LIZE BARCLAY: Elizabeth Holmes’s legacy is a stumbling block for female tech founders

The story of Elizabeth Holmes is a modern fairy-tale, where a young, golden queen and her unicorn (her tech start-up Theranos) mesmerised a kingdom (Silicon Valley) for years until valiant knights (whistle-blowers) drove her out of the kingdom.

Elizabeth Holmes and the fall of Theranos captured the minds of the media, investors, entertainment, the legal system and the patients who were defrauded. Unfortunately, this attention was not a great outcome for women in technology.

In 2003, Holmes was only 19 years old when she dropped out of Stanford to launch a medical diagnostics start-up, where she envisaged technology that would be able to identify various problems and diseases with the prick of a finger and the testing of a drop of blood. She raised more than $700m from private investors and venture capitalists.

At its peak in 2014, Theranos was valued at $9bn. She was the first female billionaire technology founder in Silicon Valley. A glaring omission was the lack of a medical specialist on her board, as well as constructive proof that the products worked.

Tipped off by whistle-blowers, Wall Street Journal investigative journalist John Carrayrou wrote an exposé about the company that started the free-fall of Theranos and ended in Holmes being sentenced on November 18 2022 to jail for 11 years and three months for defrauding investors. There are several other pending legal charges against her by past patients who received misdiagnoses for diseases ranging from cancer to diabetes.

Carrayrou eventually documented the entire case and systematic fraud of Elizabeth Holmes in Bad Blood. Several documentaries and dramatisations of the rise and fall of Holmes and Theranos were made as well.

The Elizabeth Holmes phenomenon was powered by the craving in Silicon Valley, but also the world at large, for a young, female visionary and genius technology start-up founder to join the ranks of college dropouts  dominated by the toxic “tech bro culture”. Also, the “fall forward” and “fake it until you make it” culture, along with a fierce but farcical protection of intellectual property rights, added fuel to the Theranos fire.

Furthermore, there was a tremendous “Fomo” (fear of missing out) among well-known US investors who hoped for the next Uber or Google. The celebrity status of Holmes was further driven by her emulation of Steve Jobs and the “girlboss” trend of that time. Another big driver was the craving for new disruptive technologies and the near-religious fever around the so-called “fourth industrial revolution.

Why are we discussing a failed technology villain on International Women’s Day? Even when Holmes was at her height, gracing the covers of numerous financial magazines, female technology founders struggled to get recognition and funding. The gender gap in terms of venture capital investment is seen as the largest and most tangible since 2012.

In fintech, for example, women-founded start-ups only account for 1% of total fintech investment of the past decade. In 2019 only about 2.8% of all venture capital investment went to women-led companies, which fell to 2.3% in 2020. Moreover, men could start their companies with about twice the amount of capital in comparison to women.

At the intersection of race and ethnicity with gender it becomes even more distressing. The fact that Holmes was a shining beacon before the fall of Theranos was due to her unique position as a woman in the technology world, able to raise that large amount of money. She weaponised her gender to get the recognition and funding she needed during the rise of Theranos, and then again when she was in court to showcase her vulnerability.

The exposure of Holmes as a fraud led to venture capitalists being especially wary of funding. Globally, female founders of medical and diagnostics start-ups especially were unable to get the necessary funding. Still today, women entrepreneurs and start-up founders in this sector have to endure “constant comparison” with Holmes.

Although the Covid-19 pandemic highlighted the need for accurate and rapid medical diagnostic research and technology, as well as decentralised healthcare, there is still a wariness on the side of investors, predominantly informed by Theranos and the lies of Holmes. In some cases, even male-led diagnostics companies found it difficult to get the required funding and had to go into more detail and technical specifications than before.

However, some other investors and founders see the fall of Theranos as beneficial to them, as it provides a “conversation opener” and has highlighted that there are technology start-ups in the medical field and not just digital app-based start-ups. Furthermore, the secrecy of Theranos being called out has led to the awareness of the need to make biodata more accessible.

Holmes’s legacy ended up being a big stumbling block for female technology founders, and it would take a while to build up trust, support and the necessary funding. The sensationalism around her rise and fall also highlighted the extreme lack of diversity and inclusion in the technology industry and start-up space.

Unfortunately, the reluctance to invest in female-led start-ups will only prevent society from benefiting from great inventions and technologies that could be game changers and save lives.

• Barclay is senior lecturer in futures studies & systems thinking at Stellenbosch Business School.