An early financial backer of Theranos has told the criminal fraud trial of its founder Elizabeth Holmes that he knew his first investment in the defunct blood-testing start-up was risky, but that he was more confident when later investing millions more.
Black Diamond Ventures, a Silicon Valley venture capital firm run by Chris Lucas, invested over $2 million in Theranos in 2006 and more than $5 million in 2013.
Lucas testified yesterday that there was “no guarantee” that the first investment would work out, as it was in an early-stage company, but the latter investment felt safer. “You would expect to have a higher certainty of return,” he said.
His testimony was reported last night by The Wall Street Journal, which first began raising questions about the accuracy of Theranos’s technology in 2015.
Theranos, founded in 2003, promised to revolutionise healthcare with technology that it said needed only a few drops of blood from a pinprick on a finger to conduct hundreds of medical tests. It closed in 2018 amid one of the biggest corporate scandals in recent memory.
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Holmes, 37, faces a dozen charges of wire fraud and conspiracy to commit wire fraud. She has pleaded not guilty. If convicted, she could face 20 years in jail.
A June 2014 Forbes magazine cover story about Theranos and Holmes — entitled “This CEO is out for blood” — made Lucas “very proud” of his investment, he told the court. The author of the article, Roger Parloff, wrote a retraction — entitled “How Theranos Misled Me” — the following December.
Prosecutors have signalled that Parloff could be called to testify at Holmes’s trial, which is taking place in San Jose, California, as soon as next week.
The trial is expected to run until mid-December. Ramesh “Sunny” Balwani, 56, Holmes’s former boyfriend, served as president and chief operating officer at Theranos. He faces the same charges as Holmes and is due to go on trial in the new year. He also has pleaded not guilty.