4 ms·

>Classic disruptive startup, I don't think you can call this a classic disruptive startup. Look at the board members; they are some of those most powerful peop

by learc83 12y ago

>Classic disruptive startup, I don't think you can call this a classic disruptive startup. Look at the board members; they are some of those most powerful people on the planet, and yet the founder still maintains 51%. Either she is insanely charismatic or she discovered something earth shattering (either a novel discovery, or a novel use of existing discoveries).

jacquesm 12y ago
This is not a new company and that board was not in place from day 1. If you've got the money, you too can have a board like that.
- learc83 12y ago
  Yes, but why do they have so much money? So a 19 year old walks up to an investor and says: "Give me $16 million. I've got an idea for a new way to do blood tests. It doesn't work yet, and I've got less than a year's experience in the field. But I'm wicked smart because I learned Mandarin as a child, and my professor believes in me. Oh and by the way I'm going to maintain control of my company and never want to give up more than 50%" That surely didn't happen. She must have something that at least looks very impressive to have negotiated those terms, but what I don't understand is why no one is talking about what that is. They have patents to protect them. Why aren't they releasing peer reviewed studies?
  - jacquesm 12y ago
    They have so much money because there is lots of money to be made in this field and they have a pretty compelling story. Also, those investors have likely done their due diligence and liked what they saw.
    - XorNot 12y ago
      Money attracts money. This is perhaps the long-tail of the investment insanity which happened over the past decade and culminated in the GFC for the finance sector. It somewhat stands to reason that the fiscal fervor of the times has perhaps just fallen into an area where the payoff period is typically longer. There's a very good reason to be skeptical when the most anyone can say about the company is the composition of it's board - noteworthy, but I wonder how often that was used to pitch to each of its members. It's worth rereading the story of Enron when parsing things like this - there's a lot of parallels.
    - lotsofmangos 12y ago
      Given what has occurred elsewhere in the economy in recent years, the fact that people have thrown lots of money at a compelling story means nothing without being able to look inside the box to see what is going on, Bernie Maddox managed to get a lot more money raised than these folk.
      - jacquesm 12y ago
        You don't raise that kind of money without DD. So presumably somebody got to look inside the box but they did not make it public. That's pretty common in the tech investment world.
        lotsofmangos 12y ago
        Presumably someone did, but it would not at all be unheard of for due diligence to not be particularly diligent at all and for later investors to then trust to the diligence of the earlier ones, as after all, being thoroughly diligent is exceedingly expensive and why double up when someone else has already checked... I would agree that you usually do not raise that kind of money without reasonable DD, but there are more than enough counter examples out there of people bullshitting investors out of very large sums, both deliberately and through deluding themselves.
        jacquesm 12y ago
        That does happen but less frequently than you probably think. In this case there was a company with a track record and a bunch of tech which could be audited, that's a relatively straightforward affair. It gets a lot harder in early stage 'virtual' (as in: no physical product) companies.
        lotsofmangos 12y ago
        Found this, don't have the money to spend though. http://decibio.com/theranos http://decibio.com/theranos
    - learc83 12y ago
      A compelling story doesn't buy $16 million for a 20 year old with no track record, no product, no customers, and no experience. From further reading, her initial idea was just that, an idea. She thought it would be possible to make a handheld device that could do blood tests. How you go from that to $16 million without the slightest demonstrated ability to execute is my question.
      - thinkpad20 12y ago
        > From further reading, her initial idea was just that, an idea. She thought it would be possible to make a handheld device that could do blood tests. Reminds me of: https://www.youtube.com/watch?v=DkGMY63FF3Q https://www.youtube.com/watch?v=DkGMY63FF3Q
gojomo 12y ago
…insanely charismatic or… discovered something earth shattering… Or just kept executing well. The company is 12 years old. The initial investments and staffing were likely modest and provisional. But going back to investors year after year, always having delivered what you predicted at each step, and proving that you've accumulated proprietary technical advantages, will get you to a giant company.
- learc83 12y ago
  >The initial investments and staffing were likely modest and provisional. The initial investment was $16 million from what I've read. That's a lot of money to give to then 20 year old with no record whatsoever.
  - gojomo 12y ago
    When you say, "no record", it seems you haven't read (among other things) the New Yorker profile linked above. Per that account, by the time Theranos raised its first $6 million in late 2004, Holmes had been working on it for over a year, had at least one patent in process, and had convinced her chemical engineering professor, a dean of the Stanford engineering school, to be an advisor and board member. (He's since joined Theranos full-time.) So it's not, "kid with nothing but idea and moxie handed money" – but rather "star researcher impresses and recruits a bunch of domain-experts, which then attracts investments".
    - learc83 12y ago
      I have read that, and to me that is "no record". By record, I mean a demonstrated ability to actually turn an idea into a product. When she got that first $6 million, and another $10 shortly after, she had no product, no experience, and it wasn't even clear if the technology to do what she proposed was feasible. I've read her first patent, it's super broad and covers a huge number of possible implementations. There was no way for her to know at the time if any of it was really feasible. And none of it was feasible at the time--it just wasn't ready yet as evidenced by the fact that it took 10 years before anyone heard anything about it. It took 11 more years of research to get to anything remotely commercially viable. She basically convinced people to pay her to do 11 years of pure R&D. Name me one other founder who has been able to do this with no academic credentials, and no record of success--much less a founder who was 20 at the time. >"star researcher impresses and recruits a bunch of domain-experts, which then attracts investments" She wasn't a star researcher at the time. She had almost no formal training, no publications, and a year of experience as an undergraduate. Edit: I'm not the only one who is very skeptical. http://pathologyblawg.com/pathology-news/new-yorker-theranos-founders-description-chemistry-process-comically-vague/ http://pathologyblawg.com/pathology-news/new-yorker-theranos...

by learc83 12y ago

jacquesm 12y ago

This is not a new company and that board was not in place from day 1. If you've got the money, you too can have a board like that.

learc83 12y ago
Yes, but why do they have so much money? So a 19 year old walks up to an investor and says: "Give me $16 million. I've got an idea for a new way to do blood tests. It doesn't work yet, and I've got less than a year's experience in the field. But I'm wicked smart because I learned Mandarin as a child, and my professor believes in me. Oh and by the way I'm going to maintain control of my company and never want to give up more than 50%" That surely didn't happen. She must have something that at least looks very impressive to have negotiated those terms, but what I don't understand is why no one is talking about what that is. They have patents to protect them. Why aren't they releasing peer reviewed studies?
- jacquesm 12y ago
  They have so much money because there is lots of money to be made in this field and they have a pretty compelling story. Also, those investors have likely done their due diligence and liked what they saw.
  - XorNot 12y ago
    Money attracts money. This is perhaps the long-tail of the investment insanity which happened over the past decade and culminated in the GFC for the finance sector. It somewhat stands to reason that the fiscal fervor of the times has perhaps just fallen into an area where the payoff period is typically longer. There's a very good reason to be skeptical when the most anyone can say about the company is the composition of it's board - noteworthy, but I wonder how often that was used to pitch to each of its members. It's worth rereading the story of Enron when parsing things like this - there's a lot of parallels.
  - lotsofmangos 12y ago
    Given what has occurred elsewhere in the economy in recent years, the fact that people have thrown lots of money at a compelling story means nothing without being able to look inside the box to see what is going on, Bernie Maddox managed to get a lot more money raised than these folk.
    - jacquesm 12y ago
      You don't raise that kind of money without DD. So presumably somebody got to look inside the box but they did not make it public. That's pretty common in the tech investment world.
      - lotsofmangos 12y ago
        Presumably someone did, but it would not at all be unheard of for due diligence to not be particularly diligent at all and for later investors to then trust to the diligence of the earlier ones, as after all, being thoroughly diligent is exceedingly expensive and why double up when someone else has already checked... I would agree that you usually do not raise that kind of money without reasonable DD, but there are more than enough counter examples out there of people bullshitting investors out of very large sums, both deliberately and through deluding themselves.
        jacquesm 12y ago
        That does happen but less frequently than you probably think. In this case there was a company with a track record and a bunch of tech which could be audited, that's a relatively straightforward affair. It gets a lot harder in early stage 'virtual' (as in: no physical product) companies.
        lotsofmangos 12y ago
        Found this, don't have the money to spend though. http://decibio.com/theranos http://decibio.com/theranos
  - learc83 12y ago
    A compelling story doesn't buy $16 million for a 20 year old with no track record, no product, no customers, and no experience. From further reading, her initial idea was just that, an idea. She thought it would be possible to make a handheld device that could do blood tests. How you go from that to $16 million without the slightest demonstrated ability to execute is my question.
    - thinkpad20 12y ago
      > From further reading, her initial idea was just that, an idea. She thought it would be possible to make a handheld device that could do blood tests. Reminds me of: https://www.youtube.com/watch?v=DkGMY63FF3Q https://www.youtube.com/watch?v=DkGMY63FF3Q

gojomo 12y ago

…insanely charismatic or… discovered something earth shattering… Or just kept executing well. The company is 12 years old. The initial investments and staffing were likely modest and provisional. But going back to investors year after year, always having delivered what you predicted at each step, and proving that you've accumulated proprietary technical advantages, will get you to a giant company.

learc83 12y ago
>The initial investments and staffing were likely modest and provisional. The initial investment was $16 million from what I've read. That's a lot of money to give to then 20 year old with no record whatsoever.
- gojomo 12y ago
  When you say, "no record", it seems you haven't read (among other things) the New Yorker profile linked above. Per that account, by the time Theranos raised its first $6 million in late 2004, Holmes had been working on it for over a year, had at least one patent in process, and had convinced her chemical engineering professor, a dean of the Stanford engineering school, to be an advisor and board member. (He's since joined Theranos full-time.) So it's not, "kid with nothing but idea and moxie handed money" – but rather "star researcher impresses and recruits a bunch of domain-experts, which then attracts investments".
  - learc83 12y ago
    I have read that, and to me that is "no record". By record, I mean a demonstrated ability to actually turn an idea into a product. When she got that first $6 million, and another $10 shortly after, she had no product, no experience, and it wasn't even clear if the technology to do what she proposed was feasible. I've read her first patent, it's super broad and covers a huge number of possible implementations. There was no way for her to know at the time if any of it was really feasible. And none of it was feasible at the time--it just wasn't ready yet as evidenced by the fact that it took 10 years before anyone heard anything about it. It took 11 more years of research to get to anything remotely commercially viable. She basically convinced people to pay her to do 11 years of pure R&D. Name me one other founder who has been able to do this with no academic credentials, and no record of success--much less a founder who was 20 at the time. >"star researcher impresses and recruits a bunch of domain-experts, which then attracts investments" She wasn't a star researcher at the time. She had almost no formal training, no publications, and a year of experience as an undergraduate. Edit: I'm not the only one who is very skeptical. http://pathologyblawg.com/pathology-news/new-yorker-theranos-founders-description-chemistry-process-comically-vague/ http://pathologyblawg.com/pathology-news/new-yorker-theranos...