Business Impact

When Its Employee Blew the Whistle, Theranos Was Out for Blood

Mind-boggling VC funding and influential board members appear to have created a company prepared to do anything but admit defeat.

Nov 17, 2016

Private investigators, $400,000 in legal fees, and schisms in the family of a famed political figure. Not the plot for a new thriller, but the aftermath of blowing the whistle on the ill-fated blood-testing startup Theranos.

The Wall Street Journal has published a thrilling—and, it must be said, saddening—profile of the whistle-blower behind the downfall of Theranos. It turns out that the source fueling the explosive investigations into the biotechnology company was Tyler Shultz, the grandson of former secretary of state George Shultz.

It’s a riveting read. But it’s also a telling reminder of how Silicon Valley cash and influence can be brought to bear in some unpalatable ways.

Theranos CEO, Elizabeth Holmes.

The story of Tyler Shultz gives the impression that the senior staff at Theranos, including its CEO  Elizabeth Holmes, got swept up in its own hyperbole. And, when called out, it seems to have resorted to bullying, intimidation, and cripplingly expensive legal proceedings in an attempt to silence the whistle-blower.

Holmes dropped out of Stanford to found Theranos in 2003, promising a technology that would provide accurate blood tests with just a pin-prick of blood. She wooed investors, racking up a dizzying $9 billion valuation for Theranos in the process. She also drew incredibly influential statesmen to her board, among them the elder Shultz, Henry Kissinger, William Perry, and Sam Nunn.

Such a lineup did the company no good, though: it became clear that Theranos lacked the technical abilities it claimed to possess, with a pattern of inaccurate tests and incompetent lab management that ultimately forced the FDA to ban Holmes from running a clinical lab. Instead, the company is now pinning its hopes on producing portable blood-testing hardware. But it’s got a struggle ahead: Forbes values the company at zero.

And yet some of its early backers continue to support the company. Notably, the venture capitalist Tim Draper, an early investor in Theranos, came out this week to call Holmes a “great entrepreneur” who “did great things for consumers” but “got attacked.” Draper either knows something that the rest of us don’t or is unwilling to admit that he backed the wrong horse.

For his part, it seems that Tyler Shultz acted in the best interests of the public, though his family’s now burdened with $400,000 in legal fees and he hasn’t spoken to his grandfather in months, other than via lawyers.

Meanwhile, Theranos itself is now being pursued by its ex-client Walgreens, which previously offered its blood-testing service at its stores, as part of a $140 million lawsuit. It will be interesting to see what changes when the hunter becomes hunted.

(Read more: Wall Street Journal, Vanity Fair, “Theranos Promised a Revolution, but Delivered Dangerous Errors,” “Theranos Is Closing Its Labs and Hemorrhaging Jobs”)