What I really find upsetting, more than Silicon Valley wasting millions on hype, is the board of directors. Senior government and military officials are making bad decisions for their own pocket books post retirement. General Mattis squashed any internal criticism of Theranos in the military and then left to join the board.[1] This is happening repeatedly with crappy technology being forced down the throat of the military by senior leaders who miraculously get board positions after retiring. Retirement needs to mean retirement for senior government officials. Help a non-profit or teach, but stop selling out the services and the country.
And also, why does Theranos need such a sleazy board chock full of senators, military generals and other political players? They're a freaking biotech company without scientists and physicians on the board, wtf. The whole Theranos scam really reminds me of Palantir.
Government contractors masquerading as tech companies. So sketchy.
Cashing fat the .gov to "fight terrorism" doesn't help make US citizens any safer, but does the founder wealthy enough to buy castles & fly his Stanford undergrad floozy around the world on private jets. Nice work if you can get it.
If $750K of lobbying makes them shady, what do you think of millions of dollars spent on lobbying per-quarter by the likes of Google, Amazon, and Apple? [1]
Their VC firm was not the CIA. It was In-Q-Tel, which was founded by the CIA (yes, there is a difference). In-Q-Tel has also funded companies such as FireEye. [2] What's your opinion of them?
I don't really know how to respond to the claim about "Cashing fat the .gov", because I can't parse that sentence. I will point out that Palantir has been increasingly shifting to a corporate client base.
It's semi-public knowledge that In-Q-Tel is the investment arm of the government. They make investments on behalf of any government department that puts up the money.
But why does any of that mean they aren't a technology company?
It's as if by 'tech company' you really mean 'fashionable, liberal, consumer web startup or ex-startup', which isn't a reasonable definition of 'technology'.
Palantir getting investment from In-Q-Tel gives them more credibility. The intelligence community is clearly their target market. Getting investment from that community in an overt and legit way doesn't fire any alarms to me.
I did not know much about Theranos before the recent skeptical articles started to appear on newspapers regarding the falseness of their claims.
The larger question is, how do you get to a $9B valuation without having rock solid technology or evidence to prove the effectiveness of their technology?
I would assume that the VCs in SV are a pretty smart bunch. How on earth did this happen in the first place? If Theranos really did not have the kind of earth shattering technology that they claim to have, how did they get so much money?
If you take a look at their angellist page, then you'll see that they did not even need to raise the money in stages, no seed or series stuff. If you take a look at one of their investors, DFJ, has invested in a lot of successful companies like skype and tesla. Also other investors have invested in companies like Uber and Lyft.
I don't know too much about medicine or tests for that matter. But what I do know is that people don't invest their money without good reason to do so.
What is confounding is that $45M is not chunk change, and yet they managed to raise this much cash in an unconventional way.
Not to sound too cynical, but didn't we all have similar questions when it came to investment banks and sub prime mortgages and credit instruments a few years ago? Can the greater fool theory coupled with herding behavior help explain some of this?
Careful. That kind of logical hiccup is exactly what investors #2 through the last thought. And like you say, few to none in that line come from from biomedical or biotech backgrounds. The emperor might have been sold an invisible set of clothing.
The only people that can smell this kinda bullshit are technical experts. For example, there might not be enough white blood cells in such a small sample to do a meaningful assay. And perhaps there were a few people who didn't invest.
But on the other hand, their technology wasn't promising anything revolutionary. Nothing that couldn't be done by BD.
> I would assume that the VCs in SV are a pretty smart bunch. How on earth did this happen in the first place?
Maybe the pg effect writ large?
“I can be tricked by anyone who looks like Mark Zuckerberg. There was a guy once who we funded who was terrible. I said: ‘How could he be bad? He looks like Zuckerberg!’ ”
This is an admirable mea culpa by the author. Sure, he is certainly casting blame on Theranos. However, he also issues an unqualified apology at the end of the article, stating "So I blew it. And I should have included all these colloquies in the original story. I regret the error." Many others in his position would have concluded with a pseudo-apology such as, "I'm sorry that I let them deceive me."
That link appears to have been deleted, so here it is, via Google cache:
----
Letter to the Editor: Theranos Responds
Brooke Buchanan is vice president of communications at Theranos
Both the headline and much of the content of Roger Parloff’s December 17 story, “How Theranos Misled Me” are inaccurate and — ironically — misleading. Theranos was honest and transparent with Mr. Parloff, and the headline to Mr. Parloff’s story is not supported by the facts or the story itself. Let’s take a look.
After two months of reviewing his notes, there is no statement by Theranos cited in this article that is in any way inaccurate or misleading to support his headline or the statement in his article that he was misled.
Rather, Mr. Parloff states in this story that he made an error: “I then started looking back at my research for the original story—which had been conducted, by then, 17-19 months earlier—to try to reconstruct how I made the error (italics added).” He concludes, “I regret the error.”
Mr. Parloff’s basis for saying he was misled appears to rest on the last part of the following statement in his lengthy original article: “I wrote that the company currently offers 200 – and is ramping up to offer more than 1000 – of the most commonly ordered blood diagnostic tests, all without the need of a syringe.”
The fact is that Theranos was, indeed, offering 200 diagnostic tests at that time, and was ramping up to offer more than 1000 – all via finger-stick. That is true.
Theranos had also developed over 200 assays to run with small volumes from finger-sticks, urine, and other sample types at that time, as we explained to him then. That capability remains today.
Theranos did in fact run certain tests collected through venipuncture on its proprietary technologies at the time of this article.
Theranos never told Mr. Parloff it was running all of its tests without a syringe – neither did he ask and neither was this a secret. Our website has always made clear that was not the case (e.g. “Instead of a huge needle, we can use a tiny finger stick or collect a micro-sample from a venous draw. Theranos website, 2014). Indeed, Theranos has always been clear – in statements on the website dating back to when it announced its retail lab services in 2013, in statements it made to those who asked, and elsewhere – that it has always performed some tests via venipuncture. As acknowledged in Mr. Parloff’s story, Theranos explicitly discussed its use of venipuncture with him.
To be clear, this topic was also not fact checked with Theranos prior to his article. Rather, as he readily states, this sentence was based on assumptions that led to a statement in his article which he is now reading through the lens of other’s faulty reporting – reporting based largely on anonymous and uninformed or misinformed sources with respect to our proprietary technologies and their capabilities.
In his article, Mr. Parloff now says that he feels he simply “assumed” that Theranos had brought up over 200 tests to run in its clinical lab only on finger-sticks. Again, Mr. Parloff never asked anyone at Theranos whether that assumption was correct. Had he done so, we would have corrected that ambiguity. And if the sentence had jumped out at the time as containing an erroneous assumption, Theranos would have corrected it.
Finally, it is important to point out that when Mr. Parloff first met with Theranos about writing the article, in the spring of 2014, it was originally in connection with a patent troll litigation that Theranos had undertaken. It was in that context — of demonstrating Theranos’ technological capabilities and other intellectual property — that Theranos shared data from the development of over 200 proprietary assays on finger-stick/small volumes of samples.
If Mr. Parloff now feels that because of recent reporting he got one sentence in his story from mid-2014 about Theranos wrong, it was not because he was misled, but rather because — as he states — he now feels he made faulty assumptions that he now thinks he should have further clarified. The company has grown and evolved and made many business and regulatory decisions about its operations along the way. At no point did the company mislead him.
Still nothing here about how many of these tests were actually reliable. I have a 100 fairies at the bottom of my garden who can tell me the result of any test without even drawing a drop of blood. Profit!
Heh... Akin to how the founder of the mormon church came up with the idea while getting high and sticking his face into a magic hat. Get loaded, stick your face in a hat, document your delusional visions & pander them upon the easily swayed ... voilà! You have created a $7 billion a year religion!
Theranos has always been very careful with their words - they make sure that it's not an outright lie, but if not read attentively, can very effictively mask the true meaning.
But then, I really wouldn't expect a journalist to be taken in by the PR speak. I'd sort of expect that after years of listening to doublespeak like this, a journalist would see right through... But I guess not.
Hard to not have a lot of doubt in much of what Theranos has claimed to accomplish. Far too much shroud of secrecy to seem legitimate. Every article that comes up about it reeks of something not being quite right.
That which flourishes in the night withers in the light of day
I definitely feel that vibe from all the news from Theranos. If their methods were revolutionary, they could show off (and license) their innovations with patents, instead of hiding behind trade secrets.
It definitely appears that they had some initial technology which looked promising but has failed to mature into a viable replacement for commercially available tests.
What I'm wondering is how well Theranos' investors did their due dilligence. It's not completely incredible that a VC might fund a company based on its team and market position even if its core technology isn't a viable product of a long-term business, but it would be somewhat surprising.
If I had to bet I would say Elizabeth had something promising at the beginning, but it just didn’t pan out and she got herself in very tight bind. It is fundamentally impossible to get results to the level of accuracy the FDA requires from a single fingerpick for most assays. It is not an issue of sensitivity, but that there is too much variability due tissue and capillary effects.
The one thing we can all agree on is it should make a good movie when the dust finally settles - the supporting cast Elizabeth has will make the film a must see alone.
It seems possible that there wasn't much initial due diligence nor a working product at the beginning:
> Tim Draper, the venture capitalist, said Holmes, who was friends with his daughter growing up, is the first entrepreneur he knows who kept quiet about her business
From what I understand, Tim Draper, of DFJ Venture invested in Holmes when she was a Stanford student.
> DFJ, formerly known as Draper Fisher Jurvetson, became one of Theranos’ first investors. The firm doesn’t have a seat on the Theranos board, Jurvetson said.
“We wrote a $500,000 check before anyone else, but she’s been somewhat independent and has been going at it all on her own, so I don’t have the answer to your question,” Jurvetson said when asked whether DFJ would invest again.
It seems most likely to me that this investment was based on her personality and/or personal connection, rather than due to a technology breakthrough she had made at the time. If she had something at the time, then it's taken 11 years to get where they are now, which is not having any publishable research demonstrating the results. My guess based on the situation is that she was charismatic and asked for money to go start solving the problem, from scratch, and people gave her money because of her charisma and because they judged the problem sufficiently tractable. It seems unlikely that she had more than an idea while still in university.
It looks like DFJ has not participated in the most recent investing rounds (?)
> It seems most likely to me that this investment was based on her personality and/or personal connection
isn't that how most founders get their initial $$? At least the ones I know. One got his money from his parents because his dad is a world famous cardiologist and the other one because he was friends with a bunch of people on the board of YC.
Heck, even the go pro founder got a ton of $$ from his parents.
I don't disagree, however if you're going after a very well funded and entrenched opponent (BigMed/BigPharma) then playing your cards close to the vest is warranted. That said, when you're back is up against the wall you need to walk the walk. Medical testing is probably not a business where you can "Fake it 'til you make it."
Google Ventures said that when they were looking at Theranos as an investment, they sent an employee to have the test, then were puzzled why a blood draw was required, and said that was suspicious enough not to invest.
These are warning signs I look for.
- politically linked / celebrity types
Eg:
https://www.theranos.com/leadership
David Boies
Boies served as Special Trial Counsel for the United States Department of Justice in its antitrust suit against Microsoft
Henry A. Kissinger
Gary Roughead
Gary Roughead is a retired United States Navy admiral who served as the 29th Chief of Naval Operations.
Seems more like a list of country club members who have dinner parties together.
The subtext of the Theranos story is that it's easy to mislead the press, and even investors. Silicon Valley still relies largely on optimism and TRUST. When a wolf in turtleneck clothing comes along and takes advantage of that, it risks putting all other companies on the defensive.
The company seems to be grasping at straws in desperate attempts at damage control now that everyone seems to be catching on that the company is perhaps more hype than substance. Certainly not the first time in business history that a product has failed to live up to initial expectations, but if theres a feeling that people were misled about what was real vs. conceptual then it can get ugly quite quick.
Possibly because people who bought into the hype are now feeling a little pissed at getting snookered. My initial reaction after reading the title of this article was little sympathy for the author; a journalist's job is to be skeptical and not just be a PR rep for a company. To his credit, the author takes full responsibility for his actions (I've rarely read the words "I blew it" from any journalist), and I found the article to be a very enlightening and interesting read.
Theranos was offering standard tests at a lower rate. I'm guessing the market price is so high, it's quite easy to generate positive cash flow from it. Could it be the incumbent industry players do not want a new competitor into the market?
Also Martin Shkreli got arrested recently. Who benefits most from arresting Shkreli? The pharmaceutical industry he shone the light on.
Well, Shkreli is a special kind of stupid. Rising the price 50x fold, openly saying he doesn't think it's a problem, saying he'll reduce the price but not doing it, drew quite a bit of anger from people, all that while having a history of shady business... I'm quite sure he was warned not to do this and stay under the radar by other people in the industry
Do you have any knowledge of this or pure speculation? The lab industry I know (10+ years in healthcare) does not have the 60%+ in waste necessary for Theranos to offer their prices + generate positive cash flow. Perhaps the investor dollars are funding the low prices
On the other hand, once one person has started criticizing, others who had doubts are likely to come forward; and the media always gets focused when they smell blood in the water.
because people have a job of building a website with a side of maintaining ads visible, while ad blockers write filter for a job all day long - in other words, it's a uphill battle, takes loads of time to test against all ad blockers and the effort can be nullified in few minutes of any adblocker dev time. heck, they can even crowdsource rules.
Reporter Roger Parloff certainly isn't winning any investigative reporting awards here. He seems genuinely confused why Theranos, despite having the ability to use its own technology, might also be using existing technology. One explanation might be that Theranos is collecting blood by industry-standard means so that they could also verify accuracy of their newfangled tests using a subset of that sample.
All parties here, from press to company to investors, seem to be maximally full of shit and in massive cover-your-ass mode.
I read the original article, and what I understood after reading it, was that Theranos had developed a new technology for testing small samples of blood that could be obtained from a finger prick, and could do so inexpensively (sometimes for 1/10th the prior price).
Theranos never made it clear that (A) many (most?) of the tests were not done using Theranos equipment, but by third party diagnostic equipment, and that (B) some (many?) of the tests still required a traditional blood draw.
I understand why Theranos might not want to make that clear (dilutes the value of their story) - it just seems to be the sort of thing that they should have realized would come out eventually, and better to get ahead of it.
Still hoping that Theranos manages to accomplish even 1/2 of what I thought they were doing.
Some of the later back-and-forth stuff states that even for the tests they can do, they were using third party equipment for "scaling" reasons. They're not good at PR and this reporter isn't good at getting answers. What a mess.
I believe Theranos was almost on to something, and it didn't pan out. You know, science.
So they used smoke-and-mirrors instead. Countless startups have used the same strategy - using hubris to hide failure long enough to either fix problems or get sold.
Most startups don't mess with people's lives. Theranos deserves every bit of the scrutiny they're under now.
A simple explanation for products using existing tech is be s full service vendor instead of just a few profitable niches. But that would imply them being a real business too, which doesn't seem to be the case.
Theranos was very clear on this. They have about 200 tests that are successful in a lab setting with only one in the works to be cleared by FDA. Truth is that simple ! The rest is just sleazy journalism that sells tabloids
I couldn't disagree more. Everything in Theranos' marketing and PR collateral was all about finger-pricks and nanotainers. And it was all one big fat lie. You couldn't pay me to take a blood test at one of their facilities.
They weren't "clear" on this. They said were all about their proprietary technology and getting everything from a pinprick when it turns out they weren't doing any of that.
It's like saying I have a great story to tell you but then reading you Moby Dick.
> when it turns out they weren't doing any of that
Except for the part where they had all 200 tests going through lab review... Is the doubt that they'll move on to getting more tests FDA approved once the first one passes full review?
They never once said they were not using existing machines to do these tests, not once, they only spoke about the quantity of the sample needed. Using the same analogy, saying I have a great story to tell you but then reading Moby Dick isn't necessarily cheating, because Moby Dick is a great story :).
Agreed, they should have been upfront on what technology they developed in house and what it can and cannot do. A simple table outlining that could have cleared up the air.
[1] http://www.techinsider.io/emails-theranos-elizabeth-holmes-u...