Bad Blood

Recommendation: Yes, along with The Smartest Guys in the Room

Where to read: Anywhere you’d read a good crime novel really

Read with: The Apple Thief cider, because it works on so many levels

In brief: Look, say what you like about American capitalism, but they write really good books when companies go up in smoke.


I want this book, but about Silicon Valley culture more broadly, and this level of investigation, but about every dodgy company seeking funding for half-baked ideas. Also Uber. And Tesla.

There’s a couple of great docos, an ABC special and a podcast, on Theranos if you just want the basic story but the general gist goes something like this:

  • Holmes drops out of Stanford to become an entrepreneur;
  • she “invents” a technology for conducting blood tests on tiny samples;
  • investors (none of them specialists in bio medicine) leap at the chance to get into the field (because the US healthcare market is massive);
  • the company can’t get the tech working and runs fake tests, fake labs and fake machines;
  • despite not having a single working prototype, they sign massive contracts with Walgreens and others;
  • the Wall Street Journal (Carreyrou) gets the story, publishes and everything goes to shit;
  • Theranos collapses, the SEC moves in and Holmes is prosecuted.

The most astounding thing about this book, particularly as a lawyer with (very limited) M&A experience, is the utter lack of due diligence. Investors put money within without being allowed to inspect or visit the labs, no one seems to have asked any questions about regulatory approvals or sought independent verification of any of Holmes’ claims and if anyone did get access to a dataroom, it’s not mentioned.

It’s also an illustration in the risks inherent in companies which stay private loooong after they should have listed. As the Trump Organisation, if nothing else, has demonstrated, private companies can be extremely opaque and, in many cases, avoid close scrutiny with astounding ease.

When fundraising, Theranos avoided VCs and investors with knowledge of biotech or the health care sector like the proverbial plague. They concentrated on wooing the board of Walgreens rather than the managers or techies who might have (and did) smell a rat. It even refused to use the team which specialised in the health sector in the marketing company they employed. At it’s peak, Theranos was valued at $9 billion without ever issuing a prospectus or public disclosure of any kind. As some commented in the wake of the collapse, we would all have benefited from some short sellers.

It’s also an interesting reflection on the power (or perceived power) of the NDA and threat of legal action to silence whistle blowers and former employees. It’s something we’ve had to consider more deeply in the context of the Me Too movement but, while some countries are increasing the protections afforded to whistle blowers, it’s yet to get much popular attention in the corporate setting.

One of the great strengths of Carreyrou’s All the President’s Men-style narrative approach to his own investigation is that it draws out just how close this story got to never being told. Had Theranos’ pressure tactics worked better on a few people, or if those people had less money to spend on lawyers, this could all have unfolded very differently.

The New York Times’ excellent review is here.

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