Book Review: Bad Blood: Secrets and Lies in a Silicon Valley Startup
The story behind Theranos' demise; a lesson in healthtech investing
Last week I finished listening to John Carreyrou's book - Bad Blood which details the complex web of lies and fraud undertaken by Theranos CEO and President, Elizabeth Holmes and Ramesh "Sunny" Balwani. The sad part in all of this was the complete loss of perspective, that getting diagnostic tests wrong, negatively impacts patients care, and could lead to death.
What struck me as incredible was the persistent public red flags which investors missed out on, which could've stopped the fraud early. Such as:
❌ Not having anyone with experience of blood testing or pathology on their Board.
❌ The constant turnaround of staff at the executive and junior tanks.
❌ The lack of published scientific literature on the effectiveness and profiency of their tests. There was one paper published which was in an obscure journal with questionable results. This reminded me of the evidence used to fuel opioid sales, where a short term singular study of less than 100 people was used to say there's no long-term impacts on addiction.
❌ Unable to produce appropriate FDA paperwork enabling abuse of relationships and credibility based fraud i.e. a con.
I've realised the same can be applied to healthtech startups which have questionable or incomplete evidence. The key is looking passed the fact a prominent VC firm or a Digital Opinion Leader (DOL) may be backing the company to understanding the data: what skills and knowledge are actually present in the Executive ranks and the Board, and what is the actual evidence of the technology.
I'd recommend reading this book, especially if one wants to understand more about biotech and/or healthcare investing.