Theranos, the Battered Diagnostic Startup, Has a Dallas Tie: Real Estate Magnate Craig Hall

Craig Hall’s decades-long real estate career has been propelled by calculated risks. Some have paid off, others haven’t. But the developer knows when to answer the phone. And one day in October 2006, a college dropout who helmed what would soon be billed as the Apple of medicine wanted his ear.

The rise and fall of Silicon Valley darling Theranos has been well publicized—the company was once valued at more than $1 billion (a unicorn, in tech industry jargon) but ascended like Icarus up-up-up to a $9 billion valuation, eventually crashing down to below its initial value. Lesser known is how Hall plays into this narrative. The developer took that call back in 2006. And in 20 minutes, CEO Elizabeth Holmes, the company’s founder, had convinced him to invest $2 million.

“What motivated me was that she’s extremely passionate about making a difference and changing the world and if I could contribute to something that would really make a difference in peoples lives, I wanted to do that,” Hall says. “I also knew that if it worked it would be a financial home run.”

With Theranos, Holmes and her staff had developed technology that allowed them to test for a variety of diseases with only a drop of blood from a patient’s finger prick. Simpler and cheaper blood tests would give patients the power to order their own tests without waiting for a doctor, eliminating the middle men. The technology attracted Walgreens, which initiated a partnership that would reach of thousands of customers. Theranos expanded throughout California and Arizona. Hall’s investment ballooned into more than $300 million.

Holmes, meanwhile, blossomed into a media darling. Now 32, she was touted as the world’s youngest self-made female billionaire and featured in magazines and business network shows. THIS CEO IS OUT FOR BLOOD, Fortune declared. Inc. put her on the cover in a black turtleneck and crowned her “the next Steve Jobs.”

But with that success came pressure, and soon cracks began to emerge. In October 2015, a Wall Street Journal article alleged that Theranos wasn’t using its proprietary tech on a majority of the blood tests it administered. It was also facing regulatory scrutiny. Journalists soon discovered that Theranos didn’t have a board certified pathologist running its California lab, an unheard of practice in the industry. Inspections by the Centers for Medicare & Medicaid Services as well as the Food and Drug Administration identified major oversights at its labs, which federal officials feared put patients’ health at risk. In the midst of the media firestorm, Holmes $4.5 billion fortune evaporated and Hall’s stake in the struggling startup became ostensibly worthless.

Strangely, even amid the controversy, Hall didn’t try to pull his money. He knew it would be a long-term investment and anticipated plenty of bumps in the road.

“I don’t think it’s unusual for there to be setbacks for people who are billed to be the next Steve Jobs. It’s a buggy-whip industry, and she’s trying to invent cars,” he says. “That kind of a disruption in any industry will always have setbacks, you don’t get to go ten steps forward at one time.”

He also stayed in because he considers Holmes a kindred spirit. He founded Hall Financial Group when he was 18. She launched Theranos at 19. Both became media darlings, praised for their ingenuity and maverick success. And both experienced a precipitous decline. Hall started with a single real estate purchase in Michigan and grew it into a company with $4 billion in assets and stakes in a variety of businesses in Dallas. A change in the legal environment in the 1980s sent his business spiraling downward. Almost immediately Hall found himself demonized by the same press that had embraced him, and he eventually had to declare personal bankruptcy to pay off his debts.

It was a dark period, but Hall was able to regroup and rise again. After he got out of debt, he reinvested in prime Dallas real estate that eventually allowed him to rebuild his company. Now he’s back on top—his newest development, Hall Arts, has attracted KPMG in its tower and the famed Dallas chef Stephan Pyles to its Arts District-facing ground floor. Holmes, meanwhile, is staring down a long path.

Walgreens walked away from its $50 million partnership earlier this month, removing Theranos technology from 40 of its stores. Former patients have filed false advertising claims. Speaking generally about diagnostic tests that use capillary blood, Dr. Deborah Perry, an advisor to the Point of Care Testing Committee at the College of American Pathologists, says there are scientific reasons why it’s difficult to get accurate blood samples from a finger prick instead of the invasive venipuncture, the widely used method of getting a blood sample from a vein via needle.

“The disadvantages … are that the small volume may not be enough blood for testing on standard laboratory analyzers and there is a risk of contamination by tissue fluid,” said Perry. “If many drops of blood are needed, many finger pricks will be needed, and a single venous puncture starts to look attractive.”

Adding to the confusion, Holmes and Theranos have been notoriously vague about what equipment is used when and with what result. Hall acknowledges this with a caveat, “She’s in a business where you have to be careful what you disclose but at the same time, everyone wants to understand the details. There’s a balance between transparency and not wanting to help people copy your ideas and take away a lot of efforts and capital.”

Hall says he loves to support entrepreneurs with big ideas, particularly women who he believes don’t receive the same venture capital opportunities as men.

“My hope is that (Holmes) is still going to become a game-changer in healthcare in this country. I’m OK either way,” he continued. “It’d be nice to have it be a financial success, but the technological improvement for people’s health would be even better.”

His advice to Holmes is to keep her head down, ignore outside voices and focus on making the business work for her customers. If she can do that, Hall says, all this controversy will be just a footnote in the story.

“Ultimately,” he says, “it’s going to come down to: Is this really a new disruptive technology, or isn’t it?”

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