Monday 1 April 2019 6:42 pm

How did Theranos founder Elizabeth Holmes build her house of cards?

Elizabeth Holmes is quite possibly one of the most successful salespeople in history.

If you’re unfamiliar with this mind-blowing tale, she was the founder of US medical tech company Theranos, which aimed to revolutionise healthcare by replacing traditional blood tests with miraculous machines that could detect all sorts of diseases from just a finger prick’s worth of blood.

After starting the company in 2003 at the age of just 19, Holmes’ ambitious vision attracted hundreds of millions of dollars of investment, from such heavyweights as Rupert Murdoch and former US secretary of state Henry Kissinger.


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By 2014, the company was valued at $9bn, and Holmes had become the youngest self-made female billionaire in the world. But her house of cards soon came crashing down.

Thanks to whistleblowers within the company and the work of investigative journalist John Carreyrou, it was uncovered that Theranos’ marvelous technology did not work as claimed, and that many of the test results being given to patients were inaccurate.

The company officially shut down in September last year, and Holmes now faces criminal charges – which she denies – for fraud and conspiracy.

The rise and fall of Theranos has come back into focus recently with the release last month of the HBO documentary The Inventor: Out for Blood in Silicon Valley. The film examines how Holmes was able to convince so many people – from investors to patients to employees – to back her business, even after she had been presented with evidence that her machine did not work as advertised.

So what marketing techniques did she use and abuse in order to achieve this unwarranted success?

Let’s start with her personal story. Holmes was able to capitalise on a common fear of needles – she often talked about her own phobias, and compared the idea of a needle drawing blood to torture and her personal vision of hell.


“I am absolutely terrified of it,” she said in a 2014 interview. “I’ve always said that if you were to think of torture experiments, it would be a phenomenal one because you sit there and watch as your blood is sucked out of you.”

She further played on people’s emotions and fear of their own mortality by regularly sharing the story of her uncle’s premature death to cancer. This appeal to sentiment meant that Holmes could get people to focus on Theranos’ grand purpose of trying to save lives, rather than the nitty-gritty details about the actual technology.

“When emotion is won with a brand, people tend to apply less judgement and even abandon more rational due diligence or checks and balances around the legitimacy of the offering,” says Ash Bendelow, managing director of creative agency Brave.

“This fuels and ignites the speed at which such an endeavour scales and gains notoriety. Like many marketing techniques, if you win hearts, you don’t always have to win minds.”

As well as using emotion, Holmes tried to build up her own reputation by surrounding herself with established, well-known figures. Their age – Murdoch and Kissinger were in their eighties when they invested in Theranos, whereas Holmes was still a teenager when she founded the company – helped pre-empt and mitigate any criticism of her possible lack of experience. Some even served on the board of Theranos, such as the former US secretary of defence James Mattis and statesman George Shultz.

This network not only opened doors for her, but meant that she could count on their endorsements in the press and borrow their credibility.

“Her personal connections enabled her to build what looked like a thriving, booming business,” says Marc Nohr, chief executive of advertising agency Fold7.

Image was also critical to Holmes. She deliberately modelled herself after her icon Steve Jobs – dressing exclusively in black turtlenecks – in order to encourage comparisons between herself and the founder of Apple. Jobs wasn’t the only industry titan she wanted to be associated with: she named her ambitious blood testing machine Edison, after the great American scientist who invented the light bulb.

These references to well-known figures not only helped to convince investors to get behind the business, but also served to boost her credibility and elevate her own image both as a scientist and as a business leader.

This was important, because Holmes’ personal brand was inseparable from that of Theranos’. This isn’t uncommon among startup entrepreneurs, who have to market themselves as much as their business idea in order to attract investment.

“In fields such as healthcare or technology, people will not understand the science, so they will look for assurances from someone who they think they can trust,” says Jim Prior, global chief executive of brand agency Superunion.

“The more that person’s public persona fits the stereotype of a creative, technologically savvy, entrepreneurial genius, the more easy it is for people to rally behind them. Steve Jobs was that person for Apple. Elizabeth Holmes tried to be that for Theranos.”

In Holmes’ case, her personal brand was further boosted by the fact that she was a female founder in the male-dominated world of Silicon Valley.

She’d also dropped out of Stanford University to start Theranos. America seems to have an unhealthy fascination with college dropouts, because occasionally such people end up as great successes despite their lack of formal training – think Mark Zuckerberg and Bill Gates.

“Holmes succeeded because her personal brand hits every sweet spot: poster girl of the American Dream, millennial ‘purpose’ ambassador, Silicon Valley disruptor,” says Bendelow.

“She’s a triple threat, and such an alluring combination for a range of people. There’s those wanting her to succeed, those blinded by purpose, those wanting to invest in something that they don’t really understand. Each strain of her brand validated and justified the other.”

It would be unfair to vilify all entrepreneurs who use the same tactics as Holmes. Plenty of businesses build their brand around their founder: think of Sir Richard Branson and Virgin, or the ice cream company Ben & Jerry’s, which is literally named after its creators.

And many startups will likely stretch the truth when trying to raise funds and kickstart a project. They are promising that their innovations will work and produce great profits in the future, but cannot guarantee it.

What is different about Holmes is that she carried on well past the point at which her message went from an exaggeration to a fantasy.

“Her story was a work of fiction, rather than a compelling way to tell brand truths,” argues Vicky Bullen, chief executive of Coley Porter Bell.

“Fake it til you make it is a mantra that’s been embodied by many in business, even leaders like Sir Richard Branson. Yet Holmes took it far past that and built a brand on quicksand – which is always doomed to sink.”

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Still, while it sunk eventually, Holmes kept Theranos afloat for 13 years before the truth came out and millions of dollars were wasted. If the company had not been exposed by Carreyrou, who knows how much longer she could have strung everyone along?

What we do know is that with enough charisma and a grand vision, you can sell anything to anyone, at least for a while. Holmes is unlikely to be the last person who will manage to fool the investors of Silicon Valley.

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