VC Draper: Theranos founder Elizabeth Holmes was bullied into submission from CNBC.
Investors in Theranos no doubt have a lot of recriminations about their investment in the blood testing business that the SEC subsequently declared to be a massive fraud. It has been an exercise in humility for some and a textbook example of what can happen to a company when its board and investors fail to exercise due diligence.
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But Tim Draper, the founder and managing partner of early stage venture capital firm Draper Associates and one of the earliest backers of Theranos, apparently sees a very different picture. He talked about what he regarded as the true causes of the company’s downfall in a surreal interview on CNBC Thursday. The discussion on Theranos starts at 3:04 in the video.
Draper doubled down on claims he made two years ago that Theranos Founder and CEO Elizabeth Holmes had been the subject of bullying by powerful interests such as drug companies, the American Medical Association and the U.S. Food and Drug Administration and that The Wall Street Journal reporter John Carreyrou, whose reporting led the SEC to investigate the business, was incompetent. At one point in the interview, Draper likened Carreyrou to a badger and a hyena.
Carreyrou authored a book about the rise and fall of Theranos called Bad Blood, which is scheduled to be released later this month.
“I feel that we have taken down another great icon. This woman came to me when she was nineteen years old and she said ‘I’m going to transform healthcare as we know it,’ and she got bullied into submission,” Draper said.
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He also contended that the charges that Theranos lied to investors and misled them about the technology behind their blood testing platform had not been proven.
In March, Holmes agreed to a settlement with the SEC over civil fraud charges, which included a $500,000 fine, a 10-year ban from serving as an officer or a director of a company, and surrendered voting control of the company she founded in 2003. And yet, the settlement included wording that neither Holmes nor Theranos admitted nor denied the allegations in the SEC’s complaint.
Draper’s perspective is a little mystifying given the information that has come to light about Theranos. His observation that if Theranos had just kept their technology in beta rather than pursuing the course that it did is interesting. But then, nobody forced Holmes and the company to overpromise and woefully underdeliver.
Photo: CNBC