Theranos burned through $2M a week as investors were given rosy

Around the time that Theranos was losing nearly $2 million per week, investors in the blood-testing startup were being told that the company would soon be bringing in almost $1 billion per year.

It’s not uncommon for startups to lose money in their early years, and it’s not entirely unusual for the fastest burn rate to happen right before things turn around. Instead, Theranos continued to produce mounting losses. But that’s not what the company was telling investors, according to new documents shared during the jury trial of Theranos founder and CEO Elizabeth Holmes.

In court yesterday, jurors heard testimony from the company’s longtime chief financial officer, Danise Yam, who also goes by So Han Spivey. Yam said that Theranos lost $16.2 million in 2010, $27.2 million in 2011, $57 million in 2012, and $92 million in 2013. In 2013, things had “started to get a bit tight,” Yam said. There were weeks where the company was burning through around $2 million per week, and there wasn’t any revenue to help ameliorate the losses. In 2012 and 2013, Yam didn’t even bother adding a line for revenue—there was none.

After asking questions about Theranos’ continued losses and lack of revenue, prosecutors showed Yam a document they said was shared with investors; it projected $140 million in revenue in 2014 and $990 million in 2015. Yam said she had never seen the document before, nor did she know where those numbers had come from.

“Did you ever provide financial projections to investors?” Robert Leach, an assistant US attorney, asked Yam.

“No,” she said.

In fact, Yam relied heavily on Holmes for financial projections. When Yam was working with an analytics firm to price stock options, she asked Holmes for some key financial forecasts, including projected revenue, because the CEO had “the best information.” During that process, Yam had emailed Holmes asking her how much revenue she was anticipating. In a reply, Holmes said she was projecting $100 million for 2015, nearly ten times less than what she told investors at one point.

Despite persistent losses, Holmes’ salary increased from $200,000 to $400,000, Yam said.

Quality problems

The next witness was Erika Cheung, who was hired by Theranos out of undergrad as a lab associate. Cheung said she joined the company largely on the star power of its CEO. “She had a charisma to her; she was very articulate,” Cheung said of Holmes. “She had a strong sense of conviction to her mission.”

Cheung quit after seven months on the job and filed a whistleblower complaint…