second the scene went from preternatural quiet to gory bloodbath as the fishermen struck viciously at their unsuspecting quarry. What we were doing was the journalistic version of la mattanza, Mike said. We were patiently lying in wait until we were ready to publish and then, at some time of our choosing, we would strike. As he said this, he mimicked a Sicilian fisherman violently wielding his spear, which made me laugh.
I told him that I was on board with the mattanza approach as long as the story ran before Holmes’s appearance at the Journal’s annual technology conference in Laguna Beach in October. I had recently gotten wind that she was on the conference’s list of guest speakers and felt that it would put the paper in an impossible position if my article hadn’t been published by then. Mike agreed. The conference was two and a half months away. That gave us ample time, he said.
| TWENTY-THREE |
Damage Control
Meanwhile, behind the scenes, Holmes was trying another avenue to quash the story.
In March, a month after I had started digging into the company, Theranos had closed another round of funding. Unbeknownst to me, the lead investor was Rupert Murdoch, the Australian-born media mogul who controlled the Journal’s parent company, News Corporation. Of the more than $430 million Theranos had raised in this last round, $125 million had come from Murdoch. That made him the company’s biggest investor.
Murdoch had first met Holmes in the fall of 2014 at one of Silicon Valley’s big galas, the annual Breakthrough Prize dinner. Held in Hangar 1 of NASA’s Ames Research Center in Mountain View, the award honors outstanding contributors to the fields of the life sciences, fundamental physics, and mathematics. It was created by the Russian technology investor Yuri Milner with Facebook founder Mark Zuckerberg, Google cofounder Sergey Brin, and Chinese tech tycoon Jack Ma. During the dinner, Holmes came over to Murdoch’s table, introduced herself, and chatted him up. The strong first impression she made on him was bolstered by Milner, who sang her praises when Murdoch later asked him what he thought of the young woman.
They met again a few weeks later at the media mogul’s Northern California ranch. Murdoch, who had only one bodyguard, was surprised by the size of the security detail Holmes arrived with. When he asked her why she needed it, she replied that her board insisted on it. Over a lunch served by the ranch’s staff, Holmes pitched Murdoch on an investment, emphasizing that she was looking for long-term investors. Don’t expect any quarterly reports for a while, she warned him, and certainly not an initial public offering. The investment packet that was later delivered to Murdoch’s Manhattan office reiterated that message. Its cover letter stated in the first paragraph that Theranos planned to remain private for the “long term” and went on to repeat those two words no fewer than fifteen times.
Murdoch was known to dabble in Silicon Valley startup investments. He’d been an early investor in Uber, turning a $150,000 bet into some $50 million. But unlike the big venture capital firms, he did no due diligence to speak of. The eighty-four-year-old mogul tended to just follow his gut, an approach that had served him well on his way to building one of the world’s biggest media and entertainment empires. The one call he placed before investing in Theranos was to Toby Cosgrove, the CEO of the Cleveland Clinic. Holmes had mentioned that she was on the verge of announcing an alliance with the world-renowned heart center. Like Yuri Milner, Cosgrove had only good things to say when Murdoch reached him.
Theranos was by far the single biggest investment Murdoch had ever made outside of the media assets he controlled, which included the 20th Century Fox movie studio, the Fox broadcast network, and Fox News. He was won over by Holmes’s charisma and vision but also by the financial projections she gave him. The investment packet she sent forecast $330 million in profits on revenues of $1 billion in 2015 and $505 million in profits on revenues of $2 billion in 2016. Those numbers made what was now a $10 billion valuation seem cheap.
Murdoch also derived comfort from some of the other reputable investors he heard Theranos had lined up. They included Cox Enterprises, the Atlanta-based, family-owned conglomerate whose chairman, Jim Kennedy, he was friendly with, and the Waltons of Walmart fame. Other big-name investors he didn’t know about ranged from Bob Kraft, owner of