Fortune Magazine
Around a year ago Theranos, a blood testing biotech startup, was worth about $9 billion but now is quickly moving towards complete destruction. This week, federal regulators have officially revoked Theranos’ practicing license and has banned founder and CEO Elizabeth Holmes from operating a blood test laboratory for two years. The company once “claimed it could process up to 70 lab tests on just a few drops of blood” and that its technology and testing methods were not only groundbreaking but were also offered at a low, affordable cost. Since March 2016, the firm has been under serious investigation after the CMS (Centers for Medicare and Medicaid Services) discovered that Theranos was essentially defrauding the government by selling tests that did not work as advertised.
In the Silicon Valley, it’s easy for young CEOs and rapidly scaling startups to get lost in the exciting whirlwind of exponential growth, investor funding, and booming valuations, that they often forget about the integral importance of the "boring stuff" like compliance. However, in spite of a young CEO’s lack of experience, ethical business practices should be their number one focus, especially at the beginning, because no matter how high the company's valuation becomes or how much funding it continues to receive, if you are fudging data, etc., you will eventually get caught. And cheating is ultimately the worst form of failure.
I write this article to remind any young professional that honesty really is the best policy if you truly believe in your idea. It's important to look at companies like Theranos and even Zenefits (whose former CEO Conrad Parker resigned after failing to meet compliance with regards to selling health insurance), as cautionary tales to always do the right thing. While passion and determination are great qualities entrepreneurs possess, running a business with moral business practices will always be more important than any bottom line.