In a rare case of Silicon Valley scandal, among the relentlessly positive stories of teenage billionaires and disease-curing apps, 31-year-old Elizabeth Holmes, chief executive of biotech start-up Theranos, fell from her pedestal.
The $9bn ($12.4b) start-up she founded claims it can perform a range of blood tests to diagnose conditions such as high cholesterol, HIV and diabetes – using just a few drops of blood, rather than the multiple bottles currently required. This week, The Wall Street Journal conducted an investigation that claimed Theranos’ blood-testing system didn’t really work as advertised.
Ms Holmes, who has refuted the claims, dropped out of Stanford University to found Theranos when she was 19, and is one of Silicon Valley’s much celebrated heroes. With her signature black turtlenecks, intellectual prowess and fierce ambition to create a legacy, she is often compared to Apple founder Steve Jobs, whom she has called an “incredible symbol”.
According to Forbes magazine, Ms Holmes is the youngest self-made female billionaire, with an estimated net worth of $US4.5 billion ($6.2b), and she has been profiled by everyone from the New Yorker to the New York Times and Fortune magazine. She reportedly wrote her father a letter when she was nine years old that read: “What I really want out of life is to discover … something that mankind didn’t know was possible to do”.
Theranos claims it can do blood tests on tiny pinpricks of blood samples.
The tendency to hero-worship entrepreneurs is widespread in the tech start-up community. Breathlessly admiring tales of students with billion-dollar ideas in their university dorm rooms, or engineers tinkering in their parents’ sheds, abound. The myth of Silicon Valley is that anyone with entrepreneurial get-go can succeed; all you need is the courage to fail, and an unquenchable thirst to change the world.
Words like “disrupt”, “upend”, “reinvent” and “revolutionise” are commonly thrown around to describe the goal of most start-ups – whether they are trying to do your laundry or deliver your lunch.
The idolatry of founders’ personalities often spills over into hype about the success of their companies. The hero-worship of tech leaders such as Jobs and Tesla boss Elon Musk has led to books, Hollywood movies and even operas written in their honour – but it also adds a shine to the companies they run. The aura of Jobs still envelops Apple, whose current chief executive, Tim Cook, has struggled to step out of its founder’s shadow.
The tech world is no stranger to hype – taxi-hailing app Uber claims it will change how people move and is valued at $US41 billion (56.7b); dating app Tinder, which just filed for an IPO, wants to reinvent love; and social network Facebook is trying to connect every human on the planet. But let’s be honest – if any of these companies did fail, it wouldn’t make you sick or kill you.
23andMe’s genetic testing kit.
We’d have to go back to using public transport, flirting in bars and writing emails to real friends. But when technology crosses over from software that makes life convenient to services that impact human health, that’s when hype could really hurt you.
The problem is that venture capitalists believe they can get biology to move at internet speeds. Start-up incubators like IndieBio and Y Combinator are trying to accelerate the drawn-out cycle of science, and bring products to market like a software update – create, iterate, fail, repeat.
Y Combinator’s part-time partner, alumnus and cancer researcher Elizabeth Iorns has expounded a radical idea: “Anybody can do this if you have a great idea. You don’t necessarily need to have a tenure track position (in a university) to do research.”
Maybe you don’t need to be a professor, but I’m pretty sure “anybody” can’t invent life-changing biomedical devices in a matter of months. Several people, particularly from the world of scientific research, concur. For instance, when entrepreneur Reid Rubsamen crowd-sourced more than $US400,000 (554,000) to make an HIV vaccine, scientific journal Nature questioned where the HIV researchers and experimental data were to back up his PR hype-driven hypothesis.
While paywalled, peer-reviewed science is an imperfect system that limits access of data, and biotech could do with decoupling itself from big pharma funding, at least peer review is a vetted process that ensures products that affect our health and diseases actually do what their labels say they will.
The big worry: Silicon Valley is easily dazzled by entrepreneurs and their ideas, not necessarily by balanced, low-hype, peer-reviewed data.
Which brings us to Theranos. Just like the start of any good start-up story, Holmes came up with the idea while a teenager at university. She has always been extremely secretive about how the blood-testing technology works, citing intellectual property concerns. In fact, Holmes has never published any of her findings in peer-reviewed journals. Most medical researchers would be hard pressed to find $US400 million (554m) to fund their work, no matter how much excitement surrounded it, without actually proving, through due process, that it works.
But several biotech start-ups are going exactly the way of Theranos. Juno Therapeutics raised $US300 million (415m) when it went public in December, and is valued at $4.5 billion (6.2b). Kite Pharma is worth $3 billion (4.1b) after floating its stock last year.
Last summer, US Federal Reserve chairman Janet Yellen pointed to small biotech stocks as one of the sectors where valuations looked “stretched”.
According to Quartz, more than 60 per cent of the biotech companies that have gone public in the past two years have either never tested their drugs on people, or have only trialled their safety but not their effectiveness. According to a survey by analytics company KMR, 97 per cent of drugs in pre-clinical tests never actually make it to market. So, inventing medical diagnostics and therapies involves a huge amount of time and cash, but actually bringing them to market for humans to use is even harder.
Theranos isn’t the only high-profile “direct-to-consumer” biotech company to run into trouble with the US Food and Drug Administration. Genetics company 23andMe had to halt sales of its consumer gene testing kits, when the US Food and Drug Administration (FDA) banned it from telling people they could develop conditions like Alzheimer’s or lactose intolerance in future, without being officially approved as a diagnostics test.
Like Theranos, 23andMe transacts directly with patients – there is no qualified physician-in-the-middle, helpfully demystifying what the blood test or genetic data results actually mean for your health – so the FDA has been particularly wary of the smooth claims marketed by these startups. This is particularly important for the average person, who could make damaging decisions about how they manage their medication, based on the information they receive.
But although 23andMe had to suspend sales for two years, the company, run by Anne Wojcicki, has managed to claw its way back to the market, by working with the FDA. Just this week, it announced that it would re-start selling a category of tests that can predict certain types of genetic disease, and will start bringing back other health-related tests too.
The lesson learned is not that biotech startups need to transform into slow-moving behemoths of academia, but that investors can’t expect science to move at the pace of software. Ms Holmes may still emerge from the current controversy, but it won’t be because of her entrepreneurial spirit and “fail fast” mentality – like 23andMe, she will have to fight back – patiently – with real science.