The final chapter in Elizabeth Holmes’ story as an entrepreneur is set to begin next year with her fraud trial scheduled for summer of 2020. But medical device startups and investors may find the fallout from the crash and burn of her company Theranos lingering for much longer.

Holmes, 35, is facing criminal charges, including wire fraud and conspiracy, for deliberately misleading investors, doctors, policymakers and the public about what her technology was capable of doing, the Associated Press reported on July 29. She and former Theranos president Ramesh Balwani face decades in prison if found guilty.

Even before the trial begins, biotech startups are dealing with backlash as investors find it difficult to trust healthcare entrepreneurs and legitimate biotech startups are struggling to raise funding.

“Elizabeth Holmes’ example is definitely impacting every single entrepreneur who is working on breakthrough technologies,” Sathya Elumalai, CEO of Alavita Health, an at-home diagnostics company, told Karma. “Because of Theranos example, healthcare startups are now struggling to raise that initial capital that they need to advance their technologies.” 

  • “Companies’ wild ideas and products” are being ignored by investors, he said.
  • More than half of well-funded healthcare startups were failing to publish research in the wake of the Theranos scandal, according to Stanford University research published this year. 
  • Karma Takeaway: With investors becoming more cautious, concerns are being raised about harm to the medical device pipeline and a slowdown in legitimate products making it to market.