A study

Theranos: a study in diligence and governance

A blood-testing company valued in the billions on a device that did not do what was claimed. Read and watched together, these four show how a story replaced evidence, why an eminent board did not catch it, what due diligence would have tested, and what investors were told instead of audited accounts.

3 to watch and 1 to read.

In this order

1
The Inventor: Out for Blood in Silicon Valley
2019
Directed by Alex Gibney · HBO
RecommendedDocumentaryStart hereAn evening
Start with the evening-length account: what was claimed, who believed it, and what nobody outside the company ever saw work.
A board that accepts a narrative has stopped doing diligence.
Theranos in one evening: a blood-testing company valued in the billions on a device nobody outside it had seen work. A diligence and governance failure rather than a markets one, which is why it belongs in venture, growth and board conversations. Watch who was asked to verify what, and who was never asked at all.
Where it shows up in a roomWhere it shows up in a room
Asked what you would diligence first in an early-stage company, the honest answer is the thing nobody has independently verified.
Next: Venture capital prep
Learn what it shows
2
Bad Blood
John Carreyrou
EssentialBookStart here
Then the evidence, in the order the reporter assembled it: former employees, a pathologist who tested the claims, a regulator’s inspection.
Secrecy presented as protecting the technology is the warning sign.
The Theranos investigation by the reporter who broke it. The documentary is the faster version; this is the one that shows how the evidence was actually assembled.
Where it shows up in a roomWhere it shows up in a room
It is the best answer to what you would verify independently, because it lists exactly what nobody verified.
Learn what it shows
3
The Dropout
2022
Created by Elizabeth Meriwether · Hulu
RecommendedSeriesStart hereA few evenings
Now the mechanism, slowed down. Each episode is one more exception a director, a partner or an investor chose to accept.
Diligence rarely fails at once. It fails one reasonable-sounding exception at a time.
Eight episodes dramatising Theranos from a first pitch to the newspaper investigation that ended it. Slower than the documentary and better on the mechanism: a board of eminent names with little laboratory expertise, a retail partner more afraid of missing out than of being wrong, and a validation that was always due next quarter. It is a drama, so take the facts from Bad Blood.
Where it shows up in a roomWhere it shows up in a room
Asked what a board is for, or what you would need to see before signing a commercial partnership, the retail partner storyline is that question answered badly in public.
Next: What due diligence covers
Learn what it shows
4
You Can See Everything
2026
Directed by Nathan Fielder and Lance Oppenheim · A24
For the curiousDocumentaryDeeper diveAn evening
Last, the founder’s own account. It is most useful once you know what the record shows and can watch how a persuasive story is built.
A founder’s account of events is evidence about the founder, not about the events.
Elizabeth Holmes, filmed in the weeks before she began her prison sentence. Long, at almost three hours, and less about laboratory science than about how a persuasive account is built and performed, which is precisely what a diligence process has to see past. Watch it after the facts, not instead of them.
Learn what it shows

What it teaches

The story is the way in. These are the subjects it makes concrete, and where each one is taught properly.

Valuation

A private valuation is the price the most recent investors agreed to pay, not a measurement of the business. Theranos was valued in the billions while, on the regulator’s account, its operations brought in little more than $100,000 of revenue in a year it had projected over $100 million. Ask what a price assumes before you ask whether it is high.

Governance and board oversight

A board exists to question management, which takes directors with the expertise to know what to ask and the independence to keep asking. Theranos assembled a board of famous names, few of whom had worked in laboratory diagnostics, while the founder kept voting control. Eminence is not oversight.

Due diligence

Diligence tests the claims a business depends on. Here the decisive test was simple: watch the device run a sample and compare its result with a conventional laboratory’s. The refusal to allow that, presented as protecting trade secrets, was itself the finding.

Financial reporting

A private company owes outside investors far less than a listed one, and Theranos’s investors relied largely on projections the company supplied. The securities regulator later charged that they were told of revenue the business did not have. Audited accounts, and the revenue line in particular, are where a story meets a number.

Answer these afterwards

Each is a version of a question asked in venture, growth and corporate development interviews. Write the answer down before you look anything up.

1
You are offered a stake in a company whose product you are not allowed to see working. What do you ask for, and what do you do if the answer is no?
2
A board has a former cabinet minister, two generals and no one from the industry. What would you want added before the next funding round, and why?
3
Projected revenue is a hundred times last year’s actual revenue. Which three numbers would you ask for to test the projection?

Now practise it

Watching and reading are the cheap part. These are where you have to produce something and find out whether it stuck.

Venture capital prep How to get into venture capital Cap table model

Other themes

Financial crises

Bank runs, 2008 and a hedge fund the Fed had to rescue.

Fraud and governance

How a lie is built into accounts, and who should have stopped it.

Investment banking

The deal, the floor and the conflicts inside both.

Entrepreneurship

Founders, dilution, and the businesses that nearly ran out of cash.

Markets and trading

Squeezes, corners and traders who agree only on risk.

Technology

Product judgment, platforms and the silicon underneath.