Tim Draper: Elizabeth Holmes’ biggest supporter in the foxhole

Even when the news is really bad, as it was late last week for Elizabeth Holmes and her company Theranos, as I wrote in a column, it’s always possible to cast a struggle in Silicon Valley in heroic terms.

Tim Draper did just that in an email to me about Theranos, a company he invested in nearly a decade ago. He knew Elizabeth Holmes, its CEO, as the childhood friend of one of his daughters. 

Draper, founding partner at venture capital firms Draper Associates and DFJ and an early investor in Theranos, told me that Theranos should be seen in the same category as other great disruptive companies such as Uber, Bitcoin and Tesla.

This is after federal regulators banned Holmes from operating a lab for two years.

Draper told me that constraining entrepreneurs such as Holmes, he argues, is “unconscionable.” We should celebrate entrepreneurs, not attack them, he added.

On the government regulators at the Centers for Medicare and Medicaid Services (CMS) who banned Holmes:

When someone challenges the status quo as Elizabeth has done, they are often up against industry (and sometimes government) incumbents who don’t want to see them succeed. While customers will benefit greatly from this technology as it develops, the CMS would see declining influence with the reduced cost in medicine that Theranos could potentially provide to humanity.

I understand if a government official sees inconsistencies in lab results that they need to call it out, but we all know that technologies take time to develop and improve. Putting constraints on Elizabeth or Theranos is unconscionable. In effect, CMS is saying, “we want to halt progress of this technology because it threatens our current method of operation.”

Draper’s words echo a line of defense used by Holmes as she has come under fire for the firm’s technology and how it has presented itself to investors and partners.

Holmes told CNBC: “This is what happens when you work to change things. First they think you’re crazy. Then they fight you. And then all of a sudden you change the world.”

Draper, too, compares Theranos to some of the biggest innovations such as the Wright brothers and compares Holmes’ fight to other big battles:

Uber has the taxi unions fighting them. Bitcoin has the banks. Skype had the Baby Bells. Tesla had The Big Three. Anytime there is a revolution from a new technology that can improve the human condition, the existing incumbents rally a cry of “no fair.” They rally the sitting industry, the legal system, the government, and the press in hopes of keeping their oligopolies. But technology ultimately prevails, because people want a better life.

This time, with Theranos facing not only the ban on its labs but also probes by the Securities and Exchange Commission, the U.S. Attorney’s office and consumer lawsuits, the tech industry’s David vs. Goliath defense may be played out.

Photo: Tim Draper, Silicon Valley venture capitalist. (Dai Sugano/Bay Area News Group)


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  • edward Vaczy

    I think the tech crowd in Silicon Valley needs some disruption of their own. When you are dealing with software, hardware and other technologies that are directly driving medical decision making, you cannot develop beta products in the field. If you look at the amount of time required for a new drug to come to market and the clinical trials required for validation (and I admit it is too long) you begin to get a sense for the level of validation that is required to bring healthcare altering technologies to market. Just because Theranos is a SV brainchild, does’t mean it should be given a pass on complete and through validation. When a new database technology, or gadget technology doesn’t deliver on promises, there are plenty of opportunities to go back and fix it with minimal impact. When fundamental clinical chemistry tests do not accurately reflect reality, the impact is entirely different. Tesla took a nonchalant attitude to bringing autonomous driving into the market, under the umbrella of tech advancement – yet there were tragic ramifications from software and tech that wasn’t ready for prime time. The same is true of Theranos. The SV reality distortion field (as created by Steve Jobs) can be leveraged for market advantage from Apple and others. But when it comes to medical devices, especially ones that are at the core of clinical treatment, you do not have the same options. Theranos may have a breakthrough technology on their hands, but for the conservative medical community, it’s not ready to be widely deployed. A bug in IOS is one thing, a potassium or blood glucose reading that is wrong can have dire consequences.

    • Darrell Criswell

      I don’t see that the technology is all that valuable even if it works perfectly, and how do you expect a company that doesn’t seem to understand scientific validation start producing a reliable product?

      • Thomas

        That’s the main thing, I can see some tests being valuable with patients that lost a lot of blood, but my experience is that sticking the finger hurts a lot more than the arm, and who really cares how much blood you give in the end. The technology even if working is of questionable value.

  • Will Tim Draper be playing himself in the upcoming Jennifer Lawrence biopic? If not he can always show up for the American Greed series interview.

  • Beyond9

    Uhhh, and what else is Draper going to say when he is seeing millions of his own dollars literally evaporate overnight. The beauty of this story is that in the end truth still means something regardless of how much money and influence is trying to convince the rest of us that it doesn’t.

    • At some point this kind of deception by Holmes crossed into the realms of delusion in need of psychiatric intervention. It doesn’t do anyone any good when Tim Draper keeps shooting his mouth off about how great she is, how it’s a big conspiracy by CMS(!) and more.

  • Craig Haynes

    Draper’s gov’t conspiracy is sheer lunacy given that CMS spends billions of our tax dollars on tests which CMS would love to see greatly reduced, but it has to be done via credible, safe, efficacious means. Where is the machine, Ms. Holmes, can independent researchers and engineers test it? After 10 years, we are still waiting. Who is scamming whom? Holmes is a fraud.