Answer this question only: Why and how did Theranos get in trouble? What lessons can be learned from the Theranos case?

would "dedicate her life to mak[ine] something extraordinary happen to change the world." The media bype around the charismatic Holmes and her startup was enormous; she was featured frequently on the covers of such high-profile business peblications as Fortune, Forbes, Bloowbery Businessweek, and Inc. She also made several TV appearances on CNBC and elsewbere, Many investors wore grippod by FOMO ("Icar of missing out") on the neat bie thing. As a result, oher venture capital firms began to invest in Theranos, as did billionaires Rupert Murdoch, Robert Kraft, the Waltoe fanily, the DeVos family, and others-with each investing $100 million or more. By 2014 , Theranos was valued at $10 billioe, making it ooe of the world's most valuable startups. Indeed, it was more valuable than other famous whicorns (private startups with valuations of over $1 billion) such as Uber, Airbab, and Spotify. With approximately $5 billion in Theranos stock. Elizabeth Ilolmes had become the world's youngest self-made female billionaire. At its peak, Theranos had more than 800 employees and was considered one of the hottest tech startups in Silicon Valley. Once Theranos went live with its blood testing however, things began to unravel. Walereens, in an attempt to preempt rival CVS, began to offer Theranos services to its Arixona. besed customers in 2013. The initial idea wes to install Theranos' lidison machines (minilabs) in each Walgreens wellness center, so blood could be drawe by finger prick and senalynod onsile within minutes, at lowcr cost and with higher accuracy. The problem was that Theranos machines were matical devices that needed IDA approval-which Theranos did not ob- tain. As a work-around, onsite Walereens technicians collectod blood samples by finger prick, slored them in nanotainers, and shipped them to Theranos headquarters in Palo Alto, California, wbere the blood samples were analyond. Ibe results then were sent to the customers. However, the Theranos tectmology failed to work wdll, ir at all, and patients' lab results turned out to be inaceurate. Because the Eidison machines coeldn't handle the scope of tests Theranos had advertised, Holmes decided to analyze the blood samples colloctad in Walgreens' Arizona locations us. ing old line medical devices. Furthermore, because only a drop of blood was dramn from each paticnt, the samples seeded to be diluted to meet the volume required for testing with the older equipment, which further reduced the accuracy of the results. In other instances, Theranos advised patients that larger amounts of blood were nowded for testing to be possible, which led patients beck to the trinditional method of having blood drawn by an intravenous needle. So began the gradual unrweling of a $10 billioe deception. lilizabeth Holme' story is so compelling that media companies could not resist. HBO was first with the documentary The Inwentor: Out for Bbod in Silfican Valley. Based on John Carreyrou's investieative reporting for the Wall Stmet Jowrnal that resulted in the bestvelling book Bad Mood. Secrets and Lies in a Sifion Vally Startup. Apple Stadios is producing a Hollywood movie starring Jenniler Iawrence as Blizabeth Holmes. In addition. Hulu streamed the popular TV series The Dropout? Part III of this ChepterCase appears in Section 12.4. Shortly after founding Theranos, securing initial fundine. and receiving endorsements from high-powered venture capitalists and seientists, Jitrabeth Holmes set out to build a hand-selected board of directors (in 2004). Assembline Theranos' board of directors was not done with the goal of providine stratceje guidance and oversecing corporate governance, but rather to provide a seal of approval and legitimacy. A powerful board of directors would allow Theranos, Holmes reasuned, lo intimidate government agencies such as requlatory bodies not to challenge Theranos' assertion that its technology worked as prodaimod. Holmes convineod elder statesman George Schultz. Henry Kissinger (former secretary of state), James Matthis (future secretary of defense), and William Perry (former secretary of defense). among other high powered individuals, to join Theranos' board of directors. Holmes was alse close to the Cinton Gilobal Initiative and former President Bill Clinlong she even threw a fundraiser for then-presidential candidate Hillary Clinton. Ilolmes connected to the Obama administration as well, touring the Theranos facility in the Bay Area with then-vice president Joe Biden and explaining that he had just witnessed the lab of the futare-Theranos was going to provide higher-quality services at lower costs. Shortly after Thersenos went live with its blood testing in 2013, however, medical doctors began questioning the lab results their patients had obtained from Theranos. Some acteally had their patients retested at traditional labs. After comparine Theranos' results with those obtained from Quest or I.abCarp for the same patients, physicians found discropancies, proving that Theranos tochnology was faulty. Recognixing the inherent risks of providing patients with faulty lab results (which can result, for instance, in the start of aegressive treatments for combating cancer or not undertaking a treatment when needed), one Theranos employee filed a whistleblower coemplaint with a government apency, while another employee shared information with an investigative reportcr at The Wall Sired Nournal (WSJ). The WWJ publishod a series of articles in 2015 exposing the Theranos fraud, which resulted in several unannounced inspections at Theranos by requlatory agencies. In 2018, foderal prosecutors filed eriminal charges eainst Elizabeth Holmes and her enforeer and second in command at Theranos, Ramesh "Sunry" Balwani, alloging they defrauded investors, doctors, snd patients. In 2022, in a jury trial delayed by the Covid-19 pandemic, Elizabeth Holmes was convicted of multiple counts of wire frand and onc count of conspiracy to commit wire fraud by lying to investors to raise money for her startup. She mas found not guilty of defrauding patients who had used Theranos' blood tests. A convicted felon. Holmes was sentenced to more than 11 years in prison. Questions 1. What was the orieinal mission and vision of Theranos founder Fliraheth Holmes? How did Holmes set out to fulnill her mission? 2. What is the designated mole of a board of directnes? Did the Theranos board of dirctors fulnill this role? Why or why not? If not, what was Holmes' motivation for stackine the board the woy she dide Explain. 3. Theranos was valued at some $10 hillion at its peak. Did the investors overlook any red flapes? Or was it simply FOMO ("fear of missing out") that made them hurry to jump oe the Thersenos bandmenee? Why mere so many people caught up in the hope around Theranos and Elizabeth Holmes, its charismatic leader? 4. Why and bow did Theranos get in trouble? 5. What lessons ean be kearned from the Theranos case? Theranos: Bad Blood Elizabeth Holmes was 19 years old when she founded Theranos, a medical diagnostic company, in 2003. Ambitious and entreprencurial, she dropped out of eollepe with the intent to disrupt the health care industry. Holmes' hig invention was a miniaturized lab that could run 200 diagnostic tests from a single drop of blood drawn from a painless finger prick-quilte a departure from the traditional method of using needles to draw vials of blood from veins. The lochnology and process of diagnesing blood hadn't changed much since the 1950k, and Holmes was convineod that the diagnostic hlood testing market was ripe for disruption. Stbe proclaimed she could develop a new technology that could spot everything from cholesterol to cancer within minules and more accurately than traditional blooddrawing methods. She would accomplish this feat by merging scicutific advances in medical devices with bioenginecrine Holmes' strategic intent did not just focus on developing more consumer-friendly blood tests, it also focused on providing faster, less expensive, more reliable, and more convenient lests. Sho wanted consumers to be able to take blood tests at their local pharmacy of even in the comfort of their own homes. This comenience would be an important step toward achieving individualizod bealth care, which would al low consumers to obtain important information ses they noeded it to make their own medical decisionx. Because consumers could have an entire suite of blood tests conducted every two woeks or so, and have the resulting dala sharod with their physicians, people would find themselves with a much more dynamic viow of their overall health profles. Holmes theorioed that repented testing over short intervals would allow for carly detection and prevention of discases. With its revolutionary technoloey. Theranos set out to challenge incumbent dienosti. ties and LabCorp, which were nology and charging bundrods tests. Government agencies these firms for evercharging by Quesd Diagnosties and LabCo U.S. market in a cosy duopoly : the markel. At the time Theranos got of dominating Silicon Valley with Erabech I idimes, founder and cro of Theranos, is pictured hrep with a "ronotziner" a small coriainer holding a drop of ising and appesing ioca, Theraws never got it wo wok in 2022. I bitines was convided of detrading investors. Now a in resibuon and links. eyes. In addition, to sound more traincd herself to wese a doep be natural voice. So promising was the new Holmes managed to persuade h son, then senior associste dean at Stanford University, to leav and join her startup. Robertsot to convince Tim Draper, of the DFJ, to provide initisl fundine imest in the now-famous start (Chins's versioe of Gooele)