4 ms·

> It's like the founder jumped out of a window without a parachute and was like "This is fine! I'll learn to fly before I hit the ground." I think in cases that

> It's like the founder jumped out of a window without a parachute and was like "This is fine! I'll learn to fly before I hit the ground." I think in cases that are as egregious as this, the fraud is eventually discovered, if only because at some point it has to become blatantly obvious. I think their goal was to use false figures to attract investment that would lead to real revenue that would eventually cover up the alleged fraud. If they managed to build a good product and find market fit and revenue with their Series A funds, maybe it would have worked. What’s weird though is that all these investors didn’t do basic diligence to confirm the money flows that were claimed. It’s a bit different from the Theranos fraud, where the fraud was around the effectiveness of a highly complicated and secretive product rather than revenues that are easy to confirm with bank statements.

throwup238 2y ago
> It’s a bit different from the Theranos fraud, where the fraud was around the effectiveness of a highly complicated and secretive product rather than revenues that are easy to confirm with bank statements. Anyone who did the bare minimum of due diligence found out from experts that blood from finger pricks is not usable for the kind of diagnostics they were proposing, which is why no qualified biotech VC invested in them. It was all dumb money like Ruper Murdoch and tech investors Tim Draper/DFJ who have no idea what they're doing in biotech. Investors didn't even need to look in the books or research, it prima facie was not going to work.
- JumpCrisscross 2y ago
  > Anyone who did the bare minimum of due diligence found out from experts that blood from finger pricks is not usable for the kind of diagnostics they were proposing This is technical risk, however. I remember experts telling me in 2009 that SpaceX was fundamentally fucked. Financial fraud is way more black and white because it’s backward looking.
  - throwup238 2y ago
    Just because some tech investors got caught up in the hype doesn’t mean it was a real technical risk. Finger capillary blood is fundamentally unrepresentative of blood samples taken from veins with few exceptions. Doctors and scientists have known this for a long time. Theranos’ technology was never going to work the way they sold it, and if they sold it as a faster on-site diagnostic device with standard blood draws they would have been just another in a sea of diagnostics startups that few care about.
  - hn_throwaway_99 2y ago
    > I remember experts telling me in 2009 that SpaceX was fundamentally fucked. That is a very poor analogy to Theranos' situation. In SpaceX's case, there is obviously nothing fundamentally impossible about using rockets to get stuff into space - humans have obviously been doing that for quite some time now. I'm guessing the experts you talked to were more making economic arguments, or making arguments that the stuff SpaceX was proposing doing would be too phenomenally difficult before the money ran out. That's very, very different from "physically impossible". Getting accurate quantitative tests from finger pricks is not "technical risk". It is physically impossible because capillary blood is simply not homogeneous enough at the proposed volumes. There was literally nothing of value that came out of any of Theranos' technology - it wasn't just a case of them not reaching sustainability before their runway ran out.
    - JumpCrisscross 2y ago
      Ex post facto the arguments are obviously different. I have a background in aerospace engineering, and so was able to weigh and dismiss these experts’ conclusions. (They weren’t just economic. But they were biased.) The point is consulting experts isn’t a fool-proof investing strategy. It will produce false negatives around paradigm-changing approaches while potentially bandwagonning on dead ends, e.g. amyloid plaques for Alzheimer’s.
      - deleted 2y ago
        [deleted]
      - 2y ago
- kiba 2y ago
  We all make stupid mistakes. Some of these mistakes included being scammed. We all heard of people who got fooled by the classic Nigerian prince scam and think "it can't possibly be me". It may indeed not be you but you might be more vulnerable to a different kind of scam. I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes.
  - throwup238 2y ago
    > I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes. Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise. Biotech VCs have a stable of expert consultants in many subfields of science and medicine to do the reviews for them, as well as accountants to go to for financials. That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer. Theranos’ investors did not do their due diligence and paid the price.
  - nradov 2y ago
    I am not vulnerable to any kind of scam.
    - DonHopkins 2y ago
      That's the kind of unjustified fake confidence you can only learn at an expensive motivational seminar.
      - nradov 2y ago
        Really? I've never been to a motivational seminar. I heard that they're scams. Sometimes confidence is justified.
  - mrandish 2y ago
    I've successfully taken a variety of calculated risks over several decades which have all worked out as expected. That's not to say all were successful but none turned out to be scams or materially different than I thought. The ones that failed did so for reasons I was aware of and estimated risks of before hand. I had a set of rules which I wouldn't break Risk Rules: 1. Only take significant risks in domains in which you have substantial first-hand experience, expertise and which you understand deeply. 2. Spend significant time deep diving on the specific opportunity (due diligence). 3. Write out your investment thesis in detail including calculating the risk and return. Include a bullet point list titled "Everything that has to be true for this to work." Put percentage odds next to each bullet. 4. Before leaping always ask yourself "If this goes completely bust, will I not regret it because it was for reasons I knew about and I can honestly say 'given the same opportunity, I'd make the same bet again'?" This is important because the nature of risk is that sometimes it doesn't pay out but the potential reward is worth the potential loss when averaged over multiple bets. The people I know who tend to have 'regrettable losses' also tend not to have a well-grounded understanding of how economic value works in principle. They're the kind of people who assume others get rich by "getting in on the new thing before everyone else does." While it's true this can happen, it's not what I'd consider a workable long-term plan. It's true that these rules have resulted in "missing out" on some opportunities which turned out very well for others. For example, I had some friends who were fairly early into bitcoin and did quite well. I looked into it at the time and I understood the principle while also liking the idea of decentralized currency in concept. But I ultimately passed because I just didn't feel I had enough background knowledge of the cryptocurrency domain and, because I'd recently launched a startup, I wasn't at a place where I had the time/mental energy to devote to learning and tracking the evolution of the crypto marketplace to know when to sell. Essentially, my "risk bandwidth" was already committed to a high-risk, high-return bet (and the startup bet worked out very well - in part because I was 100% focused on it). I have zero regrets about "missing out" on early bitcoin because I'm confident that pursuing bitcoin would have put my startup at (greater) risk. Also, when I made the choice to pass on bitcoin, I acknowledged that it very well might "go to the moon" and I'd be missing out, but I was confident both then and now that I was making a difficult but well-informed choice. I think that's why, when I reflect on that choice, it's never evoked a feeling of regret. The same principles and strategy that minimizes regret on losing bets that were properly taken, should also minimize regret on winning bets that were properly not taken. Another example is that during my multi-decade career as a serial tech startup entrepreneur I had most of my net worth tied up in my startups but as I made enough to set aside some into investments, those investments were entirely in a relatively conservative, long-term diversified portfolio (eg standard 'bogglehead' investing strategy). And I only looked at the portfolio once a year. My reasoning was simply that I was already exposed to more than enough financial risk (and potential reward) in my startups to take on any more volatility. Another way to put it is to evaluate, revise and optimize your risk strategy, not individual bets. As long as each bet is properly executed under the strategy, you don't regret individual bets, only the execution or strategy - which can be changed or improved going forward.

throwup238 2y ago

> It’s a bit different from the Theranos fraud, where the fraud was around the effectiveness of a highly complicated and secretive product rather than revenues that are easy to confirm with bank statements. Anyone who did the bare minimum of due diligence found out from experts that blood from finger pricks is not usable for the kind of diagnostics they were proposing, which is why no qualified biotech VC invested in them. It was all dumb money like Ruper Murdoch and tech investors Tim Draper/DFJ who have no idea what they're doing in biotech. Investors didn't even need to look in the books or research, it prima facie was not going to work.

JumpCrisscross 2y ago
> Anyone who did the bare minimum of due diligence found out from experts that blood from finger pricks is not usable for the kind of diagnostics they were proposing This is technical risk, however. I remember experts telling me in 2009 that SpaceX was fundamentally fucked. Financial fraud is way more black and white because it’s backward looking.
- throwup238 2y ago
  Just because some tech investors got caught up in the hype doesn’t mean it was a real technical risk. Finger capillary blood is fundamentally unrepresentative of blood samples taken from veins with few exceptions. Doctors and scientists have known this for a long time. Theranos’ technology was never going to work the way they sold it, and if they sold it as a faster on-site diagnostic device with standard blood draws they would have been just another in a sea of diagnostics startups that few care about.
- hn_throwaway_99 2y ago
  > I remember experts telling me in 2009 that SpaceX was fundamentally fucked. That is a very poor analogy to Theranos' situation. In SpaceX's case, there is obviously nothing fundamentally impossible about using rockets to get stuff into space - humans have obviously been doing that for quite some time now. I'm guessing the experts you talked to were more making economic arguments, or making arguments that the stuff SpaceX was proposing doing would be too phenomenally difficult before the money ran out. That's very, very different from "physically impossible". Getting accurate quantitative tests from finger pricks is not "technical risk". It is physically impossible because capillary blood is simply not homogeneous enough at the proposed volumes. There was literally nothing of value that came out of any of Theranos' technology - it wasn't just a case of them not reaching sustainability before their runway ran out.
  - JumpCrisscross 2y ago
    Ex post facto the arguments are obviously different. I have a background in aerospace engineering, and so was able to weigh and dismiss these experts’ conclusions. (They weren’t just economic. But they were biased.) The point is consulting experts isn’t a fool-proof investing strategy. It will produce false negatives around paradigm-changing approaches while potentially bandwagonning on dead ends, e.g. amyloid plaques for Alzheimer’s.
    - deleted 2y ago
      [deleted]
    - 2y ago
kiba 2y ago
We all make stupid mistakes. Some of these mistakes included being scammed. We all heard of people who got fooled by the classic Nigerian prince scam and think "it can't possibly be me". It may indeed not be you but you might be more vulnerable to a different kind of scam. I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes.
- throwup238 2y ago
  > I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes. Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise. Biotech VCs have a stable of expert consultants in many subfields of science and medicine to do the reviews for them, as well as accountants to go to for financials. That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer. Theranos’ investors did not do their due diligence and paid the price.
- nradov 2y ago
  I am not vulnerable to any kind of scam.
  - DonHopkins 2y ago
    That's the kind of unjustified fake confidence you can only learn at an expensive motivational seminar.
    - nradov 2y ago
      Really? I've never been to a motivational seminar. I heard that they're scams. Sometimes confidence is justified.
- mrandish 2y ago
  I've successfully taken a variety of calculated risks over several decades which have all worked out as expected. That's not to say all were successful but none turned out to be scams or materially different than I thought. The ones that failed did so for reasons I was aware of and estimated risks of before hand. I had a set of rules which I wouldn't break Risk Rules: 1. Only take significant risks in domains in which you have substantial first-hand experience, expertise and which you understand deeply. 2. Spend significant time deep diving on the specific opportunity (due diligence). 3. Write out your investment thesis in detail including calculating the risk and return. Include a bullet point list titled "Everything that has to be true for this to work." Put percentage odds next to each bullet. 4. Before leaping always ask yourself "If this goes completely bust, will I not regret it because it was for reasons I knew about and I can honestly say 'given the same opportunity, I'd make the same bet again'?" This is important because the nature of risk is that sometimes it doesn't pay out but the potential reward is worth the potential loss when averaged over multiple bets. The people I know who tend to have 'regrettable losses' also tend not to have a well-grounded understanding of how economic value works in principle. They're the kind of people who assume others get rich by "getting in on the new thing before everyone else does." While it's true this can happen, it's not what I'd consider a workable long-term plan. It's true that these rules have resulted in "missing out" on some opportunities which turned out very well for others. For example, I had some friends who were fairly early into bitcoin and did quite well. I looked into it at the time and I understood the principle while also liking the idea of decentralized currency in concept. But I ultimately passed because I just didn't feel I had enough background knowledge of the cryptocurrency domain and, because I'd recently launched a startup, I wasn't at a place where I had the time/mental energy to devote to learning and tracking the evolution of the crypto marketplace to know when to sell. Essentially, my "risk bandwidth" was already committed to a high-risk, high-return bet (and the startup bet worked out very well - in part because I was 100% focused on it). I have zero regrets about "missing out" on early bitcoin because I'm confident that pursuing bitcoin would have put my startup at (greater) risk. Also, when I made the choice to pass on bitcoin, I acknowledged that it very well might "go to the moon" and I'd be missing out, but I was confident both then and now that I was making a difficult but well-informed choice. I think that's why, when I reflect on that choice, it's never evoked a feeling of regret. The same principles and strategy that minimizes regret on losing bets that were properly taken, should also minimize regret on winning bets that were properly not taken. Another example is that during my multi-decade career as a serial tech startup entrepreneur I had most of my net worth tied up in my startups but as I made enough to set aside some into investments, those investments were entirely in a relatively conservative, long-term diversified portfolio (eg standard 'bogglehead' investing strategy). And I only looked at the portfolio once a year. My reasoning was simply that I was already exposed to more than enough financial risk (and potential reward) in my startups to take on any more volatility. Another way to put it is to evaluate, revise and optimize your risk strategy, not individual bets. As long as each bet is properly executed under the strategy, you don't regret individual bets, only the execution or strategy - which can be changed or improved going forward.