Ramesh “Sunny” Balwani was the president and Chief Operating Officer (CEO) of a company named Theranos for seven years. The founder of Theranos was Elizabeth Holmes, whose life goal was to be a Silicon Valley billionaire. The unfolding of the story is rather sad, a story whose path was not unlike the fictional character Gordon Gekko’s “greed is good” theme. Theranos’s business concept was a great idea, and should a company such as one like Theranos actually work, it would change a lot of how we view medicine, but the concept and reality never actualized.
Ramesh “Sunny” Balwani was born and raised in India, and came to the U.S. in 1986, and eventually became a software engineer for Lotus and Microsoft. Fortune smiled upon Balwani, and he joined a startup named CommerceBid.com as president and No. 2 executive. The business model of CommerceBid.com was to have suppliers bid against one another live on the internet, in business-to-business auctions. In November 1999, the leading software firm (Commerce One) in that area of internet bidding acquired CommerceBid.com (who had only three clients testing the software) for $232 million. Mr. Balwani received a substantial amount of money, and cashed out his shares of stock for $40 million. Selling out was a wise move, because when the dot.com bubble crashed a mere five months later, Commerce One eventually filed for bankruptcy.
After meeting Elizabeth Holmes in 2002, when she was eighteen, the two quickly became an item, and that year Balwani divorced his wife Keiko Fujimoto. Ms. Holmes dropped out of Stanford in 2003, and engaged the services of Mr. Balwani, a relatively recent Silicon Valley millionaire, as her mentor, and perhaps engaged in a few other activities as well. Ms. Holmes incorporated the startup Theranos in 2004, intent on developing a wristband that “would simultaneously detect people’s ailments by drawing their blood with microneedles and cure them by injecting them with the appropriate drug” named the TheraPatch. TheraPatch was a great concept, based on the ability to design and manufacture machines that could detect illness from a single drop of blood rather than the larger samples required of the technology of the time. Great ideas are one thing, executing them is quite another.
TheraPatch proved to be too futuristic, and so Holmes pivoted (love that term) to another concept, portable machines that could process a drop of blood and perform dozens of laboratory tests from that single drop of blood. By 2009, Theranos had burned through $47 million in startup cash, so Mr. Balwani joined the firm as No. 2 and began to illustrate his millionaire chops. Or lack of them. Balwani threw $12 million into the firm, so it wasn’t as if he didn’t have any skin in the game, but it wasn’t going to be his skin that was sacrificed, if he could help it. He was a remarkably skilled millionaire startup guru, according to some people. After all, you can’t call someone like Balwani just a lucky chump who was in the right place at the right time, now can you? Especially when looking at the success of the firm where he gained his wealth going under within a few months. That’s Silicon Valley, eh?
Being a millionaire, Mr. Balwani barked out orders to the engineers and scientists, all while wearing acid-washed jeans, designer shirts with the top three buttons open, accompanied by pungent cologne with either his Lamborghini or his Porsche, replete with vanity plates, in the parking lot. Being the hard-charging leader he believed himself to be, Balwani fired people who disagreed or proposed realistic problems which had to be resolved in order to successfully produce the product. By 2013, the Theranos product had evolved, or changed because of practical reasons (unable to take the brilliant machine from a concept to a working model) from a micro-fluid device, to a glue-dispensing robot named Edison, to a machine that could perform a full range of blood tests from a single drop of blood. Employees who raised concerns were fired, or in the parlance developed at Theranos, Balwani “disappeared” them. Balwani earned a reputation as an order-barking, demanding boss who would not tolerate any realistic observations of employees. You cannot force people to do the impossible, but that was not about to stop Balwani. In many corporate meetings, Ms. Holmes would say "Sunny says" and then go on with some unattainable goal.
The engineers at Theranos observed that Balwani was out of his depth when in discussions of engineering concepts, endlessly repeating catchy engineering terms, sometimes mispronouncing them. Reports indicate that Balwani confused the chemical symbol for potassium as “P” when it is, as most high-school chemistry students know, the symbol “K.” But Balwani was, after all, a remarkably skilled millionaire startup guru, according to some people.
The remarkably skilled millionaire startup guru told the Partner Fund Management officials in 2014, that Theranos had developed a machine that could perform amazing functions that it, in fact, could not do. Partner Fund eventually filed a lawsuit, settling out at $43 million in the spring of 2017, with Theranos making no admissions of wrongdoing. Balwani claimed that the Theranos machines were being used in the field by the U.S. military, another whopper by the remarkably skilled millionaire startup guru. Balwani’s financial projections were massively deceitful, projecting profits in the billions, when in fact, there were none.
In another remarkably honest and admirable move, Balwani had a critique of Theranos that was posted on Glassdoor.com titled “A Pile of PR Lies” removed from the website, and had the Human Resources department write and post glowing reviews of the company on Glassdoor. Balwani interrogated many employees trying to find out who posted the diatribe, without success. The Wall Street Journal began a series of articles on the technology and practices of Theranos, which led to an SEC (Securities and Exchange Commission) investigation. Subsequent to the investigation, charges were filed, and Ms. Holmes reached a settlement in March of 2018. The remarkably skilled millionaire startup guru Mr. Balwani is fighting the charges. He is after all, a remarkably skilled Silicon Valley startup guru millionaire, and not just some lucky chump who was in the right place at the right time. Mr. Balwani’s actions prove his skills, and those are spouting balloon juice, terrorizing employees, overpromising and not delivering at all, and (if the settlement that Ms. Holmes agreed to is any indication) committing fraud. In Balwani’s (that remarkably skilled Silicon Valley startup guru) defense, the fraud is yet to be proven, though his “partner” has already settled, if that means anything. Let’s hope these charges don’t go the way of Brian Hunter. To read about Mr. Hunter and his antics, I refer you to: http://www.writerbeat.com/articles/15392-A-Face-and-Name-to-Free-Market-Corruption.
After once being lauded as “the next Steve Jobs” Ms. Holmes was, in 2016, described in Forbes magazine as one of the "World's Most Disappointing Leaders.” At least Ms. Holmes, after losing more millions than I would care to estimate, had the stones to fire Mr. Balwani, who describes his departure as “voluntary retirement.” Mr. Balwani and Ms. Holmes, while previously an item, are not, as of this writing, on speaking terms. On April 27, 2018, Theranos filed a WARN Act notice, which is a legally required notice that it planned to permanently lay off 105 employees. I feel sorry for the employees. I do not feel sorry for greedy people, nor for investors who take high risks knowing that they might not pay off. As for the remarkably skilled millionaire startup guru Mr. Balwani, his luck might just have run out. Being at the right place at the right time might make you a millionaire, but it does not always prove managerial skills. Timing is everything. (The majority of facts were gleaned from The Wall Street Journal May 20, 2018.)
Update: On June 15, 2018 Elizabeth Holmes and Ramesh Balwani. From The Wall Street Journal :
Ms. Holmes, 34 years old, and Mr. Balwani, 53, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud in an indictment handed up Thursday and unsealed Friday.
“This indictment alleges a corporate conspiracy to defraud financial investors,” said Special Agent in Charge John F. Bennett of the Federal Bureau of Investigation in San Francisco. “More egregiously, this conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”