A Venture Capital Nightmare / What Went Wrong With Theranos

What’s up, everyone? Let’s take a look at this VC nightmare!

Click here to see my YouTube video!

If you haven’t heard about it yet, here’s an update… Elizabeth Holmes, founder of Theranos, was found guilty of 4 charges of fraud. How did this happen?

After dropping out of Stanford, Holmes started a healthcare company that claimed their innovative tech, with a single drop of blood, could produce over 200 test results within minutes.

It started in 2003: the massive tech boom era that had promising potential.

Today, we’re going to talk about what she did wrong, and what she did right.

What She did Wrong

Interestingly, she started investing more in her appearance instead of the actual technology. Her voice got deeper, she wore only black, and she started being more assertive.

All startups have crazy forecasts. Her forecasts were fine, but she started misrepresenting her current traction and lying to her investors about current standings.

Instead of targeting venture capitalists, she raised money by using wealthy old investors, single family offices, or high net worth individuals (people that don’t pay much attention to detail).

She steered clear of venture capital firms because they will not make any deals unless they do serious due diligence first.

What She did Right

She went out and connected with some big names and built a stalwart board of advisors.

She played her cards right by making these well-known investors battle against each other to get in on her deal.

In his video, Lincoln Archibald said…

“It’s ok to do that, but you can’t lie about your current traction. You can’t be deceptive about your revenues or other important figures.”


Another thing that made this deal so bad…

This technology impacted human lives and she didn’t disclose that to investors like Walgreens. So, people were getting dangerously misdiagnosed because of the inaccuracy of her technology.

She lied about the FDA’s approval, was deceitful, and ultimately went in way over her head. That’s what will get her behind bars.

Elizabeth Holmes isn’t the only one who has done this. It’s starting to happen in all different elements.

In closing, Lincoln advised in his video

To all VC funds out there: be careful about the allocations and investments you’re making and always do your due diligence

Thanks for stopping by and have a great weekend!

Bridger Pennington

Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!

DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.

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