Theranos FOMO kept the DeVos family from doing its investment

Theranos said a lot of things to Lisa Peterson that made the company seem credible when she evaluated it on behalf of the crazy-wealthy DeVos family. One of the things that stood out as a reason to trust Theranos and Elizabeth Holmes? Its devices didn’t need FDA approval.

That made it seem more credible that the machines worked, said Peterson, who works on investments for the DeVos clan (including former secretary of education Betsy DeVos), and who testified today during US v. Elizabeth Holmes.

Okay, some background: it’s true that Theranos didn’t need FDA approval to start using its tests and devices. That’s because they were considered “lab-developed tests” — a category of tests developed and used within a single lab, which means they don’t have to go through the typical FDA process. Just because something is a lab-developed test isn’t necessarily a reason not to trust that it works as well as advertised. But it’s definitely not a reason to have more trust that a test is reliable.

Treating the lack of FDA approval as a reason to bet on Theranos was a small aside in Peterson’s testimony; it was just one reason she thought Theranos seemed like a good investment. (A skepticism of the regulatory process is also one of the reasons Theranos board member General James Mattis wasn’t concerned with some of the company’s actions — something the powerful conservatives seem to have in common). But it set the tone for a day of testimony about the DeVos family’s approach to its $100 million investment in Theranos — which seemed to be more about shiny things and FOMO than about the science behind the blood testing devices Holmes promised would change the world.

Peterson volunteered to take the lead on assessing Theranos after hearing about the company (and Holmes) from Jerry Tubergen, the CEO of the DeVos’ family office, which is called the RDV Corporation. The company sent her two large binders with information on the blood testing tech, and she sat on a call with Holmes in early October. Then she took a trip with members of the family out to Palo Alto, where they spent five hours at Theranos headquarters.

There was a lot to bolster the case for Theranos. Peterson said the documents and conversations with Holmes gave the impression that the company could perform hundreds of tests using just a finger stick of blood. A document with the Pfizer logo seemed to show that the Theranos tech was used and validated by major pharmaceutical companies. The company had major contracts with Walgreens.

Nothing about any of those materials raised red flags with Peterson. But Peterson didn’t look that closely. The relatively poor due diligence was a theme that Lance Wade, Holmes’ attorney, hammered during cross-examination. Wade showed her charts from the Pfizer-branded report,…