Theranos: lessons for STEMs in startups

The story of Theranos and its founder Elizabeth Holmes has become famous in the news and has left a mark in the startup world but not for good reasons.

Beyond the trials, lawsuits and prominent figures involved, which you can learn by reading the book “Bad Blood” or watching the TV series “The Dropout”, in this piece, I will focus on what we can learn when working at startups.

If you are looking to join a startup but struggle to find the right one from the outside or are working at a startup but don’t know how to make sense of what’s going on, here are 7 things to pay attention to.

#1 - Huge turnover

This is one of the most important things to look for before joining any startup and it’s surprisingly easy to check on LinkedIn.

As a rule of thumb, if over 30% of the company leaves every year, something is wrong.

At Theranos, none of the original team stayed for more than a few years and most left after the first major misstep. Both scientists and assistants were hired and fired on a whim without ever considering the consequences.

Some people will try to justify huge turnovers by saying that former employees did not fit the culture or were low performers.

Don’t buy it.

When this happens, there are only two possible explanations: either there is an extremely toxic culture (and you don’t want to be there) or they are terrible at hiring without the will to improve (and you don’t want to work with such a team either).

#2 - Don’t rely on investors and board members

From the outside, you might feel reassured when professional investors have put money in the company or well-known people are on the board.

From the inside, you might hope that investors will eventually do something or ask hard questions if the company is not going in the right direction.

The reality is that investors will challenge management only if their interests or reputation are at huge risk. As long as the CEO keeps raising money and there is no scandal around the corner, their main interests are covered and they won’t interfere with the day-to-day operations.

This gets even worse if investors and board members are wealthy people who invest their own money, almost as philanthropists who see startups as a way to have an impact on the world.

#3 - Hiring is a status symbol

Getting people on board from big companies and giving them fancy titles can turn into a show-off just to prove credibility to the outside world.

Even if most of these people don’t have clear responsibilities and do little work, the simple fact of them being there raises the company’s profile.

In the Theranos story, Ana Arriola-Kanada left Apple to join Theranos as Vice President and Chief Design Architect but was not given anything to work. She left after a few months.

The reality is that almost all big-company executives don’t fit an early-stage startup. After spending decades working with large teams, long timelines and reporting structures they usually struggle to get their hands dirty. Hence they usually end up having “honorary roles”, even when the company is not a fraud.

#4 - Losing employees’ trust

Losing investors’s trust is bad but there is always more money out there.

What truly kills any company is when management loses employees’ trust as they are ultimately the only ones who make companies successful.

No matter how much money you have raised as a CEO or the breakthrough promised by CTOs/CSOs, if the people working for you stop trusting your decisions, no grandiose goal will ever be accomplished.

It gets even worse when management starts to shamelessly lie to employees (for example during town halls) about what’s really happening at the company. Celebrating fake achievements to keep up morale only works with newcomers (another consequence of the huge turnover).

What’s a sign that this is happening?

If management is surrounded by “yes-men”, it’s very likely employees have already lost trust and started asking hard questions. In this case, management's reaction is to separate themselves from these people and get a bunch of “minions” to shield them.

Whether you are looking to join a company or already on the inside, pay attention to the people surrounding management. It will tell you a lot.

#5 - Weird roles

This is mostly relevant if you’re already working at a startup and you notice people who are siloed from anyone else and you’re not really sure what they do.

The truth is that they are either working on something secretive (like the Normandy lab in Theranos where they were running inaccurate blood tests) or they tried to speak up but could not get fired so they are given meaningless positions away from everybody (in Theranos this happened to Ian Gibbons, Head of Chemistry who was given a desktop job with no tasks).

#6 - Not knowing what’s going on (or pretending)

This is something anyone can assess when speaking to a founder/CEO and it’s something many Venture Capitalists do too.

Instead of just staying at the high-level picture, ask for details about operations, product pipeline, team structures and so on.

Especially in early-stage startups, there is no good reason for a CEO to be removed from operations and not know what’s going on in their company.

There is a thin line between delegating and deflecting responsibility to deny any involvement if things come out in the future.

#7 - First impressions matter a lot

First impressions are incredibly strong and we always underestimate their power.

Once an image is created in someone’s mind, it takes an unbelievable amount of work to change that as humans love to be consistent with their beliefs.

At Theranos, even after years of doubts and countless proofs, many people kept seeing Elizabeth as the visionary female CEO she used to be. Both Ian Gibbons and George Shultz chose “to believe” despite the evidence because they could not accept the fact that they were wrong all along.

As this works effect both ways, it reminds us to pay more attention to first impressions. Something we STEM professionals are notoriously not great at.

If you enjoyed this issue, share it with someone who loves a great story!

This week's top scientific reads

1. Paternal Gut Microbiota's Influence on Offspring Health (Nature)

2. A New Polymer Plug to Treat Female Pelvic Venous Disease (European Journal of Vascular and Endovascular Surgery)

3. Wearable Patch for Brain Blood Flow Monitoring (Nature)

4. Light-Sensitive Proteins in Neuroscience (Nature Communications)

5. Most Breast Cancer Survivors Can Successfully Conceive (Dana Faber)

Read the highlights of these articles here.

Latest European funding rounds in health & bio

• SixPeaks Bio goes out of stealth mode with a €102M round to develop a pipeline of GLP-1 therapies for healthier weight loss 🇨🇭

• Captain T Cell raised €8.5M to develop T cell therapies against solid tumours 🇩🇪

• Spectrum Life raised €17M for its healthtech platform that enables insurers, employers and educators through co-creation 🇮🇪

• Grey Wolf Therapeutics raised €46.6M to develop immune-oncology drugs for immune dysfunction in oncology and autoimmunity 🇬🇧

• En Carta Diagnostics raised €1.5M to develop point-of-care molecular diagnostic kits 🇫🇷

• Somareality raised €1.5M to develop eye-tracking-based biomarkers that can assess a person’s cognitive state 🇦🇹

• Cutiss closed a €25M Series C to enter Phase III Clinical Trials for their personalized skin tissue therapy 🇨🇭

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