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A Purposeful Life

Elizabeth Anne Holmes knew she wanted to be a successful entrepreneur from a young age.

When she was seven, she set out to design a time machine and filled up a notebook with detailed engineering drawings.

When she was nine or ten, one of her relatives asked her at a family gathering the question every boy and girl is asked sooner or later: “What do you want to do when you grow up?”

Without skipping a beat, Elizabeth replied, “I want to be a billionaire.”

“Wouldn’t you rather be president?” the relative asked.

“No, the president will marry me because I’ll have a billion dollars.”

These weren’t the idle words of a child. Elizabeth uttered them with the utmost seriousness and determination, according to a family member who witnessed the scene.

Elizabeth’s ambition was nurtured by her parents. Christian and Noel Holmes had high expectations for their daughter rooted in a distinguished family history.

On her father’s side, she was descended from Charles Louis Fleischmann, a Hungarian immigrant who founded a thriving business known as the Fleischmann Yeast Company. Its remarkable success turned the Fleischmanns into one of the wealthiest families in America at the turn of the twentieth century.

Bettie Fleischmann, Charles’s daughter, married her father’s Danish physician, Dr. Christian Holmes. He was Elizabeth’s great-great-grandfather. Aided by the political and business connections of his wife’s wealthy family, Dr. Holmes established Cincinnati General Hospital and the University of Cincinnati’s medical school. So the case could be made—and it would in fact be made to the venture capitalists clustered on Sand Hill Road near the Stanford University campus—that Elizabeth didn’t just inherit entrepreneurial genes, but medical ones too.

Elizabeth’s mother, Noel, had her own proud family background. Her father was a West Point graduate who planned and carried out the shift from a draft-based military to an all-volunteer force as a high-ranking Pentagon official in the early 1970s. The Daousts traced their ancestry all the way back to the maréchal Davout, one of Napoleon’s top field generals.

But it was the accomplishments of Elizabeth’s father’s side of the family that burned brightest and captured the imagination. Chris Holmes made sure to school his daughter not just in the outsized success of its older generations but also in the failings of its younger ones. Both his father and grandfather had lived large but flawed lives, cycling through marriages and struggling with alcoholism. Chris blamed them for squandering the family fortune.

“I grew up with those stories about greatness,” Elizabeth would tell The New Yorker in an interview years later, “and about people deciding not to spend their lives on something purposeful, and what happens to them when they make that choice—the impact on character and quality of life.”

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ELIZABETH’S EARLY YEARS were spent in Washington, D.C., where her father held a succession of jobs at government agencies ranging from the State Department to the Agency for International Development. Her mother worked as an aide on Capitol Hill until she interrupted her career to raise Elizabeth and her younger brother, Christian.

During the summers, Noel and the children headed down to Boca Raton, Florida, where Elizabeth’s aunt and uncle, Elizabeth and Ron Dietz, owned a condo with a beautiful view of the Intracoastal Waterway. Their son, David, was three and a half years younger than Elizabeth and a year and a half younger than Christian.

The cousins slept on foam mattresses on the condo’s floor and dashed off to the beach in the mornings for a swim. The afternoons were whiled away playing Monopoly. When Elizabeth was ahead, which was most of the time, she would insist on playing on to the bitter end, piling on the houses and hotels for as long as it took for David and Christian to go broke. When she occasionally lost, she stormed off in a fury and, more than once, ran right through the screen of the condo’s front door. It was an early glimpse of her intense competitive streak.

In high school, Elizabeth wasn’t part of the popular crowd. By then, her father had moved the family to Houston to take a job at the conglomerate Tenneco. The Holmes children attended St. John’s, Houston’s most prestigious private school. A gangly teenage girl with big blue eyes, Elizabeth bleached her hair in an attempt to fit in and struggled with an eating disorder.

During her sophomore year, she threw herself into her schoolwork, often staying up late at night to study, and became a straight-A student. It was the start of a lifelong pattern: work hard and sleep little. As she excelled academically, she also managed to find her footing socially and dated the son of a respected Houston orthopedic surgeon. They traveled to New York together to celebrate the new millennium in Times Square.

As college drew closer, Elizabeth set her sights on Stanford. It was the obvious choice for an accomplished student interested in science and computers who dreamed of becoming an entrepreneur. The little agricultural college founded by railroad tycoon Leland Stanford at the end of the nineteenth century had become inextricably linked with Silicon Valley. The internet boom was in full swing then and some of its biggest stars, like Yahoo, had been founded on the Stanford campus. In Elizabeth’s senior year, two Stanford Ph.D. students were beginning to attract attention with another little startup called Google.

Elizabeth already knew Stanford well. Her family had lived in Woodside, California, a few miles from the Stanford campus, for several years in the late 1980s and early 1990s. While there, she had become friends with a girl who lived next door named Jesse Draper. Jesse’s father was Tim Draper, a third-generation venture capitalist who was on his way to becoming one of the Valley’s most successful startup investors.

Elizabeth had another connection to Stanford: Chinese. Her father had traveled to China a lot for work and decided his children should learn Mandarin, so he and Noel had arranged for a tutor to come to the house in Houston on Saturday mornings. Midway through high school, Elizabeth talked her way into Stanford’s summer Mandarin program. It was only supposed to be open to college students, but she impressed the program’s director enough with her fluency that he made an exception. The first five weeks were taught on the Stanford campus in Palo Alto, followed by four weeks of instruction in Beijing.

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ELIZABETH WAS ACCEPTED to Stanford in the spring of 2002 as a President’s Scholar, a distinction bestowed on top students that came with a three-thousand-dollar grant she could use to pursue any intellectual interest of her choosing.

Her father had drilled into her the notion that she should live a purposeful life. During his career in public service, Chris Holmes had overseen humanitarian efforts like the 1980 Mariel boatlift, in which more than one hundred thousand Cubans and Haitians migrated to the United States. There were pictures around the house of him providing disaster relief in war-torn countries. The message Elizabeth took away from them is that if she wanted to truly leave her mark on the world, she would need to accomplish something that furthered the greater good, not just become rich. Biotechnology offered the prospect of achieving both. She chose to study chemical engineering, a field that provided a natural gateway to the industry.

The face of Stanford’s chemical engineering department was Channing Robertson. Charismatic, handsome, and funny, Robertson had been teaching at the university since 1970 and had a rare ability to connect with his students. He was also by far the hippest member of the engineering faculty, sporting a graying blond mane and showing up to class in leather jackets that made him seem a decade younger than his fifty-nine years.

Elizabeth took Robertson’s Introduction to Chemical Engineering class and a seminar he taught on controlled drug-delivery devices. She also lobbied him to let her help out in his research lab. Robertson agreed and farmed her out to a Ph.D. student who was working on a project to find the best enzymes to put in laundry detergent.

Outside of the long hours she put in at the lab, Elizabeth led an active social life. She attended campus parties and dated a sophomore named JT Batson. Batson was from a small town in Georgia and was struck by how polished and worldly Elizabeth was, though he also found her guarded. “She wasn’t the biggest sharer in the world,” he recalls. “She played things close to the vest.”

Over winter break of her freshman year, Elizabeth returned to Houston to celebrate the holidays with her parents and the Dietzes, who flew down from Indianapolis. She’d only been in college for a few months, but she was already entertaining thoughts of dropping out. During Christmas dinner, her father floated a paper airplane toward her end of the table with the letters “P.H.D.” written on its wings.

Elizabeth’s response was blunt, according to a family member in attendance: “No, Dad, I’m not interested in getting a Ph.D., I want to make money.”

That spring, she showed up one day at the door of Batson’s dorm room and told him she couldn’t see him anymore because she was starting a company and would have to devote all her time to it. Batson, who had never been dumped before, was stunned but remembers that the unusual reason she gave took some of the sting out of the rejection.

Elizabeth didn’t actually drop out of Stanford until the following fall after returning from a summer internship at the Genome Institute of Singapore. Asia had been ravaged earlier in 2003 by the spread of a previously unknown illness called severe acute respiratory syndrome, or SARS, and Elizabeth had spent the summer testing patient specimens obtained with old low-tech methods like syringes and nasal swabs. The experience left her convinced there must be a better way.

When she got back home to Houston, she sat down at her computer for five straight days, sleeping one or two hours a night and eating from trays of food her mother brought her. Drawing from new technologies she had learned about during her internship and in Robertson’s classes, she wrote a patent application for an arm patch that would simultaneously diagnose medical conditions and treat them.

Elizabeth caught up on sleep in the family car while her mother drove her from Texas to California to start her sophomore year. As soon as she was back on campus, she showed Robertson and Shaunak Roy, the Ph.D. student she was assisting in his lab, her proposed patent.

In court testimony years later, Robertson recalled being impressed by her inventiveness: “She had somehow been able to take and synthesize these pieces of science and engineering and technology in ways that I had never thought of.” He was also struck by how motivated and determined she was to see her idea through. “I never encountered a student like this before of the then thousands of students that I had talked” to, he said. “I encouraged her to go out and pursue her dream.”

Shaunak was more skeptical. Raised by Indian immigrant parents in Chicago, far from the razzle-dazzle of Silicon Valley, he considered himself very pragmatic and grounded. Elizabeth’s concept seemed to him a bit far-fetched. But he got swept up in Robertson’s enthusiasm and in the notion of launching a startup.

While Elizabeth filed the paperwork to start a company, Shaunak completed the last semester of work he needed to get his degree. In May 2004, he joined the startup as its first employee and was granted a minority stake in the business. Robertson, for his part, joined the company’s board as an adviser.

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AT FIRST, Elizabeth and Shaunak holed up in a tiny office in Burlingame for a few months until they found a bigger space. The new location was far from glamorous. While its address was technically in Menlo Park, it was in a gritty industrial zone on the edge of East Palo Alto, where shootings remained frequent. One morning, Elizabeth showed up at work with shards of glass in her hair. Someone had shot at her car and shattered the driver’s-side window, missing her head by inches.

Elizabeth incorporated the company as Real-Time Cures, which an unfortunate typo turned into “Real-Time Curses” on early employees’ paychecks. She later changed the name to Theranos, a combination of the words “therapy” and “diagnosis.”

To raise the money she needed, she leveraged her family connections. She convinced Tim Draper, the father of her childhood friend and former neighbor Jesse Draper, to invest $1 million. The Draper name carried a lot of weight and helped give Elizabeth some credibility: Tim’s grandfather had founded Silicon Valley’s first venture capital firm in the late 1950s, and Tim’s own firm, DFJ, was known for lucrative early investments in companies like the web-based email service Hotmail.

Another family connection she tapped for a large investment, the retired corporate turnaround specialist Victor Palmieri, was a longtime friend of her father’s. The two had met in the late 1970s during the Carter administration when Chris Holmes worked at the State Department and Palmieri served as its ambassador at large for refugee affairs.

Elizabeth impressed Draper and Palmieri with her bubbly energy and her vision of applying principles of nano- and microtechnology to the field of diagnostics. In a twenty-six-page document she used to recruit investors, she described an adhesive patch that would draw blood painlessly through the skin using microneedles. The TheraPatch, as the document called it, would contain a microchip sensing system that would analyze the blood and make “a process control decision” about how much of a drug to deliver. It would also communicate its readings wirelessly to a patient’s doctor. The document included a colored diagram of the patch and its various components.

Not everyone bought the pitch. One morning in July 2004, Elizabeth met with MedVenture Associates, a venture capital firm that specialized in medical technology investments. Sitting across a conference room table from the firm’s five partners, she spoke quickly and in grand terms about the potential her technology had to change mankind. But when the MedVenture partners asked for more specifics about her microchip system and how it would differ from one that had already been developed and commercialized by a company called Abaxis, she got visibly flustered and the meeting grew tense. Unable to answer the partners’ probing technical questions, she got up after about an hour and left in a huff.

MedVenture Associates wasn’t the only venture capital firm to turn down the nineteen-year-old college dropout. But that didn’t stop Elizabeth from raising a total of nearly $6 million by the end of 2004 from a grab bag of investors. In addition to Draper and Palmieri, she secured investments from an aging venture capitalist named John Bryan and from Stephen L. Feinberg, a real estate and private equity investor who was on the board of Houston’s MD Anderson Cancer Center. She also persuaded a fellow Stanford student named Michael Chang, whose family controlled a multibillion-dollar distributor of high-tech devices in Taiwan, to invest. Several members of the extended Holmes family, including Noel Holmes’s sister, Elizabeth Dietz, chipped in too.

As the money flowed in, it became apparent to Shaunak that a little patch that could do all the things Elizabeth wanted it to do bordered on science fiction. It might be theoretically possible, just like manned flights to Mars were theoretically possible. But the devil was in the details. In an attempt to make the patch concept more feasible, they pared it down to just the diagnostic part, but even that was incredibly challenging.

Eventually they jettisoned the patch altogether in favor of something akin to the handheld devices used to monitor blood-glucose levels in diabetes patients. Elizabeth wanted the Theranos device to be portable like those glucose monitors, but she wanted it to measure many more substances in the blood than just sugar, which would make it a lot more complex and therefore bulkier.

The compromise was a cartridge-and-reader system that blended the fields of microfluidics and biochemistry. The patient would prick her finger to draw a small sample of blood and place it in a cartridge that looked like a thick credit card. The cartridge would slot into a bigger machine called a reader. Pumps inside the reader would push the blood through tiny channels in the cartridge and into little wells coated with proteins known as antibodies. On its way to the wells, a filter would separate the blood’s solid elements, its red and white blood cells, from the plasma and let only the plasma through. When the plasma came into contact with the antibodies, a chemical reaction would produce a signal that would be “read” by the reader and translated into a result.

Elizabeth envisioned placing the cartridges and readers in patients’ homes so that they could test their blood regularly. A cellular antenna on the reader would send the test results to the computer of a patient’s doctor by way of a central server. This would allow the doctor to make adjustments to the patient’s medication quickly, rather than waiting for the patient to go get his blood tested at a blood-draw center or during his next office visit.

By late 2005, eighteen months after he’d come on board, Shaunak was beginning to feel like they were making progress. The company had a prototype, dubbed the Theranos 1.0, and had grown to two dozen employees. It also had a business model it hoped would quickly generate revenues: it planned to license its blood-testing technology to pharmaceutical companies to help them catch adverse drug reactions during clinical trials.

Their little enterprise was even beginning to attract some buzz. On Christmas Day, Elizabeth sent employees an email with the subject line “Happy Happy Holidays.” It wished them well and referred them to an interview she had given to the technology magazine Red Herring. The email ended with, “And Heres to ‘the hottest start-up in the valley’!!!”