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When Theranos was still a popular golden child company, I went to a party in SF thrown by a partner at a prominent local law firm. At the party a husband of on

When Theranos was still a popular golden child company, I went to a party in SF thrown by a partner at a prominent local law firm. At the party a husband of one of the lawyers happened to be a lab worker at a biotech startup. He and I ended up chatting in a small group of spouses while the firm lawyers were clustered in another part of the house gossipping about work. Over the next 30 minutes or so this guy explained to us non-scientists why he thought Theranos might very likely be a fraud. People nodded their heads and said "interesting" but I don't think anyone really took the guy very seriously. It's easy to dismiss such concerns from people in parallel startups as jealousy or misguided. But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better? It seems to me the more interesting story in regards to WeWork and Theranos is why are the incentives in these investment funds not aligned with the purpose of rooting out such fraudulent or overblown claims. I honestly could care less about the flamboyant personalities involved. The system failures are more interesting to me.

paxys 6y ago
> But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better? Theranos didn't really have any major Silicon Valley investors backing it. The usual VC firms stayed a mile away from day 1. It raised money instead from The Walton Family, Rupert Murdoch, Betsy DeVos, Walgreens, the Cox family, Carlos Slim and other random well-connected and influential personalities. Few people will say this, but Theranos was actually a massive success for the Silicon Valley venture ecosystem. It proved that outsiders can't simply throw money at new startups and replicate their results. There is institutional knowledge, in-house teams (including top engineers) doing due diligence, mountains of data, trade secrets, IP, network effects and a lot more needed to be able to compete in that world. There's a reason why a16z, Sequoia, Khosla, Accel, KP, Greylock, Google all passed on it, despite the fact that Theranos and Holmes checked all the boxes for a no-brainer investment (Stanford-educated female founder, bio/health tech space, "changing the world" ambition, immense preexisting buzz).
- TheMagicHorsey 6y ago
  I wasn't aware of these facts. It seems VCs do have value-add. I also found out today that Theranos' law firm was not a Silicon Valley law firm. They used a firm called Boies Schiller, which apparently is a firm famous for political connections and high stakes commercial litigation. They weren't really familiar with venture capital and startups it seems, and they facilitated a massive fraud ... either wittingly or unwittingly.

paxys 6y ago

> But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better? Theranos didn't really have any major Silicon Valley investors backing it. The usual VC firms stayed a mile away from day 1. It raised money instead from The Walton Family, Rupert Murdoch, Betsy DeVos, Walgreens, the Cox family, Carlos Slim and other random well-connected and influential personalities. Few people will say this, but Theranos was actually a massive success for the Silicon Valley venture ecosystem. It proved that outsiders can't simply throw money at new startups and replicate their results. There is institutional knowledge, in-house teams (including top engineers) doing due diligence, mountains of data, trade secrets, IP, network effects and a lot more needed to be able to compete in that world. There's a reason why a16z, Sequoia, Khosla, Accel, KP, Greylock, Google all passed on it, despite the fact that Theranos and Holmes checked all the boxes for a no-brainer investment (Stanford-educated female founder, bio/health tech space, "changing the world" ambition, immense preexisting buzz).

TheMagicHorsey 6y ago
I wasn't aware of these facts. It seems VCs do have value-add. I also found out today that Theranos' law firm was not a Silicon Valley law firm. They used a firm called Boies Schiller, which apparently is a firm famous for political connections and high stakes commercial litigation. They weren't really familiar with venture capital and startups it seems, and they facilitated a massive fraud ... either wittingly or unwittingly.