Ouch. From a comment left under a Gizmodo article regarding the latest woes of the likely soon-to-be-defunct Theranos and its woefully in-over-her-head CEO Elizabeth Holmes.
As reported by noted Silicon Valley observer/writer/consultant Steve Tobak:
Theranos Debacle Triggers an Avalanche of Lawsuits by Investors Who Should Have Known BetterI've had my recurrent say regarding Theranos on this blog before, and will have new thoughts forthcoming soon. What a mess.
Very wealthy people dazzled by founder Elizabeth Holmes stampeded to invest huge sums. Now they want their money back.
As the facts in the Theranos mess come to light in one damning report after another, and the lawsuits begin to pile up, you’ve got to wonder how so many investors -- who should have known better -- got mixed up in what may very well turn out to be a wipeout of nearly $1 billion in capital. It’s a fair question to ask...
If any other VC firm lining Silicon Valley’s famed Sand Hill Road was sought by Theranos, they didn’t bite. Nor did any venture capitalists that specialize in life sciences. According to Google Ventures partner Bill Maris, Holmes’ claims of revolutionary technology that remained shrouded in secrecy and had never been vetted raised “red flags.” I’m sure he wasn’t alone in that assessment.
...The Theranos situation is no different than when your wantrepreneur neighbor, shyster accountant or overzealous investment advisor comes to you with a sure thing that can’t lose. Take it from me: It isn’t, it can, and it usually does...
No matter how you spin it, it’s gambling, plain and simple. Remember the golden rule: Don’t bet more than you can afford to lose. Most startups go under. So before you pull the trigger, make believe you’ve lost it all, and see how it makes you feel. If it makes you feel even a little bit queasy, don’t do it...
Some scathing reporting back in May on the site ZeroHedge.com
Elizabeth Holmes Admits Theranos' "Technology" Is A Fraud: Restates, Voids Years Of Test ResultsMore recent news. From The Wall Street Journal: Gen. James Mattis Has Ties to Theranos. After retiring, Gen. Mattis took seat on board. General "Mad Dog" Mattis, recall, is Donald Trump's pick to head the Defense Department beginning in 2017.
The billion dollar baby has now, officially, gone bye bye.
Just when you thought that the biggest ever "multi-billion" private company that also happens to be an utter fraud, would quietly disappear before it risked attracting even more unwarranted attention from regulators, enforcers, and criminal investigators which could potentially lead to prison time for "billionaire" Elizabeth Holmes, here she comes again reminding everyone of her fallen from grace presence, in this case with what should be the terminal news for this company, namely that as the WSJ reports (and as the company confirms) Theranos has told federal health regulators that the company voided and revised two years of results from its Edison blood-testing devices and has issued tens of thousands of corrected reports to doctors and patients.
As a reminder, the basis for Theranos ludicrous $9 billion valuation which it appears was achieved without anyone doing any actual due diligence, were the "Edison" machines which were touted as revolutionary - not just by Holmes but by the fawning media and even the Clintons. Theranos has now told regulators that it threw out all Edison test results from 2014 and 2015, effectively confirming it has no proprietary technology, and also validating that its valuation should be zero.
Worse, Theranos has told regulators that it used the Edison for 12 types of tests out of more than 200 offered to consumers and stopped using the devices altogether in late June 2015. In other words, Theranos' insane "valuation" was achieved on the basis of doing only 6% of blood tests in house (all of them erroneously we now learn), and outsourcing 94% to companies whose products actually worked and many of whom likely had a far lower valuation than the one at which a bunch of idiot billionaires "valued" Holmes' worthless company.
In the process of committing fraud and building up her valuation, Holmes repeatedly gambled with people's lives, sending them clearly wrong results. As a result some patients have received erroneous results that might have thrown off health decisions made with their doctors, the WSJ reports. All this is needed is one death and there is a criminal case...
In 2012, Gen. Mattis, then leading the military’s Central Command, pressed for the U.S. Army to procure Theranos lab equipment and deploy it in the battlefield, according to senior military officials involved in Army medical research. The officials said officers and civilian personnel involved in a review of the technology were told Gen. Mattis sought the procurement.
A Fort Detrick, Md.-based Army unit that oversees health-care regulatory matters, however, found Theranos wasn’t prepared to meet requirements and halted the procurement, the officials said. The concern, one of the officials said, was that some components of Theranos’s lab-testing equipment required U.S. Food and Drug Administration approval, which the company hadn’t obtained. In 2015, the FDA warned Theranos it was using an uncleared blood-collection device.Nothing improper here, folks? No coercive, conflict-of-interest pulling of rank?
Theranos and a representative for Gen. Mattis didn’t immediately respond to requests for comment on the matter...
More. From WSJ:
Theranos Foresaw Huge Growth in Revenue and ProfitsUgh. Wonder whether any Theranos talk will come up during WinterTech 2017 next month?
Blood-testing startup projected that 2016 revenue could hit nearly $2 billion; a surprising email
While soliciting investors in 2014 and 2015, Theranos Inc. predicted revenue of nearly $2 billion and net income of about $505 million this year, according to investor materials from the blood-testing startup.
The projections help show how Theranos and founder Elizabeth Holmes attracted more than $632 million in its latest funding round, which included the period when the investor materials were distributed. The Wall Street Journal reviewed a copy of the documents.
Theranos also said it expected 2015 revenue of nearly $1 billion and net income of about $330 million, suggesting the company would roughly double in size in 2016, the documents show. Theranos envisioned fast-growing partnerships with drugstores, hospitals, doctors and drugmakers...
I will be there. Register here.
UPDATE: from ArsTechnica, "Trump’s “Mad Dog” stays as Theranos cuts figureheads and outs investors. Disgraced biotech holds on to defense secretary pick and forgets how to email."
...On Thursday, the disgraced blood testing company announced that members of its distinguished yet puzzling "board of counselors" would be stepping down January 1. Those members include former secretaries of state Henry Kissinger and George Shultz, former defense secretary William Perry, and former senators Sam Nunn and Bill Frist. Also going is Riley Bechtel, chairman of the country’s largest construction and civil engineering company, who served on Theranos’ board of directors.Also just in: "Lawsuit for Investors in Theranos, Inc Alleges Securities Laws Violations"
Notably absent from the list of high-profile departures is retired Marine Corps Gen. James “Mad Dog” Mattis. The four-star general, who joined Theranos’ board of directors in 2013, just so happens to also be President-elect Donald Trump’s nominee for defense secretary. Trump formally announced the nomination Tuesday evening...
...On December 27, 2015, it was reported that two former employees are accusing Theranos Inc. of deleting the quality control data of its proprietary machines and cherry-picking data when comparing those machines with traditional lab machines.As an old-school former lab QA/QC guy, I would love to get a look at their QC data.
On January 27, 2016, it was reported that "Federal inspectors found 'deficient practices' at a Theranos, Inc. laboratory that 'pose immediate jeopardy to patient health and safety.'"
On March 8, 2016, it was reported that a "federal inspection report said a Theranos, Inc. laboratory ran an important blood test on 81 patients in a six-month period despite erratic results from quality-control checks meant to ensure the test's accuracy," and that "[i]naccurate results from the test can be especially serious for patients."...
UPDATE
apropos of Silicon Valley broadly,
The Year Silicon Valley Went Morally BankruptA very good read.
Tech moguls want to remake the world, but in 2016 they behaved as if they owe us no explanation for their decisions.
BY SARAH JONES
Peter Thiel has had a very good year. He vanquished Gawker, rode out Trumpism to its triumphant conclusion, and is now poised to influence the incoming administration to his advantage. The president-elect, Thiel said in October, “gets the big things right.” It’s still not clear what exactly those “things” are—Thiel has been publicly vague about the specific policy alignments he shares with Donald Trump—but the two share a certain grandiosity and a disdain for the government, as well as a warped view of what it means to be a good and decent human being.
In Silicon Valley, Thiel has long been a critic of democracy, political correctness, and women who have suffered sexual assault. As the Guardian reported in October, Thiel co-authored a 1995 book that derided Stanford University’s “multiculturalism,” accused the rape crisis movement of “vilifying men,” and referred to date rape as “belated regret.” (He’s since apologized for his “crudely argued statements,” but that’s difficult to believe now thanks to his enthusiastic support for Trump.) “Real diversity requires a diversity of ideas,” he wrote, “not simply a bunch of like-minded activists who resemble the bar scene from Star Wars.”...
"If Zuckerberg is living on another moral planet, then Theranos founder Elizabeth Holmes inhabits her own universe. This year, she starred in a peculiar and very public morality play when her revolutionary blood-testing technology company virtually collapsed."__
BTW, after citing Steve Tobak above, I investigated his new book.
"Leadership," 'eh? I've had a run at that topic before. See, e.g., my September, 2015 post "What is 'Leadership,' anyway?"
Based on a couple of negative amazon reviews, I waffled at first on buying Steve's book. But, then I went to his website, read some of his blog posts, and signed up to receive the comp excerpt Chapter 13 pdf, "Startup 101: Think like a VC."
Loved it. A quick sample:
...Regardless of how you fund your company, it pays to think like a VC. The problem is, if you ask ten of them how they pick winners, evaluate business opportunities, and avoid the most treacherous pitfalls, you’ll get ten different answers. But I’ve been around so long and worked with so many accomplished venture capitalists and entrepreneurs that I’ve boiled it down to four key questions you have to answer.Nice. Looks like my skepticism may have been unfounded. I just popped the clutch and downloaded the Kindle edition, and have started by first roaming around in it, sampling some of it randomly (starting with the Epilogue after reading the beginning material). Gonna recommend it to my niece April and her husband Jeff Nyquist, who are now in the full throes of high-tech startup world with their "NeuroTrainer" company. I first cited it here, during my WinterTech 2016 coverage last January.
WHAT PROBLEM ARE YOU SOLVING?
An employee of a company I was working with once approached me about an invention he had no idea how to market. This man had invented the perfect paper clip. No, I’m not kidding. He had analyzed all the different styles of paper clips, found that each one was flawed, and come up with a clever new design.
I checked it out. Sure enough, this had to be the most perfect paper clip in the world.
Unfortunately, I was pretty sure there were no office workers sitting at their desks cursing their paper clips because they didn’t work well enough. Nobody on earth saw this as a problem that needed to be solved. That’s the problem with inventors: They come up with brilliant concepts that nobody needs or even wants. They devise elegant solutions to nonexistent problems. And they think that if they build it, customers will come...
HOW WILL YOU BEAT THE COMPETITION?
I’m always hearing from people who want to be entrepreneurs so badly that they rack their brains trying to come up with ideas for services and products. Besides not having a clear problem statement, they can never tell me why their solution, whatever it is, is going to beat the competition. The really sad thing is that they don’t seem to think it matters.
If all you can come up with is a me-too product or service that’s been done to death, you’re just going to end up slugging it out with everyone and his brother on price. That’s no way to make a living unless you don’t mind eating out of dumpsters for the rest of your life...
DO YOU HAVE THE RIGHT TEAM?
You may have heard that the most important thing VCs look at when they evaluate a startup is the team. That’s true, but the reasons may not be as obvious as you’d think.
Business is all about people. I could say business is about understanding what motivates people and building lasting relationships with them, but that’s like saying art is about paint and a canvas. There’s a bit more to it than that.
If they’re going to get in bed with you, so to speak, investors want to dig pretty deep to find out what really makes you tick. They don’t just want to know your capabilities. They want to know who you are, how adaptable you are, what motivates you, and how you’ll act in a crisis. They want to know your true colors before they write you a check.
VCs will never admit to this, but that’s one of the reasons it takes so long to get funded. Time may not be on your side, but it’s on theirs. Obviously they don’t want to risk losing anything critical, like your market window, but the longer they observe you under different conditions, the better.
Of course, they want to know you’re a strong leader with a solid team that can do the job. They want to know all about your team, their background, and why they’re uniquely qualified to run your venture and deliver its solution to market…
DO YOU HAVE A CREDIBLE BUSINESS PLAN?
Would you like to know a little secret of the business world? Very few people are born business wizards. No, I’m not trying to be funny. I know nobody’s actually born that way. What I mean is, I don’t know too many people who actually get excited about income statements, balance sheets, and capitalization plans. And I’m no exception.
While I may have an aptitude for math and a head for numbers, my great love growing up was science, and later, technology. And yet that wasn’t enough to make it in the startup world…
The point is, if you want to run a business, you’ve got to understand how a business works. It has to be about more than just your great idea or product. Finance, raising capital, marketing, operations, they all go hand in hand. So when I say the words business plan, I don’t want you to roll your eyes or get scared. It doesn’t have to be 20 pages of spreadsheets. You just need a reasonable idea of how to get your business to the point where its growth is somewhat self-sustaining. And to do that, you have to make sure you always have enough money in the bank. You’ve got to do the math...
UPDATE: Finished the Steve Tobak book. Definitely worth your time. I'd make it required reading by VCs for all startup funding candidates. Will have more to say and cite. Stay tuned.
ON DECK
Michael Lewis' new book is out. I just downloaded it.
I've been reading Kahneman and Tversky (and Michael Lewis) for decades. I'm sure this will be a fine biographical book recounting their lives' important work.
...Where do the biases come from? Why do people have them? I’d set out to tell a story about the way markets worked, or failed to work, especially when they were valuing people. But buried somewhere inside it was another story, one that I’d left unexplored and untold, about the way the human mind worked, or failed to work, when it was forming judgments and making decisions. When faced with uncertainty— about investments or people or anything else— how did it arrive at its conclusions? How did it process evidence— from a baseball game, an earnings report, a trial, a medical examination, or a speed date? What were people’s minds doing— even the minds of supposed experts— that led them to the misjudgments that could be exploited for profit by others, who ignored the experts and relied on data?__
And how did a pair of Israeli psychologists come to have so much to say about these matters that they more or less anticipated a book about American baseball written decades in the future? What possessed two guys in the Middle East to sit down and figure out what the mind was doing when it tried to judge a baseball player, or an investment, or a presidential candidate? And how on earth does a psychologist win a Nobel Prize in economics? In the answers to those questions, it emerged, there was another story to tell. Here it is.
Lewis, Michael (2016-12-06). The Undoing Project: A Friendship That Changed Our Minds (Kindle Locations 88-98). W. W. Norton & Company. Kindle Edition.
INTERESTING THERANOS-RELATED UPDATE
Tangentially, that is.
This Blood-Testing Company Could Be the New Theranos
by Jen Wieczner @jenwieczner
It also has parallels to Valeant—and not in a good way.
Here’s the story of a a former darling biotech company, which was once worth as much as $4.5 billion. It has a technology that allows it to do a variety of diagnostic tests on just a few drops of blood. And this year it’s run into a world of trouble.Lordy.
The company has become the subject of multiple investigations by the U.S. Department of Justice and the SEC, including two criminal probes and another inquiry into the accuracy and reliability of some of its blood-testing devices. Now, patients and investors have sued the company left and right, and the Fortune 500 firm with which it had struck a major deal is now scrambling to call it off.
Sound familiar?
No, it’s not Theranos—a Silicon Valley blood-testing startup run by CEO Elizabeth Holmes with a similar downward spiral.
Rather, the company is Alere ALR -0.51% , a publicly-traded company based in Waltham, Mass. not far from Boston. Alere was founded (under a different name) in 1981, before Holmes was even born. It makes a number of diagnostic products and doesn’t necessarily directly compete with Theranos (which was once worth $9 billion, twice as much as Alere at its peak). But while Theranos’s scandals have been mostly concentrated in its laboratories, where accuracy and quality-control problems led the U.S. health department to revoke its lab license, Alere’s difficulties run the gamut...
DECEMBER 14TH UPDATE
By Maya Kosoff
THERANOS ADDS ANOTHER ACTUAL DOCTOR TO ITS BOARD"Pivot" window dressing at this point?
That brings the total number of board members with scientific or medical experience to ten.
____________
More to come...
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