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The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew

The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew that their claims were impossible, technologically speaking. Working with such small volumes to obtain quantitive estimates of blood chemistry is so implausible, as you are introducing uncontrollable variability - micro-evaporation, even tissue localization issues, I mean all the trained blood chemistry specialists knew this. I worked a little with DNA microfluidics, and it works because it's not quantitative. Now, what they could have done is just stuck to pos/neg tests, i.e. 'are you infected with this virus or not' which is a lot more plausible as you don't have to meet a quantitative goal, just a detection goal. Also, one-stop STD screening for HIV / herpes / etc. is possible too (I suggested this and someone responded, 'new company name: ClapTrap"). It's really kind of sad, as Theranos might have been able to pull that off (although new management would probably be required), and then they'd have been positioned to do all the COVID testing (which was a major problem in the initial US response). What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird.

misiti3780 5y ago
I too thought about the counterfactual in which that if their technology actually worked, COVID testing could have been have been done at scale in the US.
- jbay808 5y ago
  Isn't COVID testing being done at scale in many countries right now? I'm in Canada and I can go to a free drive through test station without appointment and get about a 24-hour turnaround on results, and that's been the case for over a year.
  - misiti3780 5y ago
    yes, but it was not happening in March 2020 in the US for a variety of reasons.
- nitrogen 5y ago
  There are companies (at least one anyway) that make rapid testing panels that include COVID, plus a dozen plus other respiratory diseases, in a single test that is profitable at $200 and costs $20 in consumables. I heard that they disabled all the other tests so they could get approved as a COVID test sooner, or something like that. The problem is you can't ask for such a test as a patient, hospital billing departments make the news for charging insurance $$$$ for each individual pathogen on the test, and doctors come out of the woodwork to say how negligent and irresponsible it is to test for so many things at once, as if it's literally impossible to take base rates into account when you do more than one test.
  - robertlagrant 5y ago
    If the regulators get out of the way it would be great to make these available direct to consumer with an app companion, and the consumer can share the results with their physician.
    - InitialLastName 5y ago
      Something tells me that if the regulators got out of the way, we would have dozens of Covid tests available, half of which would work better than a coin toss.
    - adolph 5y ago
      Millions and millions, millions of tests per day could be available today, except that the FDA is sitting on the applications, many of which I’ve looked at. And the applications are stellar. There’s absolutely no reason for an inexpensive three- or four-dollar test to be being outright rejected by the FDA right now or just sitting in a queue for many months. It’s no longer a normal time at the FDA, they’re being held up there for unknown reasons. Coronavirus (COVID-19): Press Conference with Michael Mina, 02/24/21 https://www.hsph.harvard.edu/news/features/coronavirus-covid-19-press-conference-with-michael-mina-02-24-21/ https://www.hsph.harvard.edu/news/features/coronavirus-covid...
      - nitrogen 5y ago
MattGaiser 5y ago
The problem is that successful startups often start out claiming that which is impossible. Uber was impossible, because it was illegal. Amazon was impossible, as you couldn't pack and ship stuff that cheaply. Personal computers were at one point considered ludicrous.
- kube-system 5y ago
  This is the SV “fake it ‘till you make it” culture. Right now Tesla is delivering “full self driving” cars that require a human driver at all times. Experts have said that it’s not possible using cameras alone, without LiDAR. Oversell and underdeliver. Fraud works great until it doesn’t.
  - LanceH 5y ago
    Isn't the self-driving just a feature on top of the car? They're faking one feature that a customer might opt into -- and none that I know have. Tesla has delivered a performant EV that is nice to drive in and is comparable to other luxury vehicles. It's not exactly faking for quite some time.
    - malcolmgreaves 5y ago
      The fake it part is calling something full self driving when it does anything but that.
      - MrGando 5y ago
        They stopped calling it fully self driving a little while ago in part due to a lot of pretty bad press and some good journalistic research.
        kube-system 5y ago
        > "Full Self-Driving Capability $10,000" ... is listed today as an option when configuring any vehicle on tesla.com
krageon 5y ago
> how they didn't do due diligence "due diligence" processes are in practice a lot less stringent or rigorous than an outsider would expect them to be given the amount of money involved. Companies get bought based on glorified sales pitches and nobody looks too hard at what they're buying is the unfortunate truth of the matter. Investors are no better.
- bcrosby95 5y ago
  I think it probably depends. When we sold our company they spent months digging into numbers. And they kept asking for new types of metrics that we had to figure out ways to derive from data that wasn't necessarily designed to measure those metrics.
  - SkyMarshal 5y ago
    You’re talking about selling your company, rather than raising money for a startup. At the stage where you’re selling a company, you’re expected to have sales, metrics, and various track records that can be verified, hence the intensive due diligence. And usually the acquiring company has in-house expertise on the domain, and is capable of doing the due diligence. Early stage startups have none of that, just an idea, things the team have done before as proof they can execute, and sometimes some social proof like TED talks or high-profile board members. The challenge of doing due diligence then is that most general VCs that invest across a broad range of domains lack the in-house expertise to fully vet all of them. They can hire SME advisors, or ask around in their network, and should. But it’s possible for things to slip through the cracks sometimes.
  - foobarian 5y ago
    If you had sat next to Bill Clinton on a TED talk stage and had a former Secretary of State and his friends on your board I bet things would have gone more smoothly for you.
  - akiselev 5y ago
    I went through a similar experience. Turns out the acquiring company knew it's audience well - all of the metrics were for sales pitches tailored to specific investors that they were raising money from, which they got shortly before finally closing our deal. Turtles all the way down.
Ajay-p 5y ago
Look at the board. Older men. They saw an attractive, young, energetic technology wizard and fell for her charm. I don't know if one could go as far as to say this is female privilege, but I think there was definitely elements of seduction.
munificent 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. The thing is, the primary goal of an investor is not to invest in companies that are honest and actually do what they claim. The goal is to invest in a company that reaches a valuation high enough to let them recoup their investment at a profit. If that valuation happens through fraud, hype, destroying the environment, whatever, that doesn't really factor in. It probably is the case that successfully doing what the company claims has a positive correlation with higher valuation, but it's not strictly necessary. The failure mode for the investors in Theranos is not that it was fraudulent. It's that the fraud was discovered before they could cash out. They didn't need to believe that Theranos was honest, they just needed to believe that other later investors would believe they were honest.
- avalys 5y ago
  Can you provide any examples of a high-profile company, ultimately shown to be dishonest, where the early investors were able to “cash out” before this dishonesty became known?
  - hef19898 5y ago
    Depends on what you call early. Nikola and WeWork come to mind, I assume Newman wasn't the only one to cash out early enough during one of the founding rounds.
  - ta1234567890 5y ago
    Uber Explanation, since this is being downvoted. Uber might not have lied about their business, but it surely looks like investors never cared about the businesses viability and rather only cared about being able to turn a profit on their investment (which was the point being made by the gp). To this day, it is still not clear if Uber’s business model is viable. Also not to mention the original CEO/founder’s reputation and attitude, which the investors also didn’t care about until it became too big of a scandal. Additionally, the investors didn’t even care that Uber was technically illegal (same as Airbnb btw). Some references: https://techcrunch.com/2021/02/12/will-ride-hailing-profits-ever-come/ https://techcrunch.com/2021/02/12/will-ride-hailing-profits-... https://www.marketwatch.com/story/uber-and-lyft-are-staging-a-ridiculous-race-for-fake-profits-11628205337 https://www.marketwatch.com/story/uber-and-lyft-are-staging-... https://www.businessinsider.com/uber-company-scandals-and-controversies-2017-11#january-2012-uber-gets-slammed-in-its-first-major-surge-pricing-backlash-2 https://www.businessinsider.com/uber-company-scandals-and-co...
robertlagrant 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. When you're sat on stage next to Bill Clinton people assume someone somewhere has done some due diligence already. Turns out there are a lot more jobs out there to do with marketing, hype, and event planning than there are doing fact checking.
- pessimizer 5y ago
  What is Bill Clinton but a hype man, though? The board of Theranos was filled with names evocative of gravitas to baby boomers, but whose input on anything would be worthless.
  - hef19898 5y ago
    Clinton? For all his faults, a two term president. And one that left with a federal budget running in the black. That requires some skills, even if I have no idea which exactly. Edit: Come to think of it, Clinton was also a president that didn't start or prolong a pointless war, on the scale of the war on terror, Vietnam or Korea.
    - sjg007 5y ago
      Clinton is probably one of the best Presidents in recent history. Obama is the best currently and Biden will probably be the best if he can get his legislation passed and the pandemic under control. Right now blue states with mask requirements and mandatory vaccinations are doing very very well. The rest of us are in for a bumpy ride.
makotech222 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. weird, maybe we shouldn't have our economy be decided by the whims of private investors.
cactus2093 5y ago
As someone who knows very little about biology, I watched the HBO documentary about Theranos and am kind of still confused by some of the conflicting claims I hear. In the documentary, they focused a lot on the engineering challenges of the machine they were making. The blood samples would spill, which would gum up the mechanical workings of the machine and make a huge mess and contaminate all the other samples. The documentary claimed that Theranos started doing demos where they would pretend to put the blood samples into the machine, but really take it to a lab bench and run the tests there, and then report the results back. That implies to me that at least some of their tests were actually possible to do. I left the documentary thinking "someone should simply do this again, solve the mechanical/robotics problem, and not lie about it and this could still be a game changing technology". But then I've seen other sources (like your comment here) claiming that the basic science of what they were trying to do was impossible/fraudulent from the beginning. Which is true?
- gitfan86 5y ago
  There is room for improvement in testing technology and processes. But not to the extent of "One drop of blood from your finger can provide accurate tests on 26 different types of tests" Especially when some of those tests are only accurate with a large sample of blood
  - michaelrpeskin 5y ago
    I'm always reminded of this when Theranos comes up. Years ago I was in the hospital, they wouldn't let me out until a blood test showed some numbers that made them feel better. I asked about how the one test worked. The nurse would come in and draw a tube of blood (I forget the volume, but if you've had your blood drawn for a test, a typical tube sized - 10's of mL). And then that'd go down to the lab and be mixed with reagents and a tech would look in a microscope slide and count things. Then they'd reverse the math and turn the things they counted into a concentration of stuff in my blood. That's the number the doctor looked at. So when I worked through the process, and deduced that what the lab tech counted was on average 4 particles of interest. And since I was an obnoxious grad student, I brought up shot noise and said that means there's a 50% error in the measurement and that the doctor should discharge me. Of course, he said that even with a 50% buffer, the numbers were too low for him to feel comfortable. Long story, but they needed an entire tube of my blood to count 4 particles in the microscope. A drop of blood would not have enough things in it to count. Real life is discrete, and often we need a big sample just to get enough things to count. That's why I always though Theranos was a fraud.
supperburg 5y ago
Never ever forget that anyone who said Holmes was a fraud was screamed down by accusations of sexism and toxic masculinity.
- JohnWhigham 5y ago
  Even now, people are still doing it! NYT ran an op-ed piece from a woman VC partner (who had a BS sexual harassment case got shot down in court) basically saying "yeah but what about all the male CEOs that don't get punished? You're sexist if you don't punish them!" as if Holmes is receiving any punishment herself. The delusional headcanons that some people view the world through... https://www.nytimes.com/2021/09/15/opinion/elizabeth-holmes-trial-sexism.html?searchResultPosition=2 https://www.nytimes.com/2021/09/15/opinion/elizabeth-holmes-...
908B64B197 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. What's interesting with Theranos is the composition of it's board... It's exclusively older men with little to no expertise on the subject matter (Channing Robertson might be an exception to the latter rule). Not a single rising female Silicon Valley executive or professor was invited to join, which is surprising considering how much she was advocating for more women in SV. Maybe she knew that female executives and founders wouldn't have the same reaction to a wide eyed conventionally attractive 19 years old blonde as the 40+ years old men she was used to "deal" with... I mean, we all know how Marissa Mayer got the job...
- elkos 5y ago
  > I mean, we all know how Marissa Mayer got the job... Honestly, how? Charm is one thing but some people might consider other more physical means. I'm not familiar with any story but I never payed much attention to Marissa Mayer's carrier to be frank.
deleted 5y ago
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malthaus 5y ago
You mean like most people currently know that most of the crypto-claims are bs but hype it up anyway? You don't invest in something that's changing the world, you're investing in something that gains value, changing the world is just the narrative to get the sucker downstream to jump on board EDIT: to add something less controversial, i can recommend the book "the key man" of a similar bluff in the impact investing space
aj7 5y ago
A dead giveaway for throwaway board seats: Nobel Prize winners, generals, politicians. Another: “professional board members” who sit on multiple boards but have never had senior executive roles involving profit and loss. These people may be accomplished in their own right, but they know little about business. They are there for lunch, the fat fee, and to pose. And when a big company has a NUMBER of these types, i.e. two or more, they have an authoritarian/secrecy problem.
- anitil 5y ago
  > “professional board members” who sit on multiple boards but have never had senior executive roles involving profit and loss How do they get to this position without having been senior execs?
  - wsc981 5y ago
    I believe these people generally get asked to join company boards due to their network. In a way these people function as lobbyists of the company.
  - throwawaylinux 5y ago
    Mattis, for example, had a relationship with the company while he was still working in government and had explicit communication with them telling them he wanted to help them get their product into the military. Getting hired onto the board 18 months after retiring from government (possibly the delay was due to being distracted by getting onto military contractor General Dynamics' board) is the other half of the back scratching arrangement that powers the corporate-political machine that rules the country. As to how they found him in the first place, presumably friends of friends of parents, their siblings, husbands, wives, etc. Her parents were in political circles in DC, they were good friends with CIA agents, father was an Enron VP, mother was a legislative director for some congressman. It's all very incestual in Washinton, kind of like old royalty.
  - aj7 5y ago
    A Stanford grad enters Harvard Business School after a year of “working” in Silicon Valley. After HBS, she joins an SV VC firm, never makes partner or does her own deals, but hangs on long enough to credibly assert a career in “venture capital” to those in mature industries who don’t know how to vet such a career. Excellent social skills with a unique ability to convey agreeability: a yes girl with flair. On two major boards.
josefresco 5y ago
> What just amazed me is how gullible all the investors were You have confused gullibility with willful ignorance.
ryandrake 5y ago
A little history helps [EDIT: Maybe not!] explain it a bit. Back when Holmes was a rising star, we were in the middle of #MeToo, Tech Bro companies were getting increasing scrutiny about their treatment of women, and in general how tech companies were struggling with diversity, and then all of a sudden, we have this company founded by a seemingly smart, driven, technically-savvy woman, educated at Stanford (!) and who wears turtlenecks like Steve Jobs (!!!). It was the perfect narrative. This is the kind of exec they were all looking for right at this moment! People were willing to suspend a lot of disbelief in order to make it real. I imagine these investors had the X-Files "I Want To Believe" poster in their offices. It wasn't so much gullibility as it was a perfect narrative that everyone desperately wanted to believe in. EDIT: Oh yes, I 100% agree [1] that her outsized personal charisma was a large part of it! 1: https://news.ycombinator.com/item?id=28674285 https://news.ycombinator.com/item?id=28674285 EDIT2: You're right, I got the MeToo timeline wrong. I seem to have remembered anti-sexism momentum building up long before 2017 but yea the actual hashtag and Weinstein stuff was in the news long after the company rose.
- dumbfoundded 5y ago
  Your timeline makes no sense. Theranos started falling apart in 2016 with charges being filed against Holmes in March 2018. MeToo started in October 2017 with the release of the Harvey Weinstein assault stories. By the time MeToo started, Theranos had been sued by investors, Walgreens, and CMS. Additionally, Holmes was banned from running labs and Theranos had failed many inspections with severe penalties. Theranos was all but dead by the time MeToo took off. What really happened (according to my recollection of reading Bad Blood) is that Holmes never really connected with the medical community. Anyone with any domain expertise knew her tech claims were impossible. She used her personal connections to generals, politicians, and wealthy individuals to spin this web of lies and keep raising money. Most of the Silicon Valley Investor elite had nothing to do with Theranos. I really dislike your interpretation of events. Not only because it makes no sense with the actual history but you play on stereotypes & generalizations to make a point. Tech certainly needs more female founders but you're not helping by twisting what really happened. 1) https://www.chicagotribune.com/lifestyles/ct-me-too-timeline-20171208-htmlstory.html https://www.chicagotribune.com/lifestyles/ct-me-too-timeline... 2) https://www.cnn.com/2021/09/07/tech/elizabeth-holmes-theranos-timeline/index.html https://www.cnn.com/2021/09/07/tech/elizabeth-holmes-therano...
comeonseriously 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. Gullible or just willing to take a risk on something that may get them a return on their investment before it all collapsed?
rsynnott 5y ago
> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. If you look at the investors, with few exceptions, they were _not_ sophisticated VC firms with experience in the area. Most of them were, for want of a better classification, elderly rich people. This should probably, in retrospect, have been a huge red flag.
jacinabox 5y ago
Why did Theranos insist on using 'a single drop of blood.' Why not be able to run a normal blood sample through an unprecedentedly compact form factor testing unit. Wouldn't that be good enough?
- hef19898 5y ago
  In industry terms? Absolutely. In terms of getting a billion dollar evaluation for being a disruptive start up? Probably not. Also, the former seems to be a harder problem to solve than the latter.
- hn_throwaway_99 5y ago
  I totally agree with this, and I'm still sad that what Theranos was planning to do with Walgreens was canned. I mean, if I could walk into a Walgreens, choose from a menu of lots of different tests at transparent, low prices (IIRC a lot of their prices were great), get a normal, standard venous blood draw, and then have that draw analyzed while I finishes shopping at Walgreens so I could get my results in 15-20 minutes, I think that would be a fantastic experience. Is there some reason the above is not possible or viable?
- rsynnott 5y ago
  (a) Holmes seemed to be obsessed with this due to a personal phobia of venous blood draws (personal quirks are a surprisingly common driver of weird decisions in Silicon Valley-ish companies; the fact that small low capacity vehicles are used in Boring Company tunnels seems to be down to Musk's phobia of public transport, for instance). (b) The original idea was that a patient would have one of these things _in their house_; a patient can't reasonably do a venous blood draw on themselves, but they can do a finger prick. There are some real working tests that work this way for this reason; HIV self-tests are normally finger-prick tests, say. But by the time they'd repositioned as "the machines are in a pharmacy, or maybe a central lab", yeah, it made no sense anymore.
- comfysocks 5y ago
  Maybe it's something like Elon Musk and his "no LIDAR" thing.
ClumsyPilot 5y ago
Why using small amounts of blood important? Are there some tests that need extremely large amounts of blood that the patient cannot provide? Or is the point to improve the patient's experience? When I give blood for testing, there is no difference in my experience as a patient, however many vials are taken, it just takes a bit longer. What am I missing?
- ufo 5y ago
  The argument Theranos gave is that it would allow collecting blood from a fingerprick (which would not require a trained professional, and because people are afraid of needles).
fossuser 5y ago
> The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew that their claims were impossible, technologically speaking. I'd push back on this a bit - not because it's wrong in the case of Theranos, but because it's often wrong in the general case. A lot of the time 'industry experts' go on about how some new approach is impossible for X reason and they're often wrong. Tesla is a good example of this (some people are still saying EVs can't work even today). You really have to get in the weeds yourself to understand whether something is possible or not rather than deferring to others most of the time. I do agree though that her investors didn't do that. She was also able to get famous people invested and on her board which I think compounded things.
random314 5y ago
Elizabeth Holmes went out of her way to find non expert investors. Infact, I don't think any silicon valley VCs made any significant investments in Theranos.
dontblink 5y ago
I wouldn't say all train professionals knew this. I talked to doctors about Theranos and they were impressed by them and were bullish. It may be they didn't look too much into it. Context: I was approached by a recruiter and I couldn't understand how Theranos distinguished itself from other labs or get any data when I tried to do diligence on their claims.
boatsie 5y ago
I think a similar situation happened with UBeam. Electrical engineers insisted it would be impossible to charge a phone the way they were claiming. But the “what if” dream made it so nobody wanted to listen to them.
cyanydeez 5y ago
it highlights the abject trust rich people place in certain friend of a friend associations. same thing happened with bernie madoff.

misiti3780 5y ago

I too thought about the counterfactual in which that if their technology actually worked, COVID testing could have been have been done at scale in the US.

jbay808 5y ago
Isn't COVID testing being done at scale in many countries right now? I'm in Canada and I can go to a free drive through test station without appointment and get about a 24-hour turnaround on results, and that's been the case for over a year.
- misiti3780 5y ago
  yes, but it was not happening in March 2020 in the US for a variety of reasons.
nitrogen 5y ago
There are companies (at least one anyway) that make rapid testing panels that include COVID, plus a dozen plus other respiratory diseases, in a single test that is profitable at $200 and costs $20 in consumables. I heard that they disabled all the other tests so they could get approved as a COVID test sooner, or something like that. The problem is you can't ask for such a test as a patient, hospital billing departments make the news for charging insurance $$$$ for each individual pathogen on the test, and doctors come out of the woodwork to say how negligent and irresponsible it is to test for so many things at once, as if it's literally impossible to take base rates into account when you do more than one test.
- robertlagrant 5y ago
  If the regulators get out of the way it would be great to make these available direct to consumer with an app companion, and the consumer can share the results with their physician.
  - InitialLastName 5y ago
    Something tells me that if the regulators got out of the way, we would have dozens of Covid tests available, half of which would work better than a coin toss.
  - adolph 5y ago
    Millions and millions, millions of tests per day could be available today, except that the FDA is sitting on the applications, many of which I’ve looked at. And the applications are stellar. There’s absolutely no reason for an inexpensive three- or four-dollar test to be being outright rejected by the FDA right now or just sitting in a queue for many months. It’s no longer a normal time at the FDA, they’re being held up there for unknown reasons. Coronavirus (COVID-19): Press Conference with Michael Mina, 02/24/21 https://www.hsph.harvard.edu/news/features/coronavirus-covid-19-press-conference-with-michael-mina-02-24-21/ https://www.hsph.harvard.edu/news/features/coronavirus-covid...
    - nitrogen 5y ago

MattGaiser 5y ago

The problem is that successful startups often start out claiming that which is impossible. Uber was impossible, because it was illegal. Amazon was impossible, as you couldn't pack and ship stuff that cheaply. Personal computers were at one point considered ludicrous.

kube-system 5y ago
This is the SV “fake it ‘till you make it” culture. Right now Tesla is delivering “full self driving” cars that require a human driver at all times. Experts have said that it’s not possible using cameras alone, without LiDAR. Oversell and underdeliver. Fraud works great until it doesn’t.
- LanceH 5y ago
  Isn't the self-driving just a feature on top of the car? They're faking one feature that a customer might opt into -- and none that I know have. Tesla has delivered a performant EV that is nice to drive in and is comparable to other luxury vehicles. It's not exactly faking for quite some time.
  - malcolmgreaves 5y ago
    The fake it part is calling something full self driving when it does anything but that.
    - MrGando 5y ago
      They stopped calling it fully self driving a little while ago in part due to a lot of pretty bad press and some good journalistic research.
      - kube-system 5y ago
        > "Full Self-Driving Capability $10,000" ... is listed today as an option when configuring any vehicle on tesla.com

krageon 5y ago

> how they didn't do due diligence "due diligence" processes are in practice a lot less stringent or rigorous than an outsider would expect them to be given the amount of money involved. Companies get bought based on glorified sales pitches and nobody looks too hard at what they're buying is the unfortunate truth of the matter. Investors are no better.

bcrosby95 5y ago
I think it probably depends. When we sold our company they spent months digging into numbers. And they kept asking for new types of metrics that we had to figure out ways to derive from data that wasn't necessarily designed to measure those metrics.
- SkyMarshal 5y ago
  You’re talking about selling your company, rather than raising money for a startup. At the stage where you’re selling a company, you’re expected to have sales, metrics, and various track records that can be verified, hence the intensive due diligence. And usually the acquiring company has in-house expertise on the domain, and is capable of doing the due diligence. Early stage startups have none of that, just an idea, things the team have done before as proof they can execute, and sometimes some social proof like TED talks or high-profile board members. The challenge of doing due diligence then is that most general VCs that invest across a broad range of domains lack the in-house expertise to fully vet all of them. They can hire SME advisors, or ask around in their network, and should. But it’s possible for things to slip through the cracks sometimes.
- foobarian 5y ago
  If you had sat next to Bill Clinton on a TED talk stage and had a former Secretary of State and his friends on your board I bet things would have gone more smoothly for you.
- akiselev 5y ago
  I went through a similar experience. Turns out the acquiring company knew it's audience well - all of the metrics were for sales pitches tailored to specific investors that they were raising money from, which they got shortly before finally closing our deal. Turtles all the way down.

Ajay-p 5y ago

Look at the board. Older men. They saw an attractive, young, energetic technology wizard and fell for her charm. I don't know if one could go as far as to say this is female privilege, but I think there was definitely elements of seduction.

munificent 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. The thing is, the primary goal of an investor is not to invest in companies that are honest and actually do what they claim. The goal is to invest in a company that reaches a valuation high enough to let them recoup their investment at a profit. If that valuation happens through fraud, hype, destroying the environment, whatever, that doesn't really factor in. It probably is the case that successfully doing what the company claims has a positive correlation with higher valuation, but it's not strictly necessary. The failure mode for the investors in Theranos is not that it was fraudulent. It's that the fraud was discovered before they could cash out. They didn't need to believe that Theranos was honest, they just needed to believe that other later investors would believe they were honest.

avalys 5y ago
Can you provide any examples of a high-profile company, ultimately shown to be dishonest, where the early investors were able to “cash out” before this dishonesty became known?
- hef19898 5y ago
  Depends on what you call early. Nikola and WeWork come to mind, I assume Newman wasn't the only one to cash out early enough during one of the founding rounds.
- ta1234567890 5y ago
  Uber Explanation, since this is being downvoted. Uber might not have lied about their business, but it surely looks like investors never cared about the businesses viability and rather only cared about being able to turn a profit on their investment (which was the point being made by the gp). To this day, it is still not clear if Uber’s business model is viable. Also not to mention the original CEO/founder’s reputation and attitude, which the investors also didn’t care about until it became too big of a scandal. Additionally, the investors didn’t even care that Uber was technically illegal (same as Airbnb btw). Some references: https://techcrunch.com/2021/02/12/will-ride-hailing-profits-ever-come/ https://techcrunch.com/2021/02/12/will-ride-hailing-profits-... https://www.marketwatch.com/story/uber-and-lyft-are-staging-a-ridiculous-race-for-fake-profits-11628205337 https://www.marketwatch.com/story/uber-and-lyft-are-staging-... https://www.businessinsider.com/uber-company-scandals-and-controversies-2017-11#january-2012-uber-gets-slammed-in-its-first-major-surge-pricing-backlash-2 https://www.businessinsider.com/uber-company-scandals-and-co...

robertlagrant 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. When you're sat on stage next to Bill Clinton people assume someone somewhere has done some due diligence already. Turns out there are a lot more jobs out there to do with marketing, hype, and event planning than there are doing fact checking.

pessimizer 5y ago
What is Bill Clinton but a hype man, though? The board of Theranos was filled with names evocative of gravitas to baby boomers, but whose input on anything would be worthless.
- hef19898 5y ago
  Clinton? For all his faults, a two term president. And one that left with a federal budget running in the black. That requires some skills, even if I have no idea which exactly. Edit: Come to think of it, Clinton was also a president that didn't start or prolong a pointless war, on the scale of the war on terror, Vietnam or Korea.
  - sjg007 5y ago
    Clinton is probably one of the best Presidents in recent history. Obama is the best currently and Biden will probably be the best if he can get his legislation passed and the pandemic under control. Right now blue states with mask requirements and mandatory vaccinations are doing very very well. The rest of us are in for a bumpy ride.

makotech222 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. weird, maybe we shouldn't have our economy be decided by the whims of private investors.

cactus2093 5y ago

As someone who knows very little about biology, I watched the HBO documentary about Theranos and am kind of still confused by some of the conflicting claims I hear. In the documentary, they focused a lot on the engineering challenges of the machine they were making. The blood samples would spill, which would gum up the mechanical workings of the machine and make a huge mess and contaminate all the other samples. The documentary claimed that Theranos started doing demos where they would pretend to put the blood samples into the machine, but really take it to a lab bench and run the tests there, and then report the results back. That implies to me that at least some of their tests were actually possible to do. I left the documentary thinking "someone should simply do this again, solve the mechanical/robotics problem, and not lie about it and this could still be a game changing technology". But then I've seen other sources (like your comment here) claiming that the basic science of what they were trying to do was impossible/fraudulent from the beginning. Which is true?

gitfan86 5y ago
There is room for improvement in testing technology and processes. But not to the extent of "One drop of blood from your finger can provide accurate tests on 26 different types of tests" Especially when some of those tests are only accurate with a large sample of blood
- michaelrpeskin 5y ago
  I'm always reminded of this when Theranos comes up. Years ago I was in the hospital, they wouldn't let me out until a blood test showed some numbers that made them feel better. I asked about how the one test worked. The nurse would come in and draw a tube of blood (I forget the volume, but if you've had your blood drawn for a test, a typical tube sized - 10's of mL). And then that'd go down to the lab and be mixed with reagents and a tech would look in a microscope slide and count things. Then they'd reverse the math and turn the things they counted into a concentration of stuff in my blood. That's the number the doctor looked at. So when I worked through the process, and deduced that what the lab tech counted was on average 4 particles of interest. And since I was an obnoxious grad student, I brought up shot noise and said that means there's a 50% error in the measurement and that the doctor should discharge me. Of course, he said that even with a 50% buffer, the numbers were too low for him to feel comfortable. Long story, but they needed an entire tube of my blood to count 4 particles in the microscope. A drop of blood would not have enough things in it to count. Real life is discrete, and often we need a big sample just to get enough things to count. That's why I always though Theranos was a fraud.

supperburg 5y ago

Never ever forget that anyone who said Holmes was a fraud was screamed down by accusations of sexism and toxic masculinity.

JohnWhigham 5y ago
Even now, people are still doing it! NYT ran an op-ed piece from a woman VC partner (who had a BS sexual harassment case got shot down in court) basically saying "yeah but what about all the male CEOs that don't get punished? You're sexist if you don't punish them!" as if Holmes is receiving any punishment herself. The delusional headcanons that some people view the world through... https://www.nytimes.com/2021/09/15/opinion/elizabeth-holmes-trial-sexism.html?searchResultPosition=2 https://www.nytimes.com/2021/09/15/opinion/elizabeth-holmes-...

908B64B197 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. What's interesting with Theranos is the composition of it's board... It's exclusively older men with little to no expertise on the subject matter (Channing Robertson might be an exception to the latter rule). Not a single rising female Silicon Valley executive or professor was invited to join, which is surprising considering how much she was advocating for more women in SV. Maybe she knew that female executives and founders wouldn't have the same reaction to a wide eyed conventionally attractive 19 years old blonde as the 40+ years old men she was used to "deal" with... I mean, we all know how Marissa Mayer got the job...

elkos 5y ago
> I mean, we all know how Marissa Mayer got the job... Honestly, how? Charm is one thing but some people might consider other more physical means. I'm not familiar with any story but I never payed much attention to Marissa Mayer's carrier to be frank.

deleted 5y ago

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malthaus 5y ago

You mean like most people currently know that most of the crypto-claims are bs but hype it up anyway? You don't invest in something that's changing the world, you're investing in something that gains value, changing the world is just the narrative to get the sucker downstream to jump on board EDIT: to add something less controversial, i can recommend the book "the key man" of a similar bluff in the impact investing space

aj7 5y ago

A dead giveaway for throwaway board seats: Nobel Prize winners, generals, politicians. Another: “professional board members” who sit on multiple boards but have never had senior executive roles involving profit and loss. These people may be accomplished in their own right, but they know little about business. They are there for lunch, the fat fee, and to pose. And when a big company has a NUMBER of these types, i.e. two or more, they have an authoritarian/secrecy problem.

anitil 5y ago
> “professional board members” who sit on multiple boards but have never had senior executive roles involving profit and loss How do they get to this position without having been senior execs?
- wsc981 5y ago
  I believe these people generally get asked to join company boards due to their network. In a way these people function as lobbyists of the company.
- throwawaylinux 5y ago
  Mattis, for example, had a relationship with the company while he was still working in government and had explicit communication with them telling them he wanted to help them get their product into the military. Getting hired onto the board 18 months after retiring from government (possibly the delay was due to being distracted by getting onto military contractor General Dynamics' board) is the other half of the back scratching arrangement that powers the corporate-political machine that rules the country. As to how they found him in the first place, presumably friends of friends of parents, their siblings, husbands, wives, etc. Her parents were in political circles in DC, they were good friends with CIA agents, father was an Enron VP, mother was a legislative director for some congressman. It's all very incestual in Washinton, kind of like old royalty.
- aj7 5y ago
  A Stanford grad enters Harvard Business School after a year of “working” in Silicon Valley. After HBS, she joins an SV VC firm, never makes partner or does her own deals, but hangs on long enough to credibly assert a career in “venture capital” to those in mature industries who don’t know how to vet such a career. Excellent social skills with a unique ability to convey agreeability: a yes girl with flair. On two major boards.

josefresco 5y ago

> What just amazed me is how gullible all the investors were You have confused gullibility with willful ignorance.

ryandrake 5y ago

A little history helps [EDIT: Maybe not!] explain it a bit. Back when Holmes was a rising star, we were in the middle of #MeToo, Tech Bro companies were getting increasing scrutiny about their treatment of women, and in general how tech companies were struggling with diversity, and then all of a sudden, we have this company founded by a seemingly smart, driven, technically-savvy woman, educated at Stanford (!) and who wears turtlenecks like Steve Jobs (!!!). It was the perfect narrative. This is the kind of exec they were all looking for right at this moment! People were willing to suspend a lot of disbelief in order to make it real. I imagine these investors had the X-Files "I Want To Believe" poster in their offices. It wasn't so much gullibility as it was a perfect narrative that everyone desperately wanted to believe in. EDIT: Oh yes, I 100% agree [1] that her outsized personal charisma was a large part of it! 1: https://news.ycombinator.com/item?id=28674285 https://news.ycombinator.com/item?id=28674285 EDIT2: You're right, I got the MeToo timeline wrong. I seem to have remembered anti-sexism momentum building up long before 2017 but yea the actual hashtag and Weinstein stuff was in the news long after the company rose.

dumbfoundded 5y ago
Your timeline makes no sense. Theranos started falling apart in 2016 with charges being filed against Holmes in March 2018. MeToo started in October 2017 with the release of the Harvey Weinstein assault stories. By the time MeToo started, Theranos had been sued by investors, Walgreens, and CMS. Additionally, Holmes was banned from running labs and Theranos had failed many inspections with severe penalties. Theranos was all but dead by the time MeToo took off. What really happened (according to my recollection of reading Bad Blood) is that Holmes never really connected with the medical community. Anyone with any domain expertise knew her tech claims were impossible. She used her personal connections to generals, politicians, and wealthy individuals to spin this web of lies and keep raising money. Most of the Silicon Valley Investor elite had nothing to do with Theranos. I really dislike your interpretation of events. Not only because it makes no sense with the actual history but you play on stereotypes & generalizations to make a point. Tech certainly needs more female founders but you're not helping by twisting what really happened. 1) https://www.chicagotribune.com/lifestyles/ct-me-too-timeline-20171208-htmlstory.html https://www.chicagotribune.com/lifestyles/ct-me-too-timeline... 2) https://www.cnn.com/2021/09/07/tech/elizabeth-holmes-theranos-timeline/index.html https://www.cnn.com/2021/09/07/tech/elizabeth-holmes-therano...

comeonseriously 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. Gullible or just willing to take a risk on something that may get them a return on their investment before it all collapsed?

rsynnott 5y ago

> What just amazed me is how gullible all the investors were, and how they didn't do due diligence, hire outside experts, or anything. Weird. If you look at the investors, with few exceptions, they were _not_ sophisticated VC firms with experience in the area. Most of them were, for want of a better classification, elderly rich people. This should probably, in retrospect, have been a huge red flag.

jacinabox 5y ago

Why did Theranos insist on using 'a single drop of blood.' Why not be able to run a normal blood sample through an unprecedentedly compact form factor testing unit. Wouldn't that be good enough?

hef19898 5y ago
In industry terms? Absolutely. In terms of getting a billion dollar evaluation for being a disruptive start up? Probably not. Also, the former seems to be a harder problem to solve than the latter.
hn_throwaway_99 5y ago
I totally agree with this, and I'm still sad that what Theranos was planning to do with Walgreens was canned. I mean, if I could walk into a Walgreens, choose from a menu of lots of different tests at transparent, low prices (IIRC a lot of their prices were great), get a normal, standard venous blood draw, and then have that draw analyzed while I finishes shopping at Walgreens so I could get my results in 15-20 minutes, I think that would be a fantastic experience. Is there some reason the above is not possible or viable?
rsynnott 5y ago
(a) Holmes seemed to be obsessed with this due to a personal phobia of venous blood draws (personal quirks are a surprisingly common driver of weird decisions in Silicon Valley-ish companies; the fact that small low capacity vehicles are used in Boring Company tunnels seems to be down to Musk's phobia of public transport, for instance). (b) The original idea was that a patient would have one of these things _in their house_; a patient can't reasonably do a venous blood draw on themselves, but they can do a finger prick. There are some real working tests that work this way for this reason; HIV self-tests are normally finger-prick tests, say. But by the time they'd repositioned as "the machines are in a pharmacy, or maybe a central lab", yeah, it made no sense anymore.
comfysocks 5y ago
Maybe it's something like Elon Musk and his "no LIDAR" thing.

ClumsyPilot 5y ago

Why using small amounts of blood important? Are there some tests that need extremely large amounts of blood that the patient cannot provide? Or is the point to improve the patient's experience? When I give blood for testing, there is no difference in my experience as a patient, however many vials are taken, it just takes a bit longer. What am I missing?

ufo 5y ago
The argument Theranos gave is that it would allow collecting blood from a fingerprick (which would not require a trained professional, and because people are afraid of needles).

fossuser 5y ago

> The crazy thing about Theranos is that so many people with experience in microfluidics (developed mainly for DNA sequencing although there are other uses) knew that their claims were impossible, technologically speaking. I'd push back on this a bit - not because it's wrong in the case of Theranos, but because it's often wrong in the general case. A lot of the time 'industry experts' go on about how some new approach is impossible for X reason and they're often wrong. Tesla is a good example of this (some people are still saying EVs can't work even today). You really have to get in the weeds yourself to understand whether something is possible or not rather than deferring to others most of the time. I do agree though that her investors didn't do that. She was also able to get famous people invested and on her board which I think compounded things.

random314 5y ago

Elizabeth Holmes went out of her way to find non expert investors. Infact, I don't think any silicon valley VCs made any significant investments in Theranos.

dontblink 5y ago

I wouldn't say all train professionals knew this. I talked to doctors about Theranos and they were impressed by them and were bullish. It may be they didn't look too much into it. Context: I was approached by a recruiter and I couldn't understand how Theranos distinguished itself from other labs or get any data when I tried to do diligence on their claims.

boatsie 5y ago

I think a similar situation happened with UBeam. Electrical engineers insisted it would be impossible to charge a phone the way they were claiming. But the “what if” dream made it so nobody wanted to listen to them.

cyanydeez 5y ago

it highlights the abject trust rich people place in certain friend of a friend associations. same thing happened with bernie madoff.