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

“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.

“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.

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 Heather.Somerville@wsj.com