Walking the Gray Line: Lessons Learned from Theranos Whistleblower

Running a startup is a thrilling and challenging experience, often defined by walking a fine line between various competing interests. Among the most delicate of these is the gray line between investor expectations and what is genuinely best for the company's long-term success and, more importantly, for the customers it serves—especially in medical startups, where patients' lives and well-being are at stake. This balancing act can sometimes feel like navigating a minefield, where each decision could have profound ethical, financial, and operational repercussions.

In the world of startups, especially in medtech, it's critical to recognize that while investors fuel innovation with the capital needed to develop, test, and launch products, the founders and leaders must always remain the stewards of their company's core mission. For medtech founders, that mission revolves around improving patients' lives. Any departure from that principle can quickly compromise the integrity of the company.

This philosophy was reinforced for me after listening to Tyler Schultz, the Theranos whistleblower, speak about the importance of ethical decision-making in business. His experience with Theranos and the subsequent fallout was a stark reminder of what can go wrong when a company prioritizes hype, investor demands, and growth projections over truth, transparency, and the welfare of its customers. Three years before this talk, I was fortunate to bring Dr. Phyllis Gardner, one of Theranos’s most vocal critics, on board as an advisor to help us maintain an unwavering commitment to patient safety and ethical practice.

The Disconnect Between Vision and Unrealistic Growth Expectations

One of the most persistent challenges in running a startup—particularly in medtech, where innovation is slow and carefully regulated—lies in managing investor expectations around revenue growth. Investors often have high hopes for a rapid return on investment, expecting large, sometimes unrealistic, revenue projections in a short period of time. This is not just because they are impatient, but because the venture capital model thrives on big wins. In many cases, they want to see hockey-stick growth, an exponential increase in revenue that validates their initial investment and shows that the startup is scaling quickly.

This expectation, while understandable, is often completely misaligned with the reality of medical technology development. Medtech startups must go through extensive research and development, clinical trials, and regulatory approvals before their products can even reach the market. Once on the market, the adoption of medical devices and technologies can be slow due to the cautious nature of healthcare professionals and the complex, fragmented healthcare system.

The vision founders have for their companies is often long-term and patient-focused, involving solving deeply-rooted healthcare challenges with new technology. However, translating that vision into a financial forecast that meets investor expectations is no easy task. Investors may hear your pitch, recognize the potential in your technology, but then press for aggressive revenue growth. They want proof that the technology will scale, that customers will adopt it en masse, and that profits will follow shortly after.

This disconnect can be difficult to navigate. On one hand, founders need to keep investors satisfied, maintain a healthy relationship, and ensure continued funding for the startup's operations. On the other hand, chasing unrealistic financial targets can lead to ethical compromises, rushed development, and a dilution of the company’s core mission—something we’ve seen go disastrously wrong in cases like Theranos.

The Ethical Dilemma of Medical Startups: Why Patients Must Come First

In medtech startups, the stakes are especially high because the end users are not just consumers—they're patients. Medical devices, diagnostics, and health technologies directly impact people’s lives and well-being. In many cases, they deal with vulnerable populations, such as the elderly or those suffering from chronic diseases. This puts an enormous ethical responsibility on founders and their teams to ensure that patient safety and efficacy are at the forefront of all business decisions.

This is where medtech startups face a unique challenge. In many other industries, iterating quickly, failing fast, and fixing problems later are part of the accepted approach to building products. But when people's lives are at stake, that mindset doesn’t work. You can't afford to "move fast and break things" in healthcare. Every clinical trial, product iteration, and rollout must be meticulously planned and executed with patient welfare in mind. The Hippocratic Oath that doctors take—“First, do no harm”—must be extended to the entire team in a medical startup. As founders, we must ensure that we act as responsible stewards of the patients' trust.

For us, this responsibility became deeply personal as our own family members began using the device we had created. It shifted the way we thought about every aspect of the product's development. It’s one thing to think about an anonymous patient population, but when it’s your own mother or grandfather relying on the technology, the importance of getting it right becomes paramount. Suddenly, the stakes aren’t just theoretical—they’re deeply real.

The Case for Patient-Centered Decision-Making

A patient-centered approach doesn’t just benefit the patients; it ultimately benefits the business too. Trust is one of the most critical assets a medtech company can build. If patients, doctors, and healthcare providers don’t trust your technology, they won’t use it. If they don’t use it, no amount of investor capital or rapid growth projections will save the company in the long run.

The business case for prioritizing patients is clear: a reputation for high-quality, safe, and effective products will lead to long-term customer loyalty and sustainable growth. It may not be the exponential, overnight success that some investors dream of, but it will build a solid foundation for enduring success.

Founders must make decisions that align with this long-term vision, even if it means pushing back on investor demands at times. This requires a delicate balance of clear communication, setting realistic expectations, and finding investors who share the same values and are willing to play the long game.

The Role of Investors: Finding Alignment with Ethical Founders

One of the biggest challenges in medtech is finding investors who understand the unique nature of the industry and are aligned with the company's ethical mission. Not all capital is created equal. In fact, accepting the wrong type of investment can lead to friction down the road. Some investors might prioritize rapid growth and short-term returns over patient safety and product efficacy, which can create pressure to cut corners or rush development.

It’s essential for founders to seek out investors who not only understand the regulatory and development hurdles of medtech but also believe in the company's mission. Investors who share the company's values will be more patient and supportive during the long, often slow, process of bringing a medical product to market.

I’ve had the privilege of working with several investors who have this long-term, ethical perspective, and it has made all the difference. It’s important to build a team of investors, advisors, and employees who are united in the belief that patients come first. When everyone is aligned around this principle, it becomes much easier to navigate the gray areas and make decisions that are both ethical and in the company’s best interest.

A Simple Guiding Principle for Success

At the end of the day, the guiding principle for any medtech startup must be simple: put patients first. This guiding principle drives ethical decision-making and ensures that the company stays on the right track, even when faced with competing interests. If a founder can stay true to this principle, it will serve as a compass during difficult times—whether that’s balancing investor demands with patient safety or making tough decisions about product development.

Incorporating this principle into the very fabric of the company is the key to building something that not only changes lives but also stands the test of time. It’s the foundation for ethical leadership, responsible innovation, and long-term success.

Startups are hard, and walking the gray line between investor expectations and company ethics is even harder. But by staying grounded in the mission to improve patients' lives and by seeking out likeminded investors, advisors, and team members, founders can build something truly meaningful and lasting. In the words of Tyler Schultz, it’s about doing the right thing, even when it’s hard. And for us in medtech, that means always putting patients first.