as the Executive Vice Chairman, a vaguely defined role with sweeping powers. The Board was not informed about their relationship and the vast scope of Sunny’s role. Elizabeth also hired her brother Christian and his friends, none of whom had any relevant background.

  7. Toxic Culture: Theranos blocked online communication and spied on employee conversations and social media posts. Sunny used a fear and intimidation-based approach harassing employees he disliked. Employees suspected of not being ‘loyal enough’ were fired on some pretense.

  8. Red Flag: Elizabeth managed to convince Pfizer to use Theranos devices in a patient trial. However, the collaboration soon came to an end as the devices had frequent mechanical failures, wireless transmission errors and poor temperature tolerance. There were issues with test results as well.

  9. Turning Point: Theranos landed mega-deals with Walgreens, a massive pharmacy store chain and Safeway, one of America’s largest supermarket chains. Both companies bet big on this collaboration. However, the partnership was marked by Theranos missing deadline after deadline.

  10. Red Flag: Theranos promised its devices could perform 192 different tests while they could barely do a dozen. To meet the Walgreens deadline, Theranos hacked commercially available blood testing devices and used them for testing. The test results had dangerously high error rates.

  11. Turning point: Theranos's stellar board, the Walgreens and Safeway deals, a potential defense contract and highly inflated revenue projections raised investor expectations. A new fundraising round made Theranos a unicorn, valued at an astonishing $9 billion. Elizabeth, now worth $5 billion, became Silicon Valley royalty.

  12. John Carreyrou, Wall Street Journal journalist and the book's author, discovered that Theranos’s performed its tests on hacked commercial machines. Doctors shared horror stories of faulty test results creating health scares and needless suffering for many patients. “The way Theranos is operating is like trying to build a bus while you’re driving the bus. Someone is going to get killed.”

  13. Theranos tried to scuttle John’s investigation by sending legal notices and threatening emails to his sources and Wall Street Journal. Elizabeth convinced Rupert Murdoch, the owner of Wall Street Journal, to invest $125 million in Theranos. Using this, she tried to get him to kill John's story, but Murdoch refused.

  14. John wanted to publish quickly. But the paper’s editor advised patience. He likened investigative journalism to la mattanza, a Sicilian ritual where fishermen with spears would stand in the water for hours. When the fish grew comfortable and carelessly swam close, they would swiftly go for the kill.

  15. Turning Point: The Wall Street Journal carried John’s articles exposing how Theranos ran tests on hacked devices. Subsequent pieces revealed that Walgreens and Safeway had terminated their partnership with Theranos. Throughout all this, Elizabeth played the wronged visionary, claiming false allegations were the price she had to pay for being a pioneer.

  16. An investigation by Centers for Medicare & Medicaid Services (CMS) confirmed that Theranos used hacked devices and test results were highly unreliable. Theranos was forced to void over a million test results paying $4.65 million in reimbursements. What is unimaginable, however, is the damage that could have been caused had Theranos rolled out nationwide.

  17. Investors sued Theranos, Elizabeth and Sunny for deceit. Walgreens filed a lawsuit for violation of basic quality standards and legal requirements. The Securities Exchange Commission charged Theranos with fraud and barred Elizabeth from holding office in public companies for ten years. She was forced to give up voting control and most of her shares in Theranos.

  18. Red Flag: “Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.” However, in healthcare the costs were far higher. Millions of lives were at risk as treatment decisions are made based on lab results.

  19. Culture Alert: Elizabeth knew exactly what she was doing and systematically manipulated people. Her ambition would not admit setbacks. She made disastrous decisions that cost Theranos, the investors and the general public dearly.

  20. The story of Theranos is a cautionary tale. Watch out for similar warning signs in your organization and the companies you work with. Your career or business might be at stake.


At the age of ten, Elizabeth Holmes was determined to become a billionaire entrepreneur, an ambition her parents strongly encouraged. To achieve this, she was convinced she had to create technology that changed the lives of people. Stanford became an obvious choice for a bright student with entrepreneurial dreams. With her track record of academic excellence, Elizabeth was admitted to Stanford as a President’s Scholar. At Stanford, she took a special interest in Channing Robertson’s courses in Chemical Engineering and controlled drug-delivery devices. She also started working at his lab under Shaunak Roy, a Ph.D student of Robertson’s.


Elizabeth spent the summer of 2003 interning at the Genomics Institute of Singapore. While using syringes and nasal swabs to test patients for the SARS epidemic, she was convinced there had to be a better way. On her return, she worked non-stop for five days to come up with a patent application for an arm patch that could detect medical conditions and administer suitable drug dosages. When Channing Robertson saw it, he was impressed with her drive and inventiveness in synthesizing different pieces of science and engineering. He encouraged her to drop out and start a new venture. Elizabeth incorporated her startup as Real-Time Cures, which she later changed to Theranos. Channing Robertson joined the board and Shaunak Roy became the first employee. Tim Draper, the famous venture capitalist, invested $1 million. To investors, she pitched the idea of a Therapatch, a sort of a band-aid that would draw blood painlessly, analyze it and deliver a suitable drug dosage. The readings would be instantly sent to the doctor. By 2004, Theranos had raised $6 million.


Shaunak quickly realized that making such a patch was nearly impossible due to the engineering challenges it presented. They abandoned the idea for a cartridge and reader system. The blood sample would be drawn in a card-shaped cartridge and placed in a reader would analyze the blood and produce test results. Test results would be beamed to doctors who could prescribe modified dosages. This would sharply reduce the time needed to make changes to drug doses. Elizabeth dreamed of putting them in the houses of patients. However, engineering this pared-down version was still extremely difficult. After 18 months, Shaunak managed to make a prototype which was named Theranos 1.0.

Edmond Ku was hired to engineer the Theranos 1.0 prototype into commercializable product. Elizabeth insisted on using only a drop of patient blood to perform tests and wanted the cartridge to fit in the patient's palm. This emphasis on miniaturization caused serious technical challenges. Ed’s problems were complicated by the fact that Theranos’s culture of information secrecy discouraged the engineering team and the chemistry team from communicating. He was never sure if the errors were caused by faulty chemistry work or faulty device design. 

As months went by, Elizabeth grew frustrated with the slow pace and wanted to run the engineering teams twenty hours and seven days a week. Ed felt this would overburden his already stressed team and refused to comply. Over the next few months, he saw new engineers being hired who did not report to him. A parallel engineering team was being formed to make both teams compete with each other.

Elizabeth successfully convinced Pfizer to use the Theranos system in one of their patient trials at Tennessee. Patients would have the Theranos 1.0 device in their homes and take blood tests daily. The results would be shared with Pfizer. The day before Elizabeth was to train the patients and doctors, the cartridges and readers were not working properly. Ed spent the night fixing them. When he came to know the study involved patients suffering from terminal cancer, he felt that the device was too unreliable to be used in a serious study.



At Theranos, the competition between engineering teams increased. The other team headed by Tony Nugent decided to abandon the existing approach in favor of a robotic mechanical arm which mimicked the steps a chemist would perform. Instead of building it from scratch, Tony re-engineered a commercially available glue-dispensing robot. The new device was the size of a desktop computer, but could still be installed at patient homes. Elizabeth christened this the Edison and this became the new direction for Theranos. Immediately, she started giving demos with the new system. This made Tony uneasy as the system had hardly been tested. Ed Ku and his entire team were fired. Shaunak Roy grew disillusioned with the new direction which was a far cry from the initial vision. He decided to move on.



Steve Jobs was a huge inspiration for Elizabeth who called Theranos “the iPod of healthcare”. In 2007, she recruited some Apple employees including Ana Arriola, who had worked on the iPhone’s design. Elizabeth wanted the Edison to have Apple design elements including a touchscreen similar to the iPhone and an outer case resembling the iMac. Ana soon began to have problems with the suffocating culture at Theranos. Elizabeth’s paranoia about information secrecy made Theranos block online communication across teams leading to huge productivity losses. Employees suspected that Theranos spied on their conversations and social media posts. Arrival and departure timings were strictly monitored. When board meetings were convened, employees were told to avoid eye contact with Board members. Elizabeth demanded unconditional loyalty from her employees and fired those she felt were not loyal enough. Within two years, over thirty people were fired not counting the twenty odd members of Ed Ku’s engineering team.



When Ana heard about the Pfizer trials, she asked Elizabeth to pause the trials until the problems in the Theranos system were fixed. Elizabeth refused. Anna shared her concerns with Avie Tevanian, who was on the board of Theranos. Avie by then had begun harboring concerns of his own about Theranos. The optimistic revenue projections Elizabeth shared at board meetings never materialized. Every time he asked for details about pharmaceutical deals, he was told they were under legal review. There were consistent delays in making the devices production-ready.  When Elizabeth wanted to set up a foundation for tax purposes and sought board approval for a special grant of stock, Avie felt this was not good corporate governance. Elizabeth would control the foundation, increasing her voting share. Upset with Avie’s criticisms, Elizabeth wanted him to resign from the board.

This incident shocked Avie and he began to review the Theranos documents he had. He found glaring inconsistencies and constant staff turnover. When Avie took it up with Don, the board Chairman, Don told him to consider resigning. Shaunak Roy was planning to sell his founder’s shares back to Elizabeth. Avie realized that the shares were being sold at an 82 percent discount compared to the last fundraising round. He decided to buy them. Soon, Theranos threatened Avie with a lawsuit. On second thought, Avie decided he did not want to own more of the company given what he knew about it. He wrote one last letter to Don urging him to tell the other board members about the issues with Theranos and resigned.

Todd Surdey, a Theranos sales executive, realized that the company’s revenue projections were wildly optimistic. Each contract with a pharmaceutical company was contingent on Theranos proving that its blood analysis system worked. Worse, the devices often malfunctioned. During a demo for Novartis, all three Edison readers displayed error messages. He took his concerns to Don Lucas saying that the revenue projections were vastly exaggerated given the unreliable state of the Theranos product. This time Don took the complaint seriously. He convened an emergency meeting and Elizabeth was asked to wait outside. The board decided that Elizabeth was too inexperienced to head the company and decided to make her step down. When Elizabeth was called in to be informed, she agreed that there were shortcomings and promised to correct them. In the course of the next two hours, she managed to win back the confidence of the board, in a manner that even experienced CEOs would have found hard to pull off. One of the board members was reminded of the saying that “When you strike at the king, you must kill him”. In this case, the queen survived. Todd was fired next week.



In 2009, Ramesh “Sunny” Balwani joined Theranos as Executive Vice Chairman, a vaguely defined role with sweeping powers. Sunny made his fortune when, the startup he worked with, was acquired by a competitor for $232 million. As the Chief Technology Officer, Sunny had made $40 million. When Elizabeth had met Sunny during her impressionable Stanford days, she saw in him a successful entrepreneur. Soon they had become romantically involved and Elizabeth moved into his house in 2005. Sunny had a habit of flaunting his wealth by driving Porsches and wearing expensive clothes.  

While Elizabeth had informed the board of hiring him, she had hidden their relationship and underplayed the scope of his role. Sunny used a fear and intimidation-based approach to management. Employees found him arrogant, rude and condescending. Often he would remind people that he was doing a favor to them by working at Theranos when he did not need the money. Employees he disliked faced frequent harassment and yelling. Eventually, he would “disappear them”, a phrase that employees coined for Sunny’s frequent firings.

Elizabeth took nepotism one step further by hiring her brother Christian, an analyst with no background in medical diagnostics. Christian, in turn…



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