Poor Elizabeth Holmes. Twelve months ago, the founder of the blood-testing startup Theranos led Forbes' list of America's Richest Self Made Women, ahead of even Oprah. Her 2015 net worth was estimated at a whopping $4.5 billion, based on her share of Theranos's alleged $9 billion valuation. But when Forbes unveiled its 2016 list this week, Holmes' name was missing. Why? New but still fanciful valuations had dropped Theranos's value to $800 million and her net worth effectively to zero. Talk about a "down round."
For those who haven't consumed every Schadenfreude-inducing detail of the Theranos story, the Oz-like company's reputation has plummeted like a tailless kite since the Wall Street Journal pulled the curtains back on the Silicon Valley darling last fall. Theranos's claims about its "disruptive" blood-testing technology using finger pricks, miniscule blood samples and "Edison machines" are now being investigated by multiple government agencies. Holmes had been anointed the next Steve Jobs by those who found it necessary to think in those terms (or who possibly were merely referencing her ubiquitous Jobsian attire). Now, however, she appears to more closely resemble--at least in my humble opinion -- the Valley version of Billy Sol Estes, a Texan who 60 years ago made a fortune selling mortgages on imaginary fertilizer tanks, or, as one reporter called it, "phantom cow manure."
Holmes, however, was only 19 in 2003 when she started Theranos; to some extent, she was a victim of the Venture Capitalists Gone Wild culture. Surrounded by all those flipped-out VCs, it would be hard not to succumb to power of magical thinking West Coast style, especially at that age. It's the other characters in the fractured fairy tale, such as large grocery and drugstore chains, that really should have known better and are now paying the price.
Wall Street Journal reporter John Carreyou, who broke the Theranos story in October, and fellow WSJ writer Christopher Weaver recently described how a large drug store chain apparently failed to exercise sufficient due diligence before striking a deal with Theranos to put blood-testing centers in its drugstores nationwide. Anxious for the deal to happen quickly, the chain allegedly accepted Theranos's claims at face value, despite being unable to gain access to their labs, clinical data, or financial records, and despite the fact that the limited access reportedly was due to Theranos's deliberate stonewalling. Now the chain is trying mightily to undo the deal that just had to get done.
The lesson here can most aptly be summed up in one of my grandmother's favorite sayings, "Marry in haste. Repent at leisure." Rushing to ink an agreement because there's a threat a competitor might jump ahead of you, or because you are dazzled by the potential of the technology offered is, in my experience, almost always a bad thing (another of Grandma's truisms is, "If something looks too good to be true, it probably is."). It's incumbent upon you to take whatever amount of time is necessary to complete the due diligence required to prevent unpleasant future surprises. If you succumb to the heat of the moment, you'll miss asking the critical questions, forgo making the necessary site visits, and accept at face value data that otherwise would demand verification. The excitement and anticipation of the deal's potential will take control of even the most rational mind. But take it from me, even if it seems like a deal too good to pass up, and even if you are afraid of losing out to your competition, an agreement entered into too swiftly is likely to be doomed.