March 28, 2022

Disrupting Blood Testing Tech Post-Theranos

Which startups are succeeding where Theranos failed?

Nora and Scott take a look at  innovation and breakthroughs in the blood testing industry in the wake of the Theranos scandal with Washington Post reporter Rachel Lerman. Her recent article is titled: "Theranos failed, but other blood-tech companies are still trying to make testing faster and easier."

Hosts: Nora Ali & Scott Rogowsky
Producer: Bella Hutchins
Production, Mixing & Sound Design: Daniel Markus
Music: Daniel Markus & Breakmaster Cylinder
Senior Producer: Katherine Milsop
Director of Audio: Alan Haburchak
VP, Head of Multimedia: Sarah Singer

Full transcript for this episode below. 


Scott Rogowsky: Bloody hell.

Nora Ali: Is that how we're starting?

Scott Rogowsky: That's how we're starting this episode about blood.

Nora Ali: Oh my gosh. All about blood, blood tech, health tech. How fascinated are you by Theranos, and it's downfall? Or is it just me?

Scott Rogowsky: No, I think it's not just you. I think millions of people, because there's what? The book, then the podcast, then the documentary, now-

Nora Ali: Then the other podcast.

Scott Rogowsky: ... Other podcast.

Nora Ali: The drama on Hulu.

Scott Rogowsky: The drama.

Nora Ali: Yeah.

Scott Rogowsky: Soon, the Broadway musical.

Nora Ali: I wouldn't be surprised.

Scott Rogowsky: No. It's definitely coming. It's just a classic story of American greed, and overambition, and fake it until you make it. And, unfortunately it was tied into health products, right?

Nora Ali: Mm-hmm (affirmative).

Scott Rogowsky: Which is a little more dangerous than just your run-of-the-mill, like junk bond scheme. I don't know, did anyone really get hurt from this or is that overblown?

Nora Ali: Yes. Some patients had gotten incorrect results and it definitely impacted real people, which is pretty unfortunate. And that's why they're at trial.

Scott Rogowsky: Yeah.

Nora Ali: For various reasons, for actually harming people and defrauding investors. But, there's newer blood tech, health tech companies out that are doing it the right way, which is the good news.

Scott Rogowsky: That's the shame, right? Because this really cast a pall on the whole industry. And, thankfully as we're learning, there are plenty of other companies who are crawling out from the shadow and establishing themselves.

Nora Ali: That is right. Theranos may have failed, but that does not mean there isn't innovation happening in blood testing. In fact, just this month, the Financial Times reported that a startup called Osler raised a $100 million in the five years since its launch, as the company prepares to launch its first portable blood testing device. So, today we are talking about the latest innovations and challenges in the blood testing and diagnostic industry, following the collapse of that fraudulent blood testing company Theranos. Washington Post reporter Rachel Lerman discusses her reporting on the industry in her recent article, "Theranos failed, but other blood tech companies are still trying to make testing faster and easier." For Morning Brew, this is Business Casual, the podcast reveals the unexpected business story behind everything. I'm Nora Ali.

Scott Rogowsky: And I'm Scott Rogowsky. Nora and I are here for your ears, bringing you conversations with creators, thinkers, and innovators who can tell us what it all means and why we should care. Now, let's get down to blood business. We all know about Theranos, right? There's been so much written about it. Now, the dramatic series about it, you watching The Dropout?

Rachel Lerman: I'm watching The Dropout. I'm only on episode three. So far, my favorite part is the soundtrack, which is very on point for a 2000s college girl.

Nora Ali: Yes. There's a lot of Katy Perry in there.

Scott Rogowsky: We don't need to go so deep into the background of Theranos, but it's a good starting point to discuss what's happening currently in the blood diagnostic world. So can you give us an overview on what Elizabeth Holmes claimed Theranos could do was so monumental for the diagnostics industry?

Rachel Lerman: Yes. So, Theranos was a startup that started in 2003 in Silicon Valley and it claimed that it could take just one or two drops of your blood using a tiny little pin prick, so not one of the long needles that goes into your arm. And then, it could use that tiny little drop that it got from you and run hundreds of blood tests really quickly from kind of a tabletop device that sat on a table. So, it raised hundreds of millions of dollars to be able to do this, had support from very prominent names, mostly outside of Silicon Valley, Henry Kissinger, and Rupert Murdoch, as well as some within Silicon Valley, Larry Ellison was one, etcetera, etcetera. It grew to hundreds of employees and then it imploded. There were some media investigations into it, notably by the Wall Street Journal, which basically found that the technology was not working the way that the company said it did. And so, it could only run, at best, maybe a dozen blood tests from those little drops of blood, the results were erratic, it wasn't always using that tiny little prick, it was sometimes just drawing people's blood with the needles. And, eventually the founder and CEO Elizabeth Holmes went on trial for this, for wire fraud late last year. We got the verdict in January and she was found guilty on a few of those counts. So she's awaiting sentencing.

Nora Ali: So, it's Silicon Valley, it was early 2000s when it was founded, a very interesting time for startups overall. And this was also a time when Mark Zuckerberg was becoming popular because of Facebook. So, for investors, it felt like there was maybe a sense of FOMO, got to get in on these high-flying early stage startups. So, what was it about the atmosphere and the landscape at the time that got investors so eager to be a part of Theranos?

Rachel Lerman: I think that part of it was a cascading effect. So, once a few of these big names got excited and got into it, other people saw that as a sign of credibility. "Oh, well, if he is investing in it, then I'm going to invest in it too." Like you said, nobody wants to miss out on the next best thing. There's also something very charming and relatable about Elizabeth Holmes, who at the time had dropped out of Stanford to start this company. So she was really young, 19, 20, 21 in the early days of this startup. And, she was this young, smart, very passionate entrepreneur and CEO who had this vision to revolutionize the blood testing business. So, she started getting all of these very prominent people on board, especially people who had been connected to the defense industry within the US. And then, as other investors saw those getting on board, they also jumped in. But, I mean, what we heard during the trial was that, some of the investors and the company were resistant to getting third-party checks of this technology, to getting peer-reviewed studies of this technology, to getting critical outside scientific evidence, which is usually quite common in health tech.

Scott Rogowsky: I was just thinking about the defense element of this, the fact that they had these former secretaries of state were on the board and investing and Mattis. Has enough been talked about that? What were they looking to do with Theranos? Maybe some military applications, were they looking to create some biological weapons with some of this data? I mean, what was going on with that?

Rachel Lerman: I think more saw it as a possibility that maybe this could be something useful in the field, for soldiers in the field who get injured. If you were able to quickly take blood, and then analyze it on the spot and see what was wrong with somebody, that could be quite helpful. And, I mean, that's one of the things that Elizabeth Holmes and Theranos pursued over the years, was trying to get these military partnerships. And although they did a few limited research studies with various arms of the Department of the Defense, there was never a big test of this on the battlefield.

Nora Ali: It was definitely a selling point that Elizabeth Holmes used though for investors. But, to your point about Theranos perhaps avoiding audits by outside scientists, which is common within health tech to have those checks. They also tried to expedite FDA approval by forging relationships with pharmacies like Walgreens. They even put a Pfizer logo on documentation without Pfizer's approval. How was Theranos able to circumvent the usual steps? And what does that mean as far as scrutiny now, where people know what they should be looking for, for these current biotech and blood tech companies?

Rachel Lerman: I think a big part of it for Theranos was momentum. They were getting these big names involved as investors, but also as you point out, as partners, right? They forged a partnership with Walgreens, with Safeway. They did a limited study with Pfizer and then later used that study to send to prospective investors with the Pfizer logo on the top, which Pfizer says, "Oh, we never approved the final version of this with our logo at the top." But, once they had all of these companies and people on-board, that brought others in and made others think that what was going on was real, and they were doing these demos, and there's some discussion in past media reporting that some of these demos were faked or managed from the other side, not really happening in real-time. That was a disputed point during the trial. But I mean, when I talked to other blood tech startups who have either grown up in the years after Theranos, or some of them started around the same time that have since continued, they said, this has been a key focus of what investors are looking for when they're trying to get investment from them. They want to know, they want to peer inside the technology. They want to have other scientists who've vetted this. They want to know how well does this work? They want peer-reviewed studies. They want data and explanation, and that's not unusual in the scientific or health tech community. It's just that it's been such a key focus after the disintegration of Theranos.

Scott Rogowsky: Mm-hmm (affirmative). Mm-hmm (affirmative). It often takes a bad apple to improve the quality of the orchard going forward, right? I mean, now there's going to be so much more scrutiny on these companies. But, what's your take, in general, on this whole Theranos saga? Is it just a big scam? Is it just a fake it until you make it, and this was never going to work. Or, were they earnestly trying to solve a problem? And there are other companies, obviously, in this space that we're going to talk about soon. Did they just completely lose sight of the actual end goal here, which is to come up with a very accurate and important new diagnostic tool?

Rachel Lerman: I mean, I think it's tough to know. It's tough to peer into somebody's motivations, especially since there's been so much drama that's happened since. Now, they're saying what they think sounds the best probably. But, I mean, I think there's a lot of evidence to show that Elizabeth Holmes and the early team of Theranos really did want to do this, were really passionate about this, were really interested in remaking the blood-testing technology. And, as we know from many medical devices and scientific breakthroughs, these things can take decades. They can take years, and years, and years. What Theranos seemed to do was get ahead of itself. It was promising investors and partners things that weren't really working. Things that maybe could have been possible in the future, but weren't really possible right now. So, I don't know. I talked to various experts for this story and I asked them, "Is this even possible? This idea that you can take two drops of blood from someone and run hundreds of tests on it?" And the answer seems to be, "While it's incredibly difficult, it might be theoretically possible. But it's not really possible with the technology that we have now. So we would need more breakthroughs in order to get to that point."

Nora Ali: And there are plenty of companies working on health tech, blood tech now. So let's take a quick break and more on that with Rachel when we return. Rachel, as you pointed out in your article, there's a new generation of founders who are trying to make breakthroughs in blood testing and in diagnostics. Despite the outcome of Theranos overall, what is the current state for venture fundraising, for interest overall in the blood tech and health tech industry?

Rachel Lerman: It's actually been huge. I mean, we're seeing a huge interest in the blood tech and diagnostic, in general, industry. In 2020 alone, there was data from PitchBook data that showed the diagnostic startups raised $5.4 billion, which was a 69% increase from the year before. So there's definitely a lot of money flowing into this. Now, diagnostic startups run the gamut. And, no one is doing exactly what Theranos tried to do, but there are some companies that are working in a similar space, where they're taking smaller blood samples, trying to analyze them faster and cheaper, and on-site so that patients and doctors don't have to wait days for it to be sent to a lab and sent back. And so that you can theoretically take less blood from someone and get answers faster.

Scott Rogowsky: Investor Ron Paulis, who's a physician and executive-in-residence at the firm General Catalyst told you that blood diagnostic technology field has been exploding lately, especially around molecular testing and increasing access to testing at home. So, there's been a bounce back from the downfall of Theranos and the wreckage, right? But it's difficult for these companies to emerge from that shadow. What was the turning point that got investors excited again about blood tech?

Rachel Lerman: One of the founders from a company called Sight Diagnostics told me that he went through different phases with the Theranos comparison. At first, when the company was starting out, investors were like, "Well, Theranos is already doing this and they're bigger than you. Why would we invest in you?" And then after Theranos went downhill, they were like, "Oh, I don't know. Does this work? Is this really something we should be involved in?" And now he says, they've come back around. And they're like, "Oh, this is actually really useful, and interesting, and potentially life-changing technology. And if there's a way to do it responsibly, that might be something that we're interested in." So, it's time. I think there's been enough time. I think there's also been a distancing of Silicon Valley from Theranos. You talk to people in Silicon Valley and they really want you to know that Theranos was an outlier, it was an extreme example. There's certainly a step back attitude about that. But I think, over the years, we've gotten to the point now where investors really are interested in this technology as they were before too. And so, it's giving companies this space where they can, again, raise money and innovate. And, not that they ever really stopped, but people I talked to said that there was certainly a period of hesitation and that some companies probably really did lose out on funding because of that.

Nora Ali: And it's such an important technology and category to innovate. And obviously, for health reasons. But, you pointed out that some of these newer companies maybe are a little bit more specific and aren't making these sweeping claims that Theranos did. It's not about hundreds of tests with the single drop of blood. Maybe they focus in on one test to start. So you mentioned Sight Diagnostics. What exactly is their approach to diagnostic testing?

Rachel Lerman: So, what they do is they're just focusing on one test, which is complete blood count, which shows how many white and red blood cells you can get from a sample. And that's used in a variety of different diagnostics. It's a very common test. My understanding is that, it's not necessarily that, that one test would diagnose you with something, but it can be combined with other tests and things like that to get information. And what Sight is doing is it's using... And it has regulatory clearance to do this in certain cases, and it's using AI to be able to see the blood cells within a sample, and then really quickly say, "Here's what's going on." So that doctors don't have to wait, so they can get results right away, so that they can see a visual of what is happening in the patient's blood without the traditional method, which means usually sending it out to an outside lab, waiting for it to be tested, waiting for it to come back. It's using AI to be able to analyze that quickly.

Scott Rogowsky: Let's take another quick break, but we'll come back with more, with Rachel Lerman. Rachel, another company you highlighted, Karius, developed a different technology that uses a blood draw, instead of invasive biopsies that are currently necessary for certain diagnoses. Can you explain in layman's terms, how Karius's technology works?

Rachel Lerman: So what they're trying to do is they're trying to see pathogens in a blood sample to be able to possibly detect disease. This is often done by a biopsy. What Karius is doing is it's instead taking an actual blood sample, a blood draw, and then it detects the DNA that the pathogens have left behind in the bloodstream. And then, that can give doctors an idea if somebody might be suffering from an infection. If there's a ton of DNA from pathogens within there, maybe they're suffering from an infection. So the idea is that, again, it would be faster, less invasive to be able to take a blood draw and test that for pathogen traces rather than doing an actual biopsy, which requires some minor or major surgery.

Nora Ali: You're able to speak so eloquently about these sophisticated technologies because you cover the space. But, I imagine there's investors out there who want to get in on this and don't understand the ins and outs necessarily of the sophistication of biotech and health tech. After the whole Theranos situation, just bringing this full circle again, are we seeing more expertise from investors who are looking into these spaces, versus those old white guys, which is literally the name of an episode of The Dropout drama, these old white guys who just wanted to get in because they didn't want to miss out?

Rachel Lerman: Yeah. I mean, many of the investors I talk to, even the ones that work in the health tech space and so therefore, know more about this, a lot of them are not doctors or experts themselves. So what they do is they bring in experts. They bring in people who are scientists, who are doctors, who have worked in this space to vet the technology. And that's one thing that Theranos had been criticized for, was that it didn't allow a lot of access to outsiders, saying that it was proprietary technology and things like that. And now, investors are saying no, we need to be able to, for lack of a better term, look under the hood, right? We need to be able to see what's going on here. 

Scott Rogowsky: It's also probably fair to say Theranos wasn't attracting the smartest money.

Rachel Lerman: There were definitely firms that have expertise in this, that specialize in this, that look at this. And I will say, in regards to Theranos, one of Silicon Valley's most common defenses about Theranos is, "Theranos didn't actually raise a ton of money from Silicon Valley." Which is true. I mean, they had some money from investors in Silicon Valley, but much of the money came from outside of there. And like you said, from old white men, many of them are smart in their own fields, but not necessarily experts in this one. So yes, there are VC firms, there are investors that focus specifically on this and are definitely further into that expertise.

Nora Ali: What are the biggest learnings, Rachel, from the Theranos situation, the bounce back, or maybe the return of blood tech and health tech companies? Learnings for startup founders from that situation and how to approach investors now to make sure you are showcasing your big vision, you're trying to transform industries, but you are still trying to root it in reality and not fall into the trap of Theranos?

Rachel Lerman: I definitely asked people about this and they said, "Be open about things. Tell your investors how things are actually working. Let them look under the hood. Do not ignore regulators, work with regulators to get that clearance. Do not ignore the FDA. Work to get peer-reviewed articles. Do everything you can to present evidence that smart people have looked at your technology and say that it works."

Scott Rogowsky: Okay. Well, let's get into our final segment Rachel. It's time for Quizness Casual, the Business Casual quiz. We learned a lot of about the blood testing industry. And now we're going to test you on what you know about it. I mean, obviously, you know a lot, so this should come easy to you. But, maybe these go a little deep here. We'll see how deep we get in the blood testing world. And, Nora will be there to offer some guidance, some moral support.

Nora Ali: Teammates.

Scott Rogowsky: Teammates. You guys are teammates here, okay? Here we go. Qumero Numero Uno: Elizabeth Holmes' brother and his college frat brothers who worked at Theranos, famously dubbed the Thera-bros, graduated from which university: Princeton, Duke, Yale, or Harvard?

Nora Ali: I think I know this. Rachel, do you know?

Rachel Lerman: No, I don't know. I feel like I should know this.

Nora Ali: I'm fairly certain that the Thera-bros went to Duke. So, do you trust me? Shall we lock it in Rachel?

Rachel Lerman: Well, I think so. I think Duke sounds great.

Nora Ali: Sounds right. Right? Okay. All right. Scott, we're choosing Duke.

Scott Rogowsky: The Thera-bros members of the Delta Tau Delta fraternity went not to Harvard, but the Harvard of the South, Duke. That's right. You got it. Nice job there. Nora coming up big with Rachel. Here's Q2: What is the most common blood test performed? The complete blood count test, the metabolic panel, the STI test, or a thyroid panel?

Nora Ali: Did you write about this in your article? Yeah, I feel like you wrote about it. Complete blood count.

Rachel Lerman: Yeah. Hopefully the article's right.

Nora Ali: She was so fancy. She called it the CBC. So, she knows her stuff, Scott.

Scott Rogowsky: She's on abbreviation status, abbreviation basis here. Yeah. It is the CBC. The complete blood count. And one of these companies is focused purely on this, was that Sight?

Rachel Lerman: Yep. That's right. Sight Diagnosis is focused on this. They're focusing on that one test.

Scott Rogowsky: Right? Which checks for levels of 10 different components of every major cell in your body. So it's a pretty good solid standard test there. Okay, two for two. You guys are scoring A plus. But what do you know about A, B blood types? Let's see... Q3: What blood type do mosquitoes prefer? AB positive, B negative, A positive, or O negative? Of these four, which do mosquitoes prefer to suck on?

Nora Ali: Well, my background on this is that mosquitoes love me and I'm A positive. So, that's my pick. Rachel, what are your thoughts?

Rachel Lerman: I have no idea. Is it O positive, one of the most common, or is it O negative, I always get them confused. But, since mosquitoes love you, I think we should go with A positive.

Nora Ali: Although, I feel like most people say that, they're like, "Oh yeah, mosquitoes love me more than average." Yeah. Let's just go with it. If you're cool, Rachel, I'm cool with A positive.

Rachel Lerman: I think we should.

Nora Ali: All right. Great.

Scott Rogowsky: I matched with so many mosquitoes on OKQ. Actual research has been done on this. And studies have shown that mosquitoes prefer all O blood types nearly twice as much as those with type A blood. So, O negative would be the preferential blood. And that would be the answer. You whiffed on this one, but two for three.

Nora Ali: Rachel, she did say O. So, let's give her a half point.

Scott Rogowsky: Rachel's leaving. Oh, we'll give you two and half. 

Nora Ali: That was my fault.

Rachel Lerman: We have some really anecdotal evidence that proves that mosquitoes like Nora's blood, so. 

Scott Rogowsky: So, maybe we need to do-

Nora Ali: It is statistically significant.

Scott Rogowsky: ... Maybe we need some new third-party test. Yeah.

Nora Ali: All right. Well, two for three's not bad. It's not bad.

Scott Rogowsky: Two for three. Two and a half out of three.

Nora Ali: Yes. There we go.

Scott Rogowsky: By the way, fun fact, it would take 1.2 million mosquito bites to totally drain a human body of its blood. Yummy. 

Nora Ali: Oh gosh.

Scott Rogowsky: And with that thought, we'll end things here with Rachel Lerman. Thank you for getting us excited, our blood boiling about the blood. Oh, blood boiling is usually a bad thing.

Rachel Lerman: I think we got to do blood flowing.

Nora Ali: That's it.

Scott Rogowsky: That's right.

Nora Ali: That's it. Gets our blood flowing.

Scott Rogowsky: Rachel, thank you for getting our blood flowing.

Rachel Lerman: Thank you.

Scott Rogowsky: We love hearing from our Business Casual listeners, so please hit us up. We're working on an episode about the coffee industry. Where do you get your java? Any brands you like to shout out? Who's keeping you caffeinated? Send us an email at, or DM us on Twitter @bizcasualpod. That's B-I-Zcasualpod, with your thoughts.

Nora Ali: You can also leave us a voice memo on our website,, or give us ring and leave us an old fashioned voicemail. Our number is 862-295-1135. As Business Casual grows, we are excited to get to know our listeners, old and new. Drop us a line and don't forget to leave your name and where you're calling or writing from, so we can hear from you in a future episode.

Scott Rogowsky: Business Casual's FDA approved by Katherine Milsop and Bella Hutchins. Additional production sound design and mixing by Daniel Markus. Alan Haburchak is director of audio of Morning Brew. Sarah Singer's our VP of multimedia. Music in this episode from Daniel Markus and The Mysterious Breakmaster Cylinder. If you like what you heard, please follow Business Casual, Spotify, Apple Pods, or wherever you go for your pods. And we'd love it if you give us a great rating and a review.

Nora Ali: Thanks for listening to Business Casual. I'm Nora Ali.

Scott Rogowsky: And I'm Scott Rogowsky.

Nora Ali: Keep it business.

Scott Rogowsky: And keep it casual.