What Red Flags? Elizabeth Holmes Trial Exposes Investors’ Carelessness
The New York Times
Start-up investors have often suspended skepticism while chasing a hot deal. The trial of Ms. Holmes, the founder of Theranos, has put that behavior under the spotlight.
SAN JOSE, Calif. — In 2014, Dan Mosley, a lawyer and power broker among wealthy families, asked the entrepreneur Elizabeth Holmes for audited financial statements of Theranos, her blood testing start-up. Theranos never produced any, but Mr. Mosley invested $6 million in the company anyway — and wrote Ms. Holmes a gushing thank-you email for the opportunity.
Bryan Tolbert, an investor at Hall Group, said his firm invested $5 million in Theranos in 2013, even though it did not have a detailed grasp of the start-up’s technologies or its work with pharmaceutical companies and the military.
And Lisa Peterson, who handles investments for Michigan’s wealthy DeVos family, said she did not visit any of Theranos’s testing centers in Walgreens stores, call any Walgreens executives or hire any outside experts in science, regulations or legal matters to verify the start-up’s claims. In 2014, the DeVos family invested $100 million into the company.
