Where ex-Theranos CEO Elizabeth Holmes got her start: Part 1

The ambitious young Stanford student dropped out of school to pursue her idea of creating a blood testing device that would run tests on a drop or two of blood.
8:43 | 03/16/19

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Transcript for Where ex-Theranos CEO Elizabeth Holmes got her start: Part 1
This is an investigation by the securities and exchange commission in the matter of theranos, inc. Reporter: Elizabeth Holmes -- grilled by 12 lawyers -- investigated for massive fraud. This was not how a young billionaire thought her empire would end. Do you swear to tell the truth, the whole truth, and nothing but the truth? I do. Reporter: It is certainly not where it began. Elizabeth Holmes was born in 1984, at the dawn of tech nation, just one month after the Macintosh computer. She was raised in Washington, D.C. The parents, from a young age thought of their daughter as a special person. The mother worked for various members of congress. The father worked for the state department. Mostly involved in human rights and she looked up to him as an idealist, which is what she thought of herself as well. Reporter: She wrote a letter to her father when she was 9. Dear daddy, what I want out of life is to discover something new. Something that mankind didn't know was possible. I also want to study about man and his ways. Life is really interesting. I love being with you. It's my most favorite thing in the whole world. Love, Elizabeth. I wanted to do something with my life that people thought was impossible before. At a young age she's asked by a relative, what do you want to do when you grow up? She answered immediately I want to be a billionaire. And the relative says don't you want to be president? An she says no. The president will marry me because I'll have a billion Reporter: Her family was no stranger to wealth. Elizabeth is the great-great-great-granddaughter of Charles Fleischmann, and the massive Fleischmann yeast fortune. A 42-room mansion with 40 servants, polo, yachts, safaris. They helped found "The new Yorker" magazine, and bought coconut island off the coast of Hawaii. They entertained Amelia earhart, and Shirley temple had a birthday party on their estate. But the fortune was no more. This magnificent family history that they had in terms of this extraordinary wealth had been dissipated by prior generations. So this is a picture of a young Elizabeth and her brother Christian V. Reporter: Joe fuisz was the family's neighbor when Elizabeth was a child. This is my brother, Justin, a young Elizabeth. No evidence as yet of the black turtlenecks. The past of the Holmes' family frequently came up. And it's -- was not hard for me to imagine that the Holmes family believed that Elizabeth was restoring them to their rightful place. Reporter: The Holmes moved to Houston, where Elizabeth excelled at a private school. Megan long went to St. John's with her. They both ran track, and she says Elizabeth was incredibly driven, and never gave up. Typically when you run a race, the thing that you're going to remember is the person who gets first place. But Elizabeth always finished her races last. Everyone would finish the race, and you'd hear the announcer saying don't cross the track, there's still a runner on the track. That runner was Elizabeth. She was determined to do it. Reporter: A tutor came to the house for private lessons, and Elizabeth talked her way into college-level summer courses in Chinese, courses that weren't open to high schoolers. And she convinced people that, you know, let her do it. She really -- she talked mandarin on the phone to them, and they were stunned, and she got in. Reporter: Her high school yearbook page says "Dream, laugh, reach for the stars." In 20 years? Trying to save the world. Her song? "I'm in a hurry". ??? All I really gotta do is live and die but I'm in a hurry and don't know why ??? Reporter: It all paid off when Elizabeth went to California for college. She picked Stanford which was, like, the obvious choice if you were interested in becoming an entrepreneur and a successful one. Reporter: In the heart of silicon valley, it's where many tech giants started. Varian, Hewlett-Packard, sun, Yahoo. That's why it's called silicon valley and why it really generated that entrepreneurialism. And of course that's probably why Elizabeth came here in the first place. Yes, I'm sure that's why she came here. Reporter: Phyllis Gardner is a professor of medicine here. She first met Elizabeth in 2002. This is Wilbur hall. Wilbur hall. This is where most Stanford freshmen start out. So this would've been Elizabeth Holmes first dorm. First dorm room right. Elizabeth was brought to me by a person who'd been the former president of Panasonic, saying to me that she was this brilliant girl and she had this wonderful business idea. She came up with an idea for this blood testing device. And the idea behind the blood testing device was that you would have a sticker on your arm, and this would be constantly checking your blood levels and then if you needed to, you'd be able to give yourself an injection of whatever medicine you needed. The skin is a terrible barrier to go across. I kept saying to her, it's not feasible. It just went to deaf ears. How did she respond to the criticism? Just kind of blinked her eyes and nodded, and left, and then came back another time with the same sort of concept. It was just a 19-year-old talking who'd taken one course in microfluidics, and she thought she was gonna make something of it. Elizabeth didn't want to be told it was impossible because she loved the idea. So, she went to another professor. He never allowed freshman in this advanced course. And she persuaded him that she was capable of doing it, and in fact she was. Reporter: Elizabeth took chemical engineering classes as a freshman. I was very intrigued by her Reporter: Channing Robertson was the chair of the department. Felt it would be a really interesting proposition. And he thought, hey, you know what, I see an opportunity here. Maybe you can do this. Maybe you can't. But let's give it a shot. And he became a kind of a mentor to her and said to me maybe once a century you come across someone like beethoven. "She's a beethoven figure," he said, "She's a genius. She is this rare creature." And he bet his career on it. I think he was the first enabler. He dragged her around campus, introduced her to people. Reporter: And she was breaking down doors herself. This used to be my advisor's office and I would sit here literally in the hallway waiting for him to come back to his office to try to convince him to let me into his graduate research program. In silicon valley, one of the things that people brag about is that they drop out of college. I was at a point where another few classes in chemical engineering was not necessary for what I wanted to do. Steve jobs dropped out of college. Mark Zuckerberg dropped out of college. Bill Gates dropped out of college. Zuckerberg, Gates, jobs, Holmes. You just have the sense that there are certain people who cannot be held back. Reporter: Elizabeth dropped out too. She decided she was going to actually try to build it. I think it's fair to say that. Sure it's a great idea, but it's actually scientifically impossible. Reporter: That didn't stop her from filing her first patent, the first of many. She had all the ideas, but she didn't have the cash. She didn't actually want to go to some of the traditional investors because she would have to prove that this was something that was even on a remotely, far-off, distant world something that you could do. This guy, Tim draper, who was a family friend. He has made billions of dollars from his investments. And he agreed to give her some money to get started. I ended up giving her her first million dollar check. Reporter: Everything seemed possible in 2004. But her next idea was much bigger. Something that would use only a drop or two of blood and draw more than a billion dollars in investments. Elizabeth Holmes stirred a revolution. Reporter: And her company began. So did the questions. How quickly was it before you start to notice problems?

This transcript has been automatically generated and may not be 100% accurate.

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