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How many of us heard this story: company founders smell something where money can be earned, start a company, hire a bunch of people and start spreading all the

by dig1 5y ago

How many of us heard this story: company founders smell something where money can be earned, start a company, hire a bunch of people and start spreading all the bells and whistles of the tech company have, but actually, it wasn't yet developed. I heard numerous times when founders/CEOs of companies I worked before announced that "we" have something, but we (engineering) didn't even hear for that. The problems start when those promises have to be met. I can't say I blame her for this, but I'm amazed how she managed to get funds without proper due diligence. For serious investments, VCs usually go through everything and have a good nose to smell bullsh*t. I guess (for this case) it was a good reference from influential individuals and politicians that probably (in this or that way) influenced VCs judgments.

capableweb 5y ago
I think context is very important as well. A CEO bragging about a Facebook->Instagram converter that doesn't actually works in real-life VS a blood testing machine that other treatments might depend on is for me two very different things.
jasfi 5y ago
It's advantageous to start marketing as soon as possible. However this should never turn into false promises and lies.
matwood 5y ago
If she had gotten to the next round of funding and developed anything she probably would have been fine. Overhanging the market is typically celebrated in startup culture marketing. Look how long WeWork went on or this company (https://www.aspiration.com https://www.aspiration.com) trying to go public right now. Both are playing fast and loose with their financials. At the end of the day, this feels like a bunch of rich people got suckered, couldn't dump it on the public market, and wanted to blame someone for their embarrassment.
- 1986 5y ago
  Can you talk more or provide a link about what's going on with Aspiration? All I was able to find is that they're going the SPAC route, would like to understand more about any specific sketchiness.
  - matwood 5y ago
    https://www.profgalloway.com/jumping-the-spac/ https://www.profgalloway.com/jumping-the-spac/ Over in reality, the company’s operations burned $34 million in 2020, and they’re projected to burn $133 million in 2021. In the rest of the deck, Aspiration refers to its “EBITDAM profitability this quarter” and then uses EBITDAM throughout its financial analysis. Which is rich for a company whose entire (projected) profit model is dependent on explosive customer acquisition, which (to date) has been really, really expensive. And I just love comments like this hah This is a firm that registered less than $15 million in revenue last year. PayPal makes $15 million in revenue every five hours. It’s less than most NFL starting quarterbacks made in 2020 — Leo’s former girlfriend’s husband made over twice that.
amackera 5y ago
It's important to note that she defrauded investors long after it became clear that the "bells and whistles" she was selling were just smoke and mirrors. Theranos isn't a typical case of founder hype like you describe. It was a con job through and through. Don't harbour sympathy for Holmes. She's made it harder for good-faith actors to get access to funding.
- thehappypm 5y ago
  I can't see how it was a con job. They were doing R&D. They were clearly trying to make the machines work and were just straight-up struggling with the tech.
  - yesenadam 5y ago
    (Not an expert at all, but have read Carreyrou's book.) You make it sound like they were 80 or 90% of the way there. But it seems like what they promised—hundreds of tests from a drop of blood—is totally impossible, which is why it sounded so amazing. They were not even 1% of the way to what they were saying they already could do. And they were giving what sound like fairly random blood test results to people with serious medical conditions, while pretending they were 100% of the way there.
  - Grustaf 5y ago
    The con was that they claimed that they were working when they weren't. Clear as day.
  - stevula 5y ago
    The fact that the tech was not ready for production was hidden from investors and the public. They sold the tests in Walgreens to real patients, knowing the machines were not accurate. Imagine the trauma of being diagnosed with a life-threatening disease, only to find out later that you’re fine. Or worse, a false negative result leading to a disease going undiscovered until it’s already progressed to a late stage.
    - thehappypm 5y ago
short12 5y ago
I can blame her. She committed fraud. That's plenty of reason to blame her. She blatantly lied and out on a facade to be deceptive for millions of dollars. She is the one to blame and hopefully serves federal prison time
JCM9 5y ago
Having the next great idea for a cat video app you haven’t quite built yet is very different than a medical device that doesn’t work. You don’t fake it to you make it in healthcare. People got hurt here and that’s $&?!ed up.

by dig1 5y ago

capableweb 5y ago

I think context is very important as well. A CEO bragging about a Facebook->Instagram converter that doesn't actually works in real-life VS a blood testing machine that other treatments might depend on is for me two very different things.

jasfi 5y ago

It's advantageous to start marketing as soon as possible. However this should never turn into false promises and lies.

matwood 5y ago

If she had gotten to the next round of funding and developed anything she probably would have been fine. Overhanging the market is typically celebrated in startup culture marketing. Look how long WeWork went on or this company (https://www.aspiration.com https://www.aspiration.com) trying to go public right now. Both are playing fast and loose with their financials. At the end of the day, this feels like a bunch of rich people got suckered, couldn't dump it on the public market, and wanted to blame someone for their embarrassment.

1986 5y ago
Can you talk more or provide a link about what's going on with Aspiration? All I was able to find is that they're going the SPAC route, would like to understand more about any specific sketchiness.
- matwood 5y ago
  https://www.profgalloway.com/jumping-the-spac/ https://www.profgalloway.com/jumping-the-spac/ Over in reality, the company’s operations burned $34 million in 2020, and they’re projected to burn $133 million in 2021. In the rest of the deck, Aspiration refers to its “EBITDAM profitability this quarter” and then uses EBITDAM throughout its financial analysis. Which is rich for a company whose entire (projected) profit model is dependent on explosive customer acquisition, which (to date) has been really, really expensive. And I just love comments like this hah This is a firm that registered less than $15 million in revenue last year. PayPal makes $15 million in revenue every five hours. It’s less than most NFL starting quarterbacks made in 2020 — Leo’s former girlfriend’s husband made over twice that.

amackera 5y ago

It's important to note that she defrauded investors long after it became clear that the "bells and whistles" she was selling were just smoke and mirrors. Theranos isn't a typical case of founder hype like you describe. It was a con job through and through. Don't harbour sympathy for Holmes. She's made it harder for good-faith actors to get access to funding.

thehappypm 5y ago
I can't see how it was a con job. They were doing R&D. They were clearly trying to make the machines work and were just straight-up struggling with the tech.
- yesenadam 5y ago
  (Not an expert at all, but have read Carreyrou's book.) You make it sound like they were 80 or 90% of the way there. But it seems like what they promised—hundreds of tests from a drop of blood—is totally impossible, which is why it sounded so amazing. They were not even 1% of the way to what they were saying they already could do. And they were giving what sound like fairly random blood test results to people with serious medical conditions, while pretending they were 100% of the way there.
- Grustaf 5y ago
  The con was that they claimed that they were working when they weren't. Clear as day.
- stevula 5y ago
  The fact that the tech was not ready for production was hidden from investors and the public. They sold the tests in Walgreens to real patients, knowing the machines were not accurate. Imagine the trauma of being diagnosed with a life-threatening disease, only to find out later that you’re fine. Or worse, a false negative result leading to a disease going undiscovered until it’s already progressed to a late stage.
  - thehappypm 5y ago

short12 5y ago

I can blame her. She committed fraud. That's plenty of reason to blame her. She blatantly lied and out on a facade to be deceptive for millions of dollars. She is the one to blame and hopefully serves federal prison time

JCM9 5y ago

Having the next great idea for a cat video app you haven’t quite built yet is very different than a medical device that doesn’t work. You don’t fake it to you make it in healthcare. People got hurt here and that’s $&?!ed up.