Startups, Diagnostics

Theranos saga teaches these lessons for startups

The dramatic downfall of Theranos holds key lessons for startup entrepreneurs who want to avoid CEO Holmes's fate.

entrepreneur

Everyone has been riveted by the remarkable downfall of upstart lab-testing firm Theranos and its black-clad young CEO Elizabeth Holmes.

Unless you reside on a remote planet, by now you know that the Centers for Medicare and Medicaid Services has fined the Palo Alto startup, banned Holmes from owning and operating a lab testing company for two years and yanked the CLIA certification of its lab testing facility in Newark, California. The Arizona lab was spared.

How the much-ballyhooed company got here would require a lengthy sit-down with Holmes, which must be the last thing on her mind at this very moment. We have a very nice timeline dating to February of this year here, however.

But the Theranos saga should be a cautionary tale for any young startup entrepreneur.

Here’s six lessons worth learning:

Worry about becoming Icarus
The media spotlight is intoxicating. Byte after byte of cyberspace that is dedicated to an entrepreneur’s vision of making the world a better place through one amazing idea can, however, lead one to feel invincible.

And in the case of Theranos, if all the allegations of fraud pan out, the media spotlight can lead entrepreneurs into believing their own fiction and repeating it endlessly.

But somewhere out there as the entrepreneur’s chest swells with pride, meticulous reporters will look for every “i” with a missing dot. And that media spotlight will become so hot it may burn.

Entrepreneurs who wish to avoid the fate of Icarus who flew too close to the sun, beware. Media can appear friendly to get their job done, and genuinely applaud achievements and accomplishments that you tout, but they are not your friend.

Get your story out, but keep it straight and don’t get taken in by all the attention.

When things go bad, DON’T blame the media
The reporter is not at fault that your technology doesn’t work or you said something silly or what you said didn’t match up with what happened later.

So don’t blame him or her.

Other than make you, the entrepreneur, look defensive and small, it only makes their resolve grow stronger to prove that there is rot within.

And when that happens, there will be blood…

Transparency will save you
Being in stealth mode is the conventional thing to do in the startup world. But make sure that the stealth nature of the business in those early days doesn’t seep into the corporate culture of the company you are trying to build.

Here’s a telling quote from Holmes in one of the first detailed media profiles of Theranos back in 2013:

“The company’s culture is such that confidentiality is the essence of its existence.”

Uh, what? The CIA may as well lay claim to that quote, but it should have no place in business whatsoever.

Select an expert board
Corporate governance is no small thing. It’s important to bring a diverse board to the table and not everyone from the industry you play in. A strong board can smooth over trouble and guide entrepreneurs in the right direction if he or she inspires confidence.

Not sure how having a bunch of senior defense folks or politicos on the board like Theranos did helps a healthcare startup, but it does give rise to the suspicion that many harbored about the company: it was a deliberate move to keep the board unaware of what was happening inside.

Entrepreneurs might like a puppet board or a board that could be viewed as clueless by outsiders so they can make all decisions themselves, but it’s ultimately shortsighted.

Healthcare is political
If Apple or Google or any tech company for that matter royally messes up a product or is proven to be inconsistent with previous claims, sure they will get a ton of flack. And deservedly so.

But will it lead to political types piling on? Doubtful.

But in healthcare, patient safety is paramount, and politicians are only too eager to demand accountability if only to posture that they are defending the hapless victim: the American population at large.

And when you are running a business, you can do without such scrutiny.

And finally, please change clothes for god’s sake
President Obama has famously declared that he only wears blue or gray suits so that what-to-wear doesn’t become another decision he becomes bogged down with on a daily basis.

Apple’s Steve Jobs only wore black mock turtlenecks apparently inspired by Sony. Mark Zuckerberg only wears gray T-shirts. And Theranos’ Holmes also sports black turtlenecks but less as an homage to Jobs and more because her mother took inspiration from Sharon Stone.

Let’s just say enough is enough.

The world has been blessed with color and various sartorial styles, and unless you are high-school teenager agonizing over what to wear, you can make a darn decision and quickly.

That photojournalist assigned as part of a media profile, might just thank you for it.

Photo: Getty Images, Yuri_Arcurs

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