Notable Failures & Corporate Collapses
What Happened
Theranos claimed it could run hundreds of blood tests from a finger-prick using its proprietary Edison devices.
The company attracted major investors, a $9B valuation, and partnerships with Walgreens and Safeway.
Internal employees and journalists revealed the technology did not work reliably or accurately.
Most tests were secretly run on conventional lab machines rather than Theranos devices.
Regulators intervened, partnerships collapsed, and Theranos shut down in 2018.
Elizabeth Holmes and Sunny Balwani were later convicted of fraud for misleading investors and patients.
What Drove the Collapse
unproven technology presented as revolutionary without peer-reviewed validation
secrecy and compartmentalization that prevented internal and external scrutiny
manipulated demos and selective reporting that hid accuracy problems
regulatory evasion to avoid full FDA testing of devices
a prestigious but scientifically inexperienced board that failed to challenge claims
a fear-based culture that silenced employees and discouraged transparency
The Investor Lessons
breakthrough claims require independent evidence, not narrative
charisma is not due diligence — demand real data
opaque operations and secrecy are major risk signals
boards must include domain experts capable of evaluating core technology
if results cannot be verified, the underlying product likely doesn’t exist
trust must rest on objective validation, not reputation or exclusivity