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The Elizabeth Holmes Trial: Venture Capitalist Invested in Theranos Despite Information Deficit


Venture capitalist Chris Lucas, of Black Diamond Ventures, testifying on Thursday during the trial.


Vicki Behringer

SAN JOSE, Calif.—Venture capitalist Chris Lucas invested in Theranos Inc. despite having less information about the startup than he was accustomed to getting as part of his decision-making process.

Mr. Lucas testified in federal court Thursday that his California firm, Black Diamond Ventures, first put more than $2 million into Theranos in 2006 and then invested about $5.3 million more in late 2013. That latter investment underpins one of the wire fraud counts against Theranos founder

Elizabeth Holmes,

whose criminal fraud trial has moved into its third month of witness testimony.

Mr. Lucas said in court he didn’t get as much financial or operational information about Theranos as he usually received from startups he pursued. There was such an unusual gap in information, he said, that he alerted his colleagues to the issue. When he asked Ms. Holmes about providing more details, she told him secrecy was important because competitors would try to steal Theranos’s technology—an explanation Mr. Lucas accepted.

The testimony from Mr. Lucas shows an experienced investor who endeavored to get more information from the secretive startup founder to carry out his diligence. In previous testimony, other investors said they hadn’t checked out Theranos’s claims or sought to verify documents.

But like those other investors, Mr. Lucas proceeded to invest. Mr. Lucas said he considered Ms. Holmes smart, articulate and on a mission to improve healthcare, and he overlooked the information deficit to become an important financier for Theranos.

“There would have been more information that we would have potentially liked, but we didn’t have access to it and we made the decision to invest,” Mr. Lucas said on the witness stand.

Black Diamond Ventures brought another investor, Texas-based Hall Group, into the 2006 funding round by setting up a separate investment vehicle for that firm. Hall Group in 2013 made a $4.9 million direct investment in Theranos alongside Black Diamond Ventures.

In 2006, Mr. Lucas paid between less than $1 to around $3 per share in Theranos, according to court testimony. In late 2013, Theranos shares were selling for $75 apiece. That suggested a lot of value creation and he was willing to pay for access to more Theranos equity, Mr. Lucas confirmed in testimony.

In late 2013, pressed by Ms. Holmes’s “sense of urgency” to meet a year-end deadline for fundraising, Mr. Lucas said his team ended up working around the clock through the holidays to meet Ms. Holmes’s timeline.

But by that time, Theranos had spent a decade working on its technology, launched a retail partnership with

Walgreens Boots Alliance Inc.

and raised hundreds of millions of dollars from investors.

Elizabeth Holmes, arriving at federal court in San Jose, Calif., on Tuesday, faces a dozen counts of wire fraud and conspiracy to commit wire fraud.


David Paul Morris/Bloomberg News

“So one could have believed at that time that the company could get to cash flow positive,” Mr. Lucas testified. The Walgreens partnership meant “revenue for the company, more value for the company, and we were in a real business.”

Theranos technology was used on real patients and returned erroneous results for tests for pregnancy, HIV, blood disorders, cancer risks and other serious conditions, according to the prosecution. Ms. Holmes faces a dozen counts of wire fraud and conspiracy to commit wire fraud. Her lawyers have said she invested 15 years trying to improve healthcare and running a failed startup isn’t a crime.

Mr. Lucas said that, as part of his 2013 investment, he assumed that Walgreens did “an extensive analysis” of Theranos’s technology before agreeing to invest in the startup and put its machines in drugstores. The Walgreens partnership began unraveling in 2014 after Theranos missed key deadlines, and officially ended in 2016.

Related Video

As the long-awaited trial of Theranos founder and former CEO Elizabeth Holmes gets underway, WSJ looks back at the scandal’s biggest milestones and speaks with legal reporter Sara Randazzo about what we can expect to see in the fraud trial. Photo Illustration: Adele Morgan/WSJ

Kevin Downey, one of Ms. Holmes’s lawyers, aimed to show the jury that Mr. Lucas had deep knowledge about Theranos and a personal relationship with Ms. Holmes, with whom he communicated directly and regularly. Mr. Downey displayed a page from the Theranos investment agreement that said the investor—in this case Black Diamond Ventures—had an opportunity to ask questions of and receive answers from the officers of the company.

Mr. Downey also showed the court emails and spreadsheets prepared by Mr. Lucas for Ms. Holmes in 2007 that offered financial projections for the company, using different cash-flow scenarios. Mr. Downey suggested that Mr. Lucas must have had access to private information about the company if he was able to build financial models.

One document showed Theranos with monthly revenue of more than $3 million in December 2008.

“We do achieve cash breakeven by the end of this year,” Mr. Lucas wrote in an email to Ms. Holmes.

Mr. Lucas said Thursday he didn’t recall the sources for his models and in one instance said he didn’t recall making the spreadsheet. But he said that he didn’t have any independent sources of information about Theranos’s finances beyond what Ms. Holmes gave him.

Mr. Lucas said he also had no information about Theranos’s financial situation when he made his investment in 2013.

Previous court testimony showed that Theranos lost more than $585 million over roughly a dozen years.

Write to Heather Somerville at

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