6 ms·

I wonder, is this good or bad for other startups in the diagnostics space?

the_mitsuhiko 11y ago
I don't see how there is anything good coming out of this for startups. Theranos burned the field for many more companies. //EDIT: which is very sad to see because in many ways it seemed like the CEO was behind it with a lot passion and no ill intentions.
- existencebox 11y ago
  I'm surprised by your latter statement, especially in light of your former statement. Being blinded by passion, and having "no ill intentions", even if we liberally grant that much, is not the same as being properly considerate of the risks and responsibilities of as critical a technology as healthcare diagnostics. I assign a CEO direct responsibility for being aware of the efficacy of their product, and being honest about this, or at the VERY LEAST taking a proactive, candid, and reconciliatory response when the former is found to be untrue, and none of these preconditions seems to have been met from the news I've read. We live in a society where CEOs are lionized for success, but often seem to escape responsibility for failure. Frankly, I don't care either way if we consider them to be the true guiding hand or not, I just want us to be consistent one way or the other.
  - auggierose 11y ago
    > I just want us to be consistent one way or the other That does not really make sense, a priori prescribing how we want things to be. Assume a model of the world where the CEO always did something special to make their companies succeed, and where the failure of companies is always not due to the CEO, but due to the mediocrity of the other employees. That model makes about as much sense as each of the two other models you are proposing.
    - jonnathanson 11y ago
      Respectfully, I don't think that's what he's saying. If we want to look at this formally, we see he is stating three things: 1. That we seem to apply inconsistent standards of responsibility to CEOs. Are they ultimately responsible for the outcomes of the companies they lead, for good or for bad? In current practice, we seem to selectively apply praise and eschew blame. He wants to point this out. 2. He personally believes the CEO is ultimately responsible; however... 3. At the end of the day, he just wants society to apply a consistent standard, one way or the other: either the CEO is the ultimate point of accountability for all things, or she's not. He almost "doesn't care" which one we choose, so long as we choose one. Now, you're free to criticize the dichotomy he raises in those points. Maybe you find it overly reductive or absolutist. If so, fair. (Personally speaking, I believe the buck should stop at the CEO, insofar as she is the chief executive of the company, tasked with understanding and directing all of its actions. If she took deliberate part in any alleged deceptions, that's certainly worse than if she negligently allowed the deceptions to take place. But in either case, she bears some responsibility. Not the same degree of blame, but the same mantle of responsibility. It's her company, and whether she deliberately misguided it or was simply asleep at the wheel, those are both derelictions of the CEO's responsibilities. Sure, the BOD outranks the CEO, but the CEO has a much closer relationship with the day-to-day operations of the company.)
    - existencebox 11y ago
      There are a few reasons I take the stance I do. (as a slight edit, sister post Jonnathanson summarized my broader point far better than I could have, whereas my below is more a "more on why the current system isn't great") 1. We are currently living in a world without the constraint I propose, in which CEO comp is often a pro-factum given and attribution of blame almost unheard of. I do not pretend that the system I propose will _always be correct_, but I do believe it would motivate better behavior, as tighter accountability often does in other systems even if it doesn't necessarily "make sense". 2. Given the innate ambiguity of most of these situations, who gets to make that call anyway? (fault of failure). Is it even possible to make? My bet would be in many situations, difficult at best; but there is a massive power discrepancy currently at play, where executives have significantly more control over message/direction/response than those they can saddle with blame, so I suggest structuring systems in ways that help offset that imbalance. Does this put more duress on CEOs to take responsibility for their employees? Yes, and despite what I conceded above re: "making sense" not being necessary, I truly do think that sort of responsibility does "make sense" especially in a world where as CEO you take a massive percent share of those employees value. To coopt an old turn of phrase, "No free lunches."
  - the_mitsuhiko 11y ago
    I think what's happening to the company is what should have happened from my understanding of the situation. At the time time I can sympathise with the CEO because she has been working on that since she was 19 years old and it would appear that she is behind this with a passion. That by no means implies that she is not responsible for this. In my mind it's just a sad development from that perspective. Something I would not have wished on anyone.
    - jjm 11y ago
      Working on end result properly is not the same as "wishing" or "dreaming". My commentary is this, The quantification of the relationship between her leadership role and the direct effectiveness of the product is quite different than many other successful founder/CEOs. It is that which blinded her from either pivoting or acknowledging the reality of low effectiveness. A circumstance which to others would be justification to shutdown. Unless this was all well understood and then that would enter into discussions of willful negligence. A characteristic that has consequences as people's livelihood were expected to be affected. The spectacle is negatively impact ing startup partnerships. The result is either more due diligence with all parties, which either translates to more funding and a longer IPO journey, or cutting off these less mature startups at the knees early from funding until "results" are evident. Another question is will this situation coupled with general lack luster equity market enthusiasm be incorrect fodder for "bubble" talk (barring this a straw on camel back scenario - doubt it).
- nkrisc 11y ago
  Intentions are as valuable as ideas. Outcomes and execution are ultimately what matters.
joezydeco 11y ago
Perhaps it's just a lesson to have your science locked down and proven before you make all kinds of promises to investors. And if your science is broken, don't snow people over with a board of directors that Fortune-50 companies can't even muster.
- a3n 11y ago
  Except sometimes you need those investors' money to get to where your science is locked down and proven.
  - tclmeelmo 11y ago
    Experienced investors aren't going to invest much if the science isn't on a good foundation. Even if they would, that's a pretty expensive way to fund research: it's cheaper to fund it by grants or through revenue.
    - a3n 11y ago
      And were these experienced investors? :)
      - tclmeelmo 11y ago
        I am under the impression that they were experienced in IT but inexperienced in biomedical investments.
  - hga 11y ago
    As I understand it, that's how it works with the VCs who specialize in biomedicine. They'll provide limited funding to scientists with a credible theory to see if it pans out, with further funding to ideally follow. Theranos got way too far without having to prove their science.
  - xenihn 11y ago
    Makes you wonder how much investor funding that would have otherwise gone to startups with an actual viable product was sucked up by Theranos.
Geekette 11y ago
There's been a lot of speculation about this being bad for other health related startups, etc. But I don't think so. To be a valid comparison, your startup would have to be perceived to have a confluence of factors shielding it from accountability: A combination of long tenure (Theranos is 13 years old) + huge amount of funding (this co. has $750M+) + a very politically influential board appear to be shielding Theranos from typical consequences of non-verified innovation (contrary to standard scientific process) and resistance to directly address specific allegations of misconduct (in tech process, company operations, among personnel etc).
tclmeelmo 11y ago
I would predict that it depends on where the money is coming from. For VC firms that are experienced in the biomedical space, Theranos changes nothing because they were already suspicious of Theranos. For firms that are inexperienced in the biomedical space, they have hopefully learned that growth cannot compensate for flaws in science or technology. If they continue to invest in biomedical, they will be much more careful in their DD; or perhaps they lose their appetite for biomedical and leave entirely. I don't think things have changed for biomedical startups that are based on good science and technology and have an experienced team. What would be wonderful is if the media learned a lesson from this mess. As I see it, they were a passenger in the Theranos hype machine.
- yoohoocthulhu 11y ago
  I'd say that Theranos is so much of an outlier that it's failure won't really have a huge effect. They weren't patenting nor licensing any exciting technology. They had no groundbreaking presentations of their technology. They had no experts in the field working at the company or on the board.... I mean, it's amazing they raised money to begin with
  - deleted 11y ago
    [deleted]
- jonnathanson 11y ago
  "For firms that are inexperienced in the biomedical space, they have hopefully learned that growth cannot compensate for flaws in science or technology. If they continue to invest in biomedical, they will be much more careful in their DD; or perhaps they lose their appetite for biomedical and leave entirely." Exactly, which will result in essentially a return to the status quo. The investors who understand the complexities and models of the various biomedical industries will continue to invest as they always have. The carpetbaggers will fold up their tents and move on. The result is less likely to be systemic taint or damage to biotech startups as a whole -- though this may happen in the short term -- and more likely to be a reduction in fly-by-night or sketchy biotech startups for lack of funding. "I don't think things have changed for biomedical startups that are based on good science and technology and have an experienced team." Yes. To paraphrase Buffett, the tide will go out, and we'll see who's been swimming naked -- but the people who've been wearing swimsuits will be just fine. "What would be wonderful is if the media learned a lesson from this mess. As I see it, they were a passenger in the Theranos hype machine." The media hype surrounding Theranos was truly spectacular to behold. One day, nobody's ever heard of this company that's been stealthily chugging along for nearly a decade and raising heroic amounts of capital. The next day, Holmes is on the cover of every business magazine, in full Steve Jobs attire and disposition. (I'm pretty sure one or two breathless headlines actually called her "The next Steve Jobs.") Soon she's headlining the lecture circuit and racking up more puff pieces and cover stories. It's as if nobody took a critical eye to any of this hype, other than the WSJ. No doubt a confluence of factors was at play here: A desire to fill the "Great Tech Visionary" vibe left vacant by Steve Jobs's death. A desire to find the next great female role model. A desire to cover "hard tech," and not just the Nth food-delivery app of the week. And then there's just good old-fashioned me-tooism, which routinely plagues the business press: "Everyone else is covering this, so it must be a Thing, and now that it's a Thing, we have to cover it!"
yoohoocthulhu 11y ago
The diagnostics space is kind of screwed at the moment anyway by court rulings that have severely limited the patentability of diagnostics tests

I don't see how there is anything good coming out of this for startups. Theranos burned the field for many more companies. //EDIT: which is very sad to see because in many ways it seemed like the CEO was behind it with a lot passion and no ill intentions.

existencebox 11y ago
I'm surprised by your latter statement, especially in light of your former statement. Being blinded by passion, and having "no ill intentions", even if we liberally grant that much, is not the same as being properly considerate of the risks and responsibilities of as critical a technology as healthcare diagnostics. I assign a CEO direct responsibility for being aware of the efficacy of their product, and being honest about this, or at the VERY LEAST taking a proactive, candid, and reconciliatory response when the former is found to be untrue, and none of these preconditions seems to have been met from the news I've read. We live in a society where CEOs are lionized for success, but often seem to escape responsibility for failure. Frankly, I don't care either way if we consider them to be the true guiding hand or not, I just want us to be consistent one way or the other.
- auggierose 11y ago
  > I just want us to be consistent one way or the other That does not really make sense, a priori prescribing how we want things to be. Assume a model of the world where the CEO always did something special to make their companies succeed, and where the failure of companies is always not due to the CEO, but due to the mediocrity of the other employees. That model makes about as much sense as each of the two other models you are proposing.
  - jonnathanson 11y ago
    Respectfully, I don't think that's what he's saying. If we want to look at this formally, we see he is stating three things: 1. That we seem to apply inconsistent standards of responsibility to CEOs. Are they ultimately responsible for the outcomes of the companies they lead, for good or for bad? In current practice, we seem to selectively apply praise and eschew blame. He wants to point this out. 2. He personally believes the CEO is ultimately responsible; however... 3. At the end of the day, he just wants society to apply a consistent standard, one way or the other: either the CEO is the ultimate point of accountability for all things, or she's not. He almost "doesn't care" which one we choose, so long as we choose one. Now, you're free to criticize the dichotomy he raises in those points. Maybe you find it overly reductive or absolutist. If so, fair. (Personally speaking, I believe the buck should stop at the CEO, insofar as she is the chief executive of the company, tasked with understanding and directing all of its actions. If she took deliberate part in any alleged deceptions, that's certainly worse than if she negligently allowed the deceptions to take place. But in either case, she bears some responsibility. Not the same degree of blame, but the same mantle of responsibility. It's her company, and whether she deliberately misguided it or was simply asleep at the wheel, those are both derelictions of the CEO's responsibilities. Sure, the BOD outranks the CEO, but the CEO has a much closer relationship with the day-to-day operations of the company.)
  - existencebox 11y ago
    There are a few reasons I take the stance I do. (as a slight edit, sister post Jonnathanson summarized my broader point far better than I could have, whereas my below is more a "more on why the current system isn't great") 1. We are currently living in a world without the constraint I propose, in which CEO comp is often a pro-factum given and attribution of blame almost unheard of. I do not pretend that the system I propose will _always be correct_, but I do believe it would motivate better behavior, as tighter accountability often does in other systems even if it doesn't necessarily "make sense". 2. Given the innate ambiguity of most of these situations, who gets to make that call anyway? (fault of failure). Is it even possible to make? My bet would be in many situations, difficult at best; but there is a massive power discrepancy currently at play, where executives have significantly more control over message/direction/response than those they can saddle with blame, so I suggest structuring systems in ways that help offset that imbalance. Does this put more duress on CEOs to take responsibility for their employees? Yes, and despite what I conceded above re: "making sense" not being necessary, I truly do think that sort of responsibility does "make sense" especially in a world where as CEO you take a massive percent share of those employees value. To coopt an old turn of phrase, "No free lunches."
- the_mitsuhiko 11y ago
  I think what's happening to the company is what should have happened from my understanding of the situation. At the time time I can sympathise with the CEO because she has been working on that since she was 19 years old and it would appear that she is behind this with a passion. That by no means implies that she is not responsible for this. In my mind it's just a sad development from that perspective. Something I would not have wished on anyone.
  - jjm 11y ago
    Working on end result properly is not the same as "wishing" or "dreaming". My commentary is this, The quantification of the relationship between her leadership role and the direct effectiveness of the product is quite different than many other successful founder/CEOs. It is that which blinded her from either pivoting or acknowledging the reality of low effectiveness. A circumstance which to others would be justification to shutdown. Unless this was all well understood and then that would enter into discussions of willful negligence. A characteristic that has consequences as people's livelihood were expected to be affected. The spectacle is negatively impact ing startup partnerships. The result is either more due diligence with all parties, which either translates to more funding and a longer IPO journey, or cutting off these less mature startups at the knees early from funding until "results" are evident. Another question is will this situation coupled with general lack luster equity market enthusiasm be incorrect fodder for "bubble" talk (barring this a straw on camel back scenario - doubt it).
nkrisc 11y ago
Intentions are as valuable as ideas. Outcomes and execution are ultimately what matters.

joezydeco 11y ago

Perhaps it's just a lesson to have your science locked down and proven before you make all kinds of promises to investors. And if your science is broken, don't snow people over with a board of directors that Fortune-50 companies can't even muster.

a3n 11y ago
Except sometimes you need those investors' money to get to where your science is locked down and proven.
- tclmeelmo 11y ago
  Experienced investors aren't going to invest much if the science isn't on a good foundation. Even if they would, that's a pretty expensive way to fund research: it's cheaper to fund it by grants or through revenue.
  - a3n 11y ago
    And were these experienced investors? :)
    - tclmeelmo 11y ago
      I am under the impression that they were experienced in IT but inexperienced in biomedical investments.
- hga 11y ago
  As I understand it, that's how it works with the VCs who specialize in biomedicine. They'll provide limited funding to scientists with a credible theory to see if it pans out, with further funding to ideally follow. Theranos got way too far without having to prove their science.
- xenihn 11y ago
  Makes you wonder how much investor funding that would have otherwise gone to startups with an actual viable product was sucked up by Theranos.

Geekette 11y ago

There's been a lot of speculation about this being bad for other health related startups, etc. But I don't think so. To be a valid comparison, your startup would have to be perceived to have a confluence of factors shielding it from accountability: A combination of long tenure (Theranos is 13 years old) + huge amount of funding (this co. has $750M+) + a very politically influential board appear to be shielding Theranos from typical consequences of non-verified innovation (contrary to standard scientific process) and resistance to directly address specific allegations of misconduct (in tech process, company operations, among personnel etc).

tclmeelmo 11y ago

I would predict that it depends on where the money is coming from. For VC firms that are experienced in the biomedical space, Theranos changes nothing because they were already suspicious of Theranos. For firms that are inexperienced in the biomedical space, they have hopefully learned that growth cannot compensate for flaws in science or technology. If they continue to invest in biomedical, they will be much more careful in their DD; or perhaps they lose their appetite for biomedical and leave entirely. I don't think things have changed for biomedical startups that are based on good science and technology and have an experienced team. What would be wonderful is if the media learned a lesson from this mess. As I see it, they were a passenger in the Theranos hype machine.

yoohoocthulhu 11y ago
I'd say that Theranos is so much of an outlier that it's failure won't really have a huge effect. They weren't patenting nor licensing any exciting technology. They had no groundbreaking presentations of their technology. They had no experts in the field working at the company or on the board.... I mean, it's amazing they raised money to begin with
- deleted 11y ago
  [deleted]
jonnathanson 11y ago
"For firms that are inexperienced in the biomedical space, they have hopefully learned that growth cannot compensate for flaws in science or technology. If they continue to invest in biomedical, they will be much more careful in their DD; or perhaps they lose their appetite for biomedical and leave entirely." Exactly, which will result in essentially a return to the status quo. The investors who understand the complexities and models of the various biomedical industries will continue to invest as they always have. The carpetbaggers will fold up their tents and move on. The result is less likely to be systemic taint or damage to biotech startups as a whole -- though this may happen in the short term -- and more likely to be a reduction in fly-by-night or sketchy biotech startups for lack of funding. "I don't think things have changed for biomedical startups that are based on good science and technology and have an experienced team." Yes. To paraphrase Buffett, the tide will go out, and we'll see who's been swimming naked -- but the people who've been wearing swimsuits will be just fine. "What would be wonderful is if the media learned a lesson from this mess. As I see it, they were a passenger in the Theranos hype machine." The media hype surrounding Theranos was truly spectacular to behold. One day, nobody's ever heard of this company that's been stealthily chugging along for nearly a decade and raising heroic amounts of capital. The next day, Holmes is on the cover of every business magazine, in full Steve Jobs attire and disposition. (I'm pretty sure one or two breathless headlines actually called her "The next Steve Jobs.") Soon she's headlining the lecture circuit and racking up more puff pieces and cover stories. It's as if nobody took a critical eye to any of this hype, other than the WSJ. No doubt a confluence of factors was at play here: A desire to fill the "Great Tech Visionary" vibe left vacant by Steve Jobs's death. A desire to find the next great female role model. A desire to cover "hard tech," and not just the Nth food-delivery app of the week. And then there's just good old-fashioned me-tooism, which routinely plagues the business press: "Everyone else is covering this, so it must be a Thing, and now that it's a Thing, we have to cover it!"

yoohoocthulhu 11y ago

The diagnostics space is kind of screwed at the moment anyway by court rulings that have severely limited the patentability of diagnostics tests