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Blood and guts

17 July 2014 By Richard Beales

Lab tests epitomize U.S. healthcare: they’re time-consuming, unpleasant and opaquely expensive. Theranos, a private firm started in 2003 and now worth $9 billion according to Fortune magazine, is trying to upend the ubiquitous and profitable phlebotomy industry. It may also help investors smell blood.

Founded by Stanford University dropout Elizabeth Holmes, an admirer of Apple founder Steve Jobs right down to her mostly black professional uniform, Theranos claims to need only a drop of blood taken by finger pinprick, produce results faster, and charge lower fees – which are listed clearly on its website – to do the same job now performed bureaucratically by older rivals.

As with so many Silicon Valley startups, the ambition goes much further. Theranos is already talking about early detection of diseases and how easy access to regular testing could give people much better understanding and control of their health.

Holmes goes about her business with a focus, and secrecy, evocative of Jobs. For example, the identities of some of her backers remain closely guarded. Theranos also doesn’t give away much about how it has radically minimized the size of both the samples it needs and the machines it uses for analysis.

That has invited questions from skeptics. And unlike a fledgling software company, Theranos needs equipment, physical locations where it can draw blood and people to do the drawing – even if it’s a quicker and simpler process than the time-honored one. That means the firm has some bigger challenges like those facing electric car maker Tesla Motors, butting heads in a regulated industry with established and entrenched companies.

Theranos has enlisted a roster of experienced figures to help with the cause. Former Secretary of State Henry Kissinger, ex-Defense Secretary William Perry and onetime Wells Fargo boss Dick Kovacevich, among others, are on the company’s board.

Ordinary investors can’t easily buy into Theranos, at least not yet. Incumbents Quest Diagnostics and Laboratory Corp are, however, directly in danger if Holmes succeeds. As it happens, each also has a market value of about $9 billion. Selling their shares short could be an unusually direct way to bet on the disruptive potential of Theranos.


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