What lessons does Elizabeth Holmes' fall have for startup investors?

 Billionaire Elizabeth Holmes, the founder of Theranos, has been found guilty of defrauding investors. What lessons does the Homes-saga hold for startup investors back home, this report finds out

This week, Theranos founder Elizabeth Holmes was charged with defrauding investors. Holmes now faces at least 20 years in prison.

The way she established and sold her startup story offers valuable lessons to investors across the globe now. Even to Rupert Murdoch, one of the investors who believed in her idea.

Startups can command hefty valuations, very quickly. As venture capital and private equity firms in the US Silicon Valley place a premium on ideas that promise disruptive innovation, new-age tech companies can raise millions of dollars in funds, even before coming up with a product-market fit, or in some cases, even a workable prototype.

However, in this glitzy world of innovations and disruptions that are waiting to happen, some founders, like Holmes, are spinning a web of lies and charting their path to success by leveraging the greed of investors. They exemplify the “fake it till you make it” philosophy.

Theranos was founded by Holmes, a Stanford chemical engineering drop out when she was 19 years old. It was once valued at over $9 bn.

And how did she pull it off?

Holmes claimed to have developed tests that could help in the early detection of ailments ranging from high cholesterol and high blood sugar to liver dysfunction and cancer from just a couple of drops of blood drawn from a finger prick at any pharmacy.

The small amount of blood was collected in a container tube and analyzed in a Theranos lab on a proprietary analysis machine called “Edison”.

The “invention” was believed to have the potential to revolutionize healthcare and slash diagnostic costs. That was until it came to light that Theranos’ Edison machines weren’t providing accurate results.

The company knew this. So it was diluting blood samples and subjecting them to “traditional tests”, instead of using its famed Edison machines.