The spectacular collapse of blood-testing startup Theranos Inc. resulted in a $150 million setback for the heirs of Walmart founder Sam Walton. However, for a family with an estimated combined net worth of $174 billion, this investment loss represents a mere fraction of their vast fortune. Indeed, the Theranos write-off accounts for less than 0.09 percent of the Walton family’s total wealth, highlighting the minimal financial impact of the failed venture on one of America’s wealthiest families.
The Walton family’s extensive holdings are managed through various entities, including Walton Enterprises LLC. It was through this Bentonville-based holding company that the investment in Theranos was channeled. Records from a related investor lawsuit reveal that Walton Enterprises acquired Series C-2 preferred shares in Theranos in December 2014, deploying capital through two distinct investment vehicles.
Crucially, Madrone Capital Partners, a Menlo Park, California-based private equity and venture capital firm, played a significant role in this investment. Overseen by Greg Penner, Rob Walton’s son-in-law, Madrone Capital Partners directed nearly $100 million ($99,999,984) into Theranos. The remaining portion of the Walton family’s investment, approximately $50 million ($49,999,992), was invested via Soda Springs Partners LLC, an entity Bloomberg identifies as operating from the same location as Walton Enterprises.
These investments occurred during a venture financing round spanning from March 2013 to April 2015. During this period, Theranos was actively raising capital, offering preferred stock at $17 per share, according to legal documents from a class-action lawsuit representing investors who felt misled by the company.
The promise of Theranos, once valued at over $10 billion, unraveled following a series of investigative reports by The Wall Street Journal beginning in October 2015. These reports cast serious doubt on the accuracy and viability of Theranos’ blood-testing technology. The ensuing fallout led to the severing of partnerships, including a prominent collaboration with Walgreens, and a cascade of investor lawsuits. Ultimately, both founder Elizabeth Holmes and former COO Ramesh Balwani faced criminal fraud charges, with the company eventually announcing its shutdown.
Interestingly, this is not the first time Madrone Capital Partners has navigated investment losses in the technology sector. The firm held an 11 percent stake in solar-panel manufacturer Solyndra through its investments when Solyndra declared Chapter 11 bankruptcy in 2011. Solyndra, despite attracting almost $1 billion in private equity, ultimately failed.
Beyond venture capital, Madrone Capital Partners engages in direct investments in private companies and allocates capital to private equity funds. While demonstrating a particular interest in alternative energy technologies and opportunities in China, Madrone Capital Partners maintains a diversified portfolio. A notable example of their broader investment strategy is a 2007 transaction alongside Goldman Sachs Capital Partners where Madrone Capital Partners acquired a minority stake in hotel giant Global Hyatt Corp. in a $1 billion equity investment. The specific size of Madrone’s stake in Hyatt was not publicly disclosed.
The Theranos saga serves as a stark reminder of the inherent risks associated with venture capital and technology investments. While the Walton family’s financial exposure through Madrone Capital Partners to Theranos resulted in a significant dollar loss, its impact on their overall financial health remains negligible. For Madrone Capital Partners, the experience likely provides valuable lessons in due diligence and risk assessment within the dynamic landscape of Silicon Valley and beyond.
