Theranos’s lesson for investors: speak to lab workers

The fraud conviction of Elizabeth Holmes, the chief executive of the now-defunct US biotechnology company Theranos in Palo Alto, California, highlights the need for early peer review of scientific data from start-up companies (Nature 601, 173–174; 2022). But that is unlikely to happen in the highly secretive start-up world, in which investment is based on the only real asset of value — intellectual property and know-how. So how can investors perform suitable due diligence? In our view, they must speak directly to the engineers and scientists expected to deliver on breakthrough technologies.

Investor engagement solely with chief executives on technical matters is not enough. Holmes was not qualified as an engineer or a scientist, and so would seem to have little substance in her own right to support her ‘scientific vision’.

The Theranos story reinforces the need for honest engagement at all levels in new start-ups. The scientists expected to deliver the impossible are the people who should be consulted on the risks involved, not those whose job it is to sell a ‘vision’.