As former Theranos CEO and founder Elizabeth Holmes was found guilty of fraud, the implications for the medical technology industry are coming into focus.
Ms. Holmes founded the failed blood testing startup Theranos and was found guilty of four of 11 fraud charges Jan. 3. The company saw a dramatic rise and fall, as Ms. Holmes convinced investors Theranos was revolutionizing healthcare by its ability to perform multiple blood tests from a single drop of blood. Before the holes in the technology were exposed, the company's valuation was $9 billion.
The outcome of the trial suggested the unofficial Silicon Valley motto "fake it till you make it" can be detrimental. Tech venture capitalist Roger McNamee told the BBC, "Theranos was an early warning of a cultural shift in Silicon Valley that has allowed promoters and scoundrels to prosper."
During the trial, former Theranos employees testified that they didn't believe the blood tests to be accurate, adding the company was potentially giving false medical information to patients. "[Patients] think they’re getting correct results," Erika Cheung, former Theranos employee, said on the stand, according to The Guardian.
The Theranos verdict suggests Ms. Holmes was aware of her fraudulent claims on the technology's capabilities, creating the potential to endanger patients. One patient testified they received a false-positive HIV result, for example. However, the jury failed to reach a verdict on all charges related to patients.
The close guarding of intellectual property by tech companies also played a role in allowing Theranos to avoid scrutiny regarding its lack of technological substance. Its secrecy around the specifics of its science kept Theranos investors in the dark, with the BBC citing Walgreens' frustration with the opaque business practices as an example of problems that can arise.
This high-profile trial has sounded alarms for many health tech investors and raised doubts about the culture of the sector. As for how to address it, Ruby Gadelrab, founder and CEO of MDisrupt, a medical due diligence company for the health tech industry told CNBC that going forward investors should do their due diligence and make sure health experts have a voice in the process.