How to Lose $700 Million, Theranos-Style

Business figures, government officials, and international magnates invested more than $700 million in an ambitious company promising to revolutionize blood testing—Theranos.

The Wall Street Journal’s John Carreyrou got his hands on previously sealed documents that show just how much capital has sunken with the Theranos ship. The documents are part of a lawsuit alleging that the company made false and misleading claims about its operations and technology while soliciting money from investors. (Theranos has denied the suit’s allegations.) The following groups and individuals have lost a considerable sum of money following their investments:

— $150 million: The Walton Family, heirs to Walmart Founder Sam Walton
— $125 million: Rupert Murdoch, executive chairman of News Corp
— $100 million: Betsy DeVos & her family, Secretary of Education
— $100 million: The Cox family, owners of media properties
— $96 million: Partner Fund Management, investment management firm
— $70 million: Shareholders who invested through venture funds
— $30 million: Carlos Slim, media investor
— $25 million: Andreas Dracopoulos, Greek shipping heir
— $20: The Oppenheimer family, former owners of De Beers
— $6.2 million: Riley Bechtel, former chairman of Bechtel Corp
— $1 million: Robert Kraft, owner of New England Patriots
(*Not included: Earlier investors who invested nearly $100 million in Theranos before 2013.)

I feel uneasy every time I see a star-studded investor list for a startup that has raised hundreds of millions of dollars. The uneasy factor goes up when you realize none of the investors have deep medical or biotech expertise. Remember when GV’s Bill Maris said the firm passed on investing back in 2013 because it had a lot of questions about the company’s technology?

Maris said, “We looked at it a couple times, but there was so much hand-waving — like, Look over here!— that we couldn’t figure it out. So, we just had someone from our life-science investment team go into Walgreens and take the test. And it wasn’t that difficult for anyone to determine that things may not be what they seem here.”

At Fortune’s 2016 Brainstorm Tech conference, TPG’s David Trujillo made the point that people were simply not doing their diligence. “It’s just taking what a management team says at face value and not being able to follow up with it,” he said. “Part of it is the competitive dynamic of sources chasing opportunity that has created companies not having to share quite as much as they would outside this bubble we’ve been in.”

The hand-waving. The trade secrets. The competitive advantage. The revolutionary technology. For years, Holmes successfully dazzled investors, reporters, and the public.

As Fortune has previously noted, the notoriously private company would use the sanctity of trade secrets as an excuse to run an operation shrouded in secrecy. When hundreds of millions of dollars are on the line, however, investors should expect transparency — not slippery and confusing language masquerading as industry jargon.

One Term Sheet newsletter reader asked, “How are these not lessons that [Silicon Valley] should not already know? Do your diligence, understand the tech, don’t accept ‘trade secret’ BS, and check out board oversight.”

As we now know, it was a very, very expensive lesson to learn.

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

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