Elizabeth Holmes is on trial for fraud, but don't forget about her VC enablers(sfchronicle.com)
sfchronicle.com
Elizabeth Holmes is on trial for fraud, but don't forget about her VC enablers
https://www.sfchronicle.com/opinion/openforum/article/Elizabeth-Holmes-is-on-trial-for-fraud-but-16546832.php
117 comments
Looks like victim blaming. While this might be justified, the article doesnt give enough substance to do so. Also I disagree that Holmes is a scapegoat here (expect if you could make a case that she is not liable for her actions).
The VCs are definitely not victims here. Their own greed and incompetency to listen to experts put them in that position.
The real victims are the people that received the results from such fraudulent tests and maybe even received improper treatments because of it.
The real victims are the people that received the results from such fraudulent tests and maybe even received improper treatments because of it.
They are literally the victims. Elizabeth Holmes made representations which she knew to be false to secure investments. That is explicitly fraud.
That investors may have been foolish and greedy does not take away from the fact that Holmes acted to deceive them.
If I leave the keys in the ignition of my sports car and it’s stolen, I’m a very foolish person, but certainly no less the victim of a car theft.
That investors may have been foolish and greedy does not take away from the fact that Holmes acted to deceive them.
If I leave the keys in the ignition of my sports car and it’s stolen, I’m a very foolish person, but certainly no less the victim of a car theft.
> Elizabeth Holmes made representations which she knew to be false to secure investments. That is explicitly fraud.
the problem - this became an institutionalized modus operandi of Silicon Valley, finance, higher education, IP law, crypto, even real estate - essentially the entire economy of intangible goods and services. As Jim Chanos put in ‘We are in the golden age of fraud’ - lying to investors, public or congress or courts became so normalized that people no longer see any problem with it
the problem - this became an institutionalized modus operandi of Silicon Valley, finance, higher education, IP law, crypto, even real estate - essentially the entire economy of intangible goods and services. As Jim Chanos put in ‘We are in the golden age of fraud’ - lying to investors, public or congress or courts became so normalized that people no longer see any problem with it
Not to minimize what happened with Theranos but I suspect a lot of discussion around it is and has been shaped by the larger problem it is a small part of. Yes, there was blatant fraud and lots of blame and harm of various sorts to go around the whole network associated with it, but for every one Theranos there's who knows how many more that are part of something more subtle but collectively no less problematic. Maybe Holmes was engaging in outright fraud, but for every one Holmes doing that, there's probably 100s across various fields bending the truth systematically to various degrees short of what Theranos represents.
"If I leave the keys in the ignition of my sports car and it’s stolen, I’m a very foolish person, but certainly no less the victim of a car theft."
Except that the investors gave the keys of their cars to Holmes. Holmes didn't grab their money without their permission.
Except that the investors gave the keys of their cars to Holmes. Holmes didn't grab their money without their permission.
If you talk to your insurance, you are not the victim. They won't pay out a claim if you left your key in the car.
That's not true.
They'd say you didn't take reasonable care.
And then, in the US, if you have comprehensive coverage, they'd pay the claim.
What kind of crap insurance do you have?
Mine certainly does
Mine certainly does
She told them she was the valet.
> Elizabeth Holmes made representations which she knew to be false to secure investments.
Lot of companies do that atleast with software. Didnt Bill Gates tell IBM that they have an OS when they didnt and then bought an OS from someone else?
Lot of companies do that atleast with software. Didnt Bill Gates tell IBM that they have an OS when they didnt and then bought an OS from someone else?
Being on the purchasing end of things, I see it pretty commonly with software. While it's being sold, they tell you that it does things. During installation, they tell you those things are having the bugs ironed out and will be available soon. After installation and a few months of use, they ask you to participate in a focus group about how the features should look when they get around to starting them.
However, the software people rarely try to gaslight you into believing that the features actually do exist and you don't need them anyway. At least, in my experience. And, when pressed by customers, they usually fess up that the features are still "under development".
Listening to the "The Dropout" podcast, the thing that is striking is that Theranos had a bunch of things they said to investors and customers (Walgreens, Safeway) that they would not fess up to in deposition before the SEC. All of a sudden, the genius founder can't remember hardly anything of what happened in the last 10 years.
I don't doubt that Holmes wanted it to work. I think she thought that in the first few years, her R&D lab would actually be producing a machine that did what they claimed, and that they'd just be running the tests in house until the FDA approval came to sell them to everyone and his dog. But it seems she and the other brass didn't want to ever hear that they were not succeeding. And so they had to lie.
I was pretty disappointed because the articles about it made it seem like she had made or been part of a breakthrough in her undergraduate research to dramatically reduce the sample size. Imagine the applications in veterinary medicine! But this was not the case, she took existing tech and then started raising investment on the promise that it could be extended by sufficiently smart people, and then sold an image of herself as a prodigy to keep the ball rolling, while immunizing herself to the reality of the actual performance of the machines.
However, the software people rarely try to gaslight you into believing that the features actually do exist and you don't need them anyway. At least, in my experience. And, when pressed by customers, they usually fess up that the features are still "under development".
Listening to the "The Dropout" podcast, the thing that is striking is that Theranos had a bunch of things they said to investors and customers (Walgreens, Safeway) that they would not fess up to in deposition before the SEC. All of a sudden, the genius founder can't remember hardly anything of what happened in the last 10 years.
I don't doubt that Holmes wanted it to work. I think she thought that in the first few years, her R&D lab would actually be producing a machine that did what they claimed, and that they'd just be running the tests in house until the FDA approval came to sell them to everyone and his dog. But it seems she and the other brass didn't want to ever hear that they were not succeeding. And so they had to lie.
I was pretty disappointed because the articles about it made it seem like she had made or been part of a breakthrough in her undergraduate research to dramatically reduce the sample size. Imagine the applications in veterinary medicine! But this was not the case, she took existing tech and then started raising investment on the promise that it could be extended by sufficiently smart people, and then sold an image of herself as a prodigy to keep the ball rolling, while immunizing herself to the reality of the actual performance of the machines.
The big difference is that they knew they could make it fast. It is like you are a carpenter and say you have a table in stock which you didn't build yet.
The big difference is she didn't have anything and no viable path to deliver it. A fundamental step had to be made which wasn't there. It is like promising anti gravity flight. If you have a functioning anti gravity Prototyp you can probably make a plane with enough engineering. If you don't it will not happen no matter how much money you pour in.
The big difference is she didn't have anything and no viable path to deliver it. A fundamental step had to be made which wasn't there. It is like promising anti gravity flight. If you have a functioning anti gravity Prototyp you can probably make a plane with enough engineering. If you don't it will not happen no matter how much money you pour in.
Any records of what she actually said to investors? Imo, it was likely just the usual pitch with vague promises and a lot of "believe/estimate/think/consider/approximately/likely/close to/in development". Just like any other startup before they strike it big or lose millions.
Looks more like she "messed with the wrong mf'ers" as they say. Tbf, $1 billion is a lot of money.
Looks more like she "messed with the wrong mf'ers" as they say. Tbf, $1 billion is a lot of money.
>Their own greed and incompetency to listen to experts put them in that position.
You could say the same thing about any fraud victims, especially love scams[1].
[1]"Police statistics show more than 75 per cent of people caught up in online romance scams refuse to believe they're being ripped off." https://www.abc.net.au/radio/programs/am/online-love-fraud-v...
You could say the same thing about any fraud victims, especially love scams[1].
[1]"Police statistics show more than 75 per cent of people caught up in online romance scams refuse to believe they're being ripped off." https://www.abc.net.au/radio/programs/am/online-love-fraud-v...
that's not the same thing.
VCs are professional experienced investors and they failed doing their job.
someone falling for a romance scam is simply inexperienced in that matter, and should not be expected to know better
someone falling for a romance scam is simply inexperienced in that matter, and should not be expected to know better
This is literally victim-blaming. Someone who walks alone at a bad neighborhood should have known better, it doesn’t make them less of a victim if they get mugged or raped.
i am not saying that VCs are not victims, but that there is a difference between a victim that should have known better and one that should not be expected to know better.
there is also a big difference between loosing your life savings and a failed investment, given that the majority of investments fail anyways.
there is also a big difference between loosing your life savings and a failed investment, given that the majority of investments fail anyways.
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>someone falling for a romance scam is simply inexperienced in that matter, and should not be expected to know better
People that fall for romance scams tend to be older and significantly more experienced (in terms of life and love) than people who don't. They also continue with the relationship even when friends, family and eventually law enforcement sit down with them and show them that it's a scam.
I think many of these scams really highlight our innate desire to fool ourselves, especially when we are desperate and hopeful.
People that fall for romance scams tend to be older and significantly more experienced (in terms of life and love) than people who don't. They also continue with the relationship even when friends, family and eventually law enforcement sit down with them and show them that it's a scam.
I think many of these scams really highlight our innate desire to fool ourselves, especially when we are desperate and hopeful.
older and significantly more experienced (in terms of life and love)
i doubt that older people are more experienced.
being married for a decade or two does nothing to prepare you for an online relationship.
older people likely never had an online relationship before and also weren't switching partners as often when they were young as people nowadays tend to. if they were they should have less trouble finding a new partner.
they are falling for online relationships precisely because they don't know how to find a partner otherwise.
but that isn't even the issue.
i don't know if i could tell the difference between a genuine relationship and a well executed pretender. not meeting in person makes it really hard to verify the claims being made.
what is puzzling is why someone would give up their life savings for someone they haven't even meet yet in person.
some expensive gifts for a few thousand dollars, sure, but all i have? that's something i'd bring into a marriage and only use if it is really needed. but then, i am a skeptic by nature.
i doubt that older people are more experienced.
being married for a decade or two does nothing to prepare you for an online relationship.
older people likely never had an online relationship before and also weren't switching partners as often when they were young as people nowadays tend to. if they were they should have less trouble finding a new partner.
they are falling for online relationships precisely because they don't know how to find a partner otherwise.
but that isn't even the issue.
i don't know if i could tell the difference between a genuine relationship and a well executed pretender. not meeting in person makes it really hard to verify the claims being made.
what is puzzling is why someone would give up their life savings for someone they haven't even meet yet in person.
some expensive gifts for a few thousand dollars, sure, but all i have? that's something i'd bring into a marriage and only use if it is really needed. but then, i am a skeptic by nature.
"Their own greed and incompetency to listen to experts put them in that position" Maybe, but the article does not provide good evidence for that. In hindsight everything is obvious. One argument that it would have problems with regulations might also not be valid, since if you really manage to build something everybody wants to buy often regulation follows suite to allow for that.
There were a lot of warning signs and even if the VC had invested already the could have killed it before it all collapsed in a giant media scandal.
Same goes for SpaceX's point to point travel. It will never happen and there are many warning signs pointing to this fact. For example in their presentation they list a large list of cities, many of those are completely out of the question. So in essence a blatant lie.
Sure SpaceX probably wont go under because they have some real projects but it is quite questionable for a company to make such claims knowing it will never meet them.
Same goes for SpaceX's point to point travel. It will never happen and there are many warning signs pointing to this fact. For example in their presentation they list a large list of cities, many of those are completely out of the question. So in essence a blatant lie.
Sure SpaceX probably wont go under because they have some real projects but it is quite questionable for a company to make such claims knowing it will never meet them.
Yes. But let's say the investor thinks: sure the point to point is silly, but the real market is to compute with the Ariane programm, and space x will win; it is still justified to invest. Of course if the space x launches so far were in reality all cgi rendered, then that is fraud, but one shdnt say that this could have been obvious since there were warning signs.
Maybe I am wrong but such announcements which clearly will never happen are just PR, like Ryanair announcing every couple of years that they either charge for toilets or remove the seats, both which will probably not happen in any near future but it gives them free press coverage.
So what were the warning signs before investors invested?
Maybe I am wrong but such announcements which clearly will never happen are just PR, like Ryanair announcing every couple of years that they either charge for toilets or remove the seats, both which will probably not happen in any near future but it gives them free press coverage.
So what were the warning signs before investors invested?
To me that is way beyond some PR. Saying the rocket will be red and then it's blue, that might be PR, it doesn't affect the overall business and in the larger of things is irrelevant. Clamming you will be providing p2p travel to many destinations in the world is a whole other segment.
These announcements go beyond PR, they are borderline fraud.
These announcements go beyond PR, they are borderline fraud.
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> Clinical labs are not regulated by the FDA, but fall under a far less arduous regulation known as Clinical Laboratory Improvement Amendments, or CLIA.
I know a bit about the clinical laboratory environment through a close relation. In fact, that person was the first clue I had that Theranos was BS. (This was before the WSJ article or any of the whistle blowers had come forward.)
Clinical laboratories are so resource constrained that FDA regulation would literally kill them. And many may not realize this, but 75%+ of any diagnosis is actually done by the lab. Care teams make hypotheses and labs reject them.
I feel somewhat sympathetic to this article's thesis, that these "fraud" laws are meant more as a bailout for rich and powerful people as a way to pin blame on a scape goat. A regular person defrauded by a bank or some other professional would have no hope of bringing their abuser to a criminal trial. But demonizing then CLIA loophole as if it is some ghastly deviation only fixed by the Powerful and Mighty FDA seems short-sighted.
Again, keep in mind that basically all lab scientists, all medical researchers who investigate lab procedures and all of the academics who study this and teach the next generation said Theranos was BS long before the government or press.
No one listened to them.
I know a bit about the clinical laboratory environment through a close relation. In fact, that person was the first clue I had that Theranos was BS. (This was before the WSJ article or any of the whistle blowers had come forward.)
Clinical laboratories are so resource constrained that FDA regulation would literally kill them. And many may not realize this, but 75%+ of any diagnosis is actually done by the lab. Care teams make hypotheses and labs reject them.
I feel somewhat sympathetic to this article's thesis, that these "fraud" laws are meant more as a bailout for rich and powerful people as a way to pin blame on a scape goat. A regular person defrauded by a bank or some other professional would have no hope of bringing their abuser to a criminal trial. But demonizing then CLIA loophole as if it is some ghastly deviation only fixed by the Powerful and Mighty FDA seems short-sighted.
Again, keep in mind that basically all lab scientists, all medical researchers who investigate lab procedures and all of the academics who study this and teach the next generation said Theranos was BS long before the government or press.
No one listened to them.
I suspect one reason why professionals in the industry were not listened to is that we are very used to hearing experienced voices in an industry in the process of being disrupted explain why the disruption can't happen and won't work, right up until it does both. The most famous example is the "PC guys are not going to just figure this out" quote regarding the iPhone. A lot of VCs will see people they regard as 'incumbents' being witheringly critical and think that's a good sign.
Clearly there's a big difference between a businessman saying such things and professional scientists and clinicians.
Clearly there's a big difference between a businessman saying such things and professional scientists and clinicians.
This seems to be the most plausible explanation. I can remember Steve Ballmer, an undeniably intelligent and capable professional, laughing away the idea of the iPhone doing even single digit percentage market share.
I don’t think it was just competitive posturing. He genuinely was down talking what is arguably the most successful consumer product of the last 50 years.
I don’t think it was just competitive posturing. He genuinely was down talking what is arguably the most successful consumer product of the last 50 years.
I dunno, the PC itself has probably had more overall impact, but on a consumer level, smartphones are probably bigger I guess.
Smartphones have more impact. Smartphones are shipped in the billions each year and for most people on the planet it's their first and primary computer. PCs only ship in the 150 million per year range.
Again, agreed on consumer. On society, definitely the PC as they've transformed pretty much every business and almost every home in the world. Like PC's have been shipping my entire life (approx 40 years), while smartphones (touch screen iPhone like etc) have only been around for the last 14.
And how are all smartphone apps developed?
And how are all smartphone apps developed?
The difference seems to be that Ballmer definitely was an expert for all things commercial/enterprisey (he made MS quite a bit of money during his reign), but not an expert for consumer products.
> The difference seems to be that Ballmer definitely was an expert for all things commercial...
That's exactly what Ballmer was commenting on - the iPhone's $500 price (IIRC) was going to cause sticker shock, had it not been spread over a 24-month contract period. When Job's announced the price, he didn't mention carrier financing.
That's exactly what Ballmer was commenting on - the iPhone's $500 price (IIRC) was going to cause sticker shock, had it not been spread over a 24-month contract period. When Job's announced the price, he didn't mention carrier financing.
Steve Ballmer was making sales projection claims. His biggest objection was cost of the phone, and apple overcame that with carrier financing. He never claimed that was Apple was trying was not physically possible according to our understanding of technology, just that it was too expensive and too different to be popular.
Professionals panning Theranos were not doing so because they thought it could not sell, or the cost, or other market-based concerns. They had "what you're saying is not possible based on my understanding of the physical world" concerns, and those questions were never answered at any point because it was a fraud and there was no answer.
Professionals panning Theranos were not doing so because they thought it could not sell, or the cost, or other market-based concerns. They had "what you're saying is not possible based on my understanding of the physical world" concerns, and those questions were never answered at any point because it was a fraud and there was no answer.
I agree to an extent. The criticism was more like, "that seems physically impossible," like many of us might react if a story claiming someone had invented warp drive got to the top of HN.
However, most of the knowledge about such things is "siloed" inside the lab science community itself, without much awareness from the outside.
That being said, I think so few Valley VCs got duped because they actually did the due diligence and determined this was in the "not physically possible" realm.
However, most of the knowledge about such things is "siloed" inside the lab science community itself, without much awareness from the outside.
That being said, I think so few Valley VCs got duped because they actually did the due diligence and determined this was in the "not physically possible" realm.
Scientists have exactly the same behavior, bias against the paradigm breaking new. Of course this does a good job most of the time filtering out crap, but any big changes that are legitimate are going to have a whole lot of pushback.
“a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents die, and a new generation grows up that is familiar with it.”
listen to reason, not authority
“a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents die, and a new generation grows up that is familiar with it.”
listen to reason, not authority
I think it’s important to understand the difference between product/engineering skepticism (eg, it will be hard for a new entrant to build a great smartphone; it will be hard to break into the taxi industry with an app) and fundamental scientific skepticism based on a claim of some major scientific breakthrough. These are vastly different things, and (in my understanding) experts correctly realized that Theranos would have needed the latter for their product claims to be true. This is what the investors failed to internalize.
I know it’s popular (and sometimes true) to blame scientists for failing to adopt new ideas, but I don’t think you get to play that card in a situation where the alleged ideas are being kept secret. And yet many do play that card. As a scientist if someone arrives with a product that implies a massive (but unpublished) scientific breakthrough, then I’m going to express polite skepticism until they publish their results. If for whatever business reason, the startup wants to keep their breakthrough secret (rather than publishing and patenting it), well that rings alarm bells — but even then surely the investors can hire outside experts to review the science under NDA. If the startup refuses even that, then I think you need to accept that the most likely possibility is fraud rather than someone figuring out how to bypass the laws of thermodynamics or whatever.
I know it’s popular (and sometimes true) to blame scientists for failing to adopt new ideas, but I don’t think you get to play that card in a situation where the alleged ideas are being kept secret. And yet many do play that card. As a scientist if someone arrives with a product that implies a massive (but unpublished) scientific breakthrough, then I’m going to express polite skepticism until they publish their results. If for whatever business reason, the startup wants to keep their breakthrough secret (rather than publishing and patenting it), well that rings alarm bells — but even then surely the investors can hire outside experts to review the science under NDA. If the startup refuses even that, then I think you need to accept that the most likely possibility is fraud rather than someone figuring out how to bypass the laws of thermodynamics or whatever.
Are you suggesting the scientists in this case didn't give good reasons?
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.
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.
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.
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.
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.
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.
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.
That might make it fraudulent or negligent but a con is a very specific thing.
(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.
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.
The con was that they claimed that they were working when they weren't. Clear as day.
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
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
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.
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) 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.
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.
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.
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.
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.
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.
It's advantageous to start marketing as soon as possible. However this should never turn into false promises and lies.
I have a vivid memory about the first time I found out about Theranos and Holmes. It was in the business school setting, and the point the professor was making was about how cool it is that a young woman is disturbing an old industry. Not the science, not the business, but the age and gender of the protagonist.
It struck me as a bit weird intellectually - DEI is important but let's first establish that the thing being done is great, and then second take a look at who's doing it. It seemed like this short circuited in the speaker's mind because it was such a cool narrative. I wonder if that happened more broadly - it's a story that you easily wish were true!
It struck me as a bit weird intellectually - DEI is important but let's first establish that the thing being done is great, and then second take a look at who's doing it. It seemed like this short circuited in the speaker's mind because it was such a cool narrative. I wonder if that happened more broadly - it's a story that you easily wish were true!
> I have a vivid memory about the first time I found out about Theranos and Holmes. It was in the business school setting, and the point the professor was making was about how cool it is that a young woman is disturbing an old industry. Not the science, not the business, but the age and gender of the protagonist.
And now her defense is that she was used, abused, and manipulated by men. Occam's razor says she was a fraud then and is a fraud now.
And now her defense is that she was used, abused, and manipulated by men. Occam's razor says she was a fraud then and is a fraud now.
This was definitely one of the main reasons. I remember at the time how gushing the media were. They were desperate for a female Jobs and she preyed upon that.
I remember at the time so many experts I knew in the field would say the Theranos claims were total BS and what she speaks of was tried and doesn’t work for X, Y, and Z reason. A science company board full of people without a science background was also a giant red flag. There were very much some she wasn’t fooling, but the broader media-sphere, PR engine, and high profile folks without a technical background bought the whole thing hook, like and sinker.
In that way it was a textbook con. Avoid those that would sniff you out and focus on those that will be gullible to your play.
In that way it was a textbook con. Avoid those that would sniff you out and focus on those that will be gullible to your play.
This kind of back seat driving peer review isn’t helpful. “What she claims she can do is bs!” isn’t the story, because you’re really just disagreeing with marketing.
The problem is it took far too long for anyone to actually check the real mechanics of what was being done to see if it was faked, someone with almost no access saying it’s fake is not an authority.
The problem is it took far too long for anyone to actually check the real mechanics of what was being done to see if it was faked, someone with almost no access saying it’s fake is not an authority.
The point of this whole Theranos thing is that medical product conversations need to be based on science, not marketing. It was the lack of transparency / access that is precisely what caused many scientists to question the claims. That’s generally not how science is done so it sets off the BS detectors. If you’ve made this breakthrough, show us.
People got hurt here because of how that played out, and that’s messed up.
People got hurt here because of how that played out, and that’s messed up.
Experts do tend to say that about things that end up working, though.
yeah but not in an established field by a college dropout. The whole pitch was ridiculous. We do all the tests with only one machine and we make the machine a lot smaller, oh and we do it with just a fraction of the blood.
diogenes123(1)
Throwback to 2015 letter to the editor in fortune rebuffing the stories they published about Theranos
https://fortune.com/2015/12/20/letter-to-the-editor-theranos...
https://archive.md/NE7NB
Really quite something.
Original story: https://archive.md/BpOhV
And the even more original glowing and fawning cover story they did on Holmes in 2014: https://archive.md/XN6i6
> Precisely how Theranos accomplishes all these amazing feats is a trade secret. Holmes will only say–and this is more than she has ever said before–that her company uses “the same fundamental chemical methods” as existing labs do. Its advances relate to “optimizing the chemistry” and “leveraging software” to permit those conventional methods to work with tiny sample volumes.
Interesting how that reads in retrospect
> Holmes counters that because, as noted, her tests employ “the same fundamental chemical methods” as existing tests, peer-review publication of validation studies is both unnecessary and inappropriate.
Incredibly arrogant to the end fits well with her past behaviour
> Theranos, which does not buy any analyzers from third parties, is therefore in a unique position. While it would need FDA approval to sell its own analyzers to other labs, it doesn’t do that. It uses its analyzers only in its own CMS-certified lab. All its tests are therefore LDTs, effectively exempt from FDA oversight.
https://fortune.com/2015/12/20/letter-to-the-editor-theranos...
https://archive.md/NE7NB
Really quite something.
Original story: https://archive.md/BpOhV
And the even more original glowing and fawning cover story they did on Holmes in 2014: https://archive.md/XN6i6
> Precisely how Theranos accomplishes all these amazing feats is a trade secret. Holmes will only say–and this is more than she has ever said before–that her company uses “the same fundamental chemical methods” as existing labs do. Its advances relate to “optimizing the chemistry” and “leveraging software” to permit those conventional methods to work with tiny sample volumes.
Interesting how that reads in retrospect
> Holmes counters that because, as noted, her tests employ “the same fundamental chemical methods” as existing tests, peer-review publication of validation studies is both unnecessary and inappropriate.
Incredibly arrogant to the end fits well with her past behaviour
> Theranos, which does not buy any analyzers from third parties, is therefore in a unique position. While it would need FDA approval to sell its own analyzers to other labs, it doesn’t do that. It uses its analyzers only in its own CMS-certified lab. All its tests are therefore LDTs, effectively exempt from FDA oversight.
Are we ever going to start talking about Stanford’s connection to this and related?
Of course, and equally: don't absolve her of guilt because she is a privileged white woman.
I haven't forgotten about her domestic abuse claims. Is she still pursuing that route?
What kind of psychopath has a baby right before a trial that may send her away to prison.
The kind that uses image and fraud in pursuit of their own ambitions. I'm guessing her child will be used to argue why she shouldn't go to prison. Convenient timing, isn't it?
Afraid to ask, but wouldn't the VCs be victims of her fraud rather than enablers?
Is the article trying to say that the investors somehow wanted or at least tolerated that Holmes skirted the rules and scammed patients? That would seem incredibly short sighted.
It's much more likely that she misled investors, and isn't that exactly what the lawsuit is about?
> This dismal success rate is why venture capitalists historically have rarely invested in these companies. So why then did they collectively put $1.3 billion in Theranos?
> Greed.
Well in that sense, most venture capital investment stems from "greed", but surely that's the whole point, to leverage the "greed" of risk loving investors into funding new ventures?
It's much more likely that she misled investors, and isn't that exactly what the lawsuit is about?
> This dismal success rate is why venture capitalists historically have rarely invested in these companies. So why then did they collectively put $1.3 billion in Theranos?
> Greed.
Well in that sense, most venture capital investment stems from "greed", but surely that's the whole point, to leverage the "greed" of risk loving investors into funding new ventures?
diogenes123(1)
Stupid article.
> Many diagnostic startup companies use this loophole to bypass the FDA’s rigorous clinical study and validation requirements which, on average, take three to seven years.
Then:
> Why didn’t any of the investors simply require Theranos to submit all their tests and the hardware platform to the FDA?
> Many diagnostic startup companies use this loophole to bypass the FDA’s rigorous clinical study and validation requirements which, on average, take three to seven years.
Then:
> Why didn’t any of the investors simply require Theranos to submit all their tests and the hardware platform to the FDA?
For the 1000th time, a total of 0 (zero) VCs that most people would associate with "silicon valley" invested in Theranos, and the board was all made up of political and business figures like Kissinger.
>For the 1000th time, a total of 0 (zero) VCs that most people would associate with "silicon valley" invested in Theranos
Well, Tim Draper is a VC that people would associate with "Silicon Valley". (portfolio: https://www.dfj.com/)
The first $500k seed came from DFJ.[1]
But somewhat to your point, Elizabeth Holmes did not get his backing via the typical "VC due diligence" channel. Instead, she was childhood friends with Draper's daughter. Apparently, her charm completely bypassed his VC radar for detecting bullshit.
[1] https://news.crunchbase.com/news/theranos-elizabeth-holmes-t....
Well, Tim Draper is a VC that people would associate with "Silicon Valley". (portfolio: https://www.dfj.com/)
The first $500k seed came from DFJ.[1]
But somewhat to your point, Elizabeth Holmes did not get his backing via the typical "VC due diligence" channel. Instead, she was childhood friends with Draper's daughter. Apparently, her charm completely bypassed his VC radar for detecting bullshit.
[1] https://news.crunchbase.com/news/theranos-elizabeth-holmes-t....
Draper actually continues to back her [1], recently (2019 tbf, but after the release of the Carreyrou book) claiming that Theranos has opened the door for other companies to make progress in the blood test area.
[1] https://m.youtube.com/watch?v=vqliQZv1ehA&t=410s
[1] https://m.youtube.com/watch?v=vqliQZv1ehA&t=410s
In a world where the most founder-friendly investors get the best deals, what makes more sense for Tim Draper: throwing Holmes, a family friend, under a bus, or signaling to other founders and friends that he’ll stick by them to the bitter end?
Not supporting fraud seems like a reasonable option to me.
It's a super-easy thing to say on a message board where none of us have any skin in the game.
Can you point to the statement where he supported fraud or asserted that she was innocent of any crime?
If you need me to I can point you to a statement where he said he wouldn't back her as a CEO again.
You know it is possible to signal support to a friend and colleague when they're at rock bottom and with the entire world piling onto them, without endorsing the worst of their actions, right?
Can you point to the statement where he supported fraud or asserted that she was innocent of any crime?
If you need me to I can point you to a statement where he said he wouldn't back her as a CEO again.
You know it is possible to signal support to a friend and colleague when they're at rock bottom and with the entire world piling onto them, without endorsing the worst of their actions, right?
Draper has repeatedly said that he doesn’t think Holmes did anything wrong. He thinks that her downfall is because of a “witch hunt,” that she is a “great icon” “bullied into submission” by a corrupt FDA and big healthcare, and has said that he is “thrilled” with what she did at theranos.
The last time I can find him saying anything about her fraud allegations was in May 2018, saying she's "innocent until proven guilty", which is a simple assertion of a fundamental legal principle, and a way of showing some humanity to a friend without defending or denying any crimes that may later be found to have been committed.
The last time I can find him saying anything publicly about her, he said he wouldn't back her as CEO again - though he would back her as "chief science officer", before quickly changing the subject [2]. Again, he's clearly trying to show her some personal support as a friend and colleague when nobody else in the world will do that, whilst very clearly stopping short of endorsing or denying any criminal behaviour.
What can you find that's more damning than this?
And why is it so important to you that Tim Draper should have publicly trashed her? Is it not enough that basically every other media and investment figure in the world was trashing her? Do you not have anyone for whom you would publicly signal support, if they were at rock bottom and the rest of the world was piling onto them, even if you know they may have done the wrong thing?
[1] https://cheddar.com/media/tim-draper-elizabeth-holmes-is-inn...
[2] https://theoutline.com/post/7157/one-of-theranos-first-inves...
The last time I can find him saying anything publicly about her, he said he wouldn't back her as CEO again - though he would back her as "chief science officer", before quickly changing the subject [2]. Again, he's clearly trying to show her some personal support as a friend and colleague when nobody else in the world will do that, whilst very clearly stopping short of endorsing or denying any criminal behaviour.
What can you find that's more damning than this?
And why is it so important to you that Tim Draper should have publicly trashed her? Is it not enough that basically every other media and investment figure in the world was trashing her? Do you not have anyone for whom you would publicly signal support, if they were at rock bottom and the rest of the world was piling onto them, even if you know they may have done the wrong thing?
[1] https://cheddar.com/media/tim-draper-elizabeth-holmes-is-inn...
[2] https://theoutline.com/post/7157/one-of-theranos-first-inves...
I agree that it's easy to say this here, but I still fail to see what example a VC would want to set by doing what Draper has done here. Is this supposed to show that he's standing behind his founders even if they commit fraud? There's a huge difference between being founder friendly and doing what Draper did imo.
As per the links in my most recent comment [1], he hasn't defended or denied any crimes of which she's been found guilty (she's yet to be found guilty of anything), and days after she was indicted in June 2018 said simply that she's "innocent until proven guilty". He's said basically nothing about her since. I can't find anything at all he's said publicly about her since March 2019, in which he notably reduced the level of support he was willing to express, and also notably said the barest minimum thing he could say in her support, before moving on as quickly as possible.
You know there are people in the world who think things like: I was the first person to show her support when nobody else did, and so now I'm going to be the last person to keep supporting her when nobody else will. It won't cost me anything to show that I still care about her even if she's done wrong. If I don't, who else will? Some people sleep better at night doing that, rather than joining the mob taking delight in laying the boots in.
[1] https://news.ycombinator.com/item?id=28958722
You know there are people in the world who think things like: I was the first person to show her support when nobody else did, and so now I'm going to be the last person to keep supporting her when nobody else will. It won't cost me anything to show that I still care about her even if she's done wrong. If I don't, who else will? Some people sleep better at night doing that, rather than joining the mob taking delight in laying the boots in.
[1] https://news.ycombinator.com/item?id=28958722
At least not defending it. You can find a million and one ways to justify being evil.
Is that backing her or is that licking his own embarrassing wounds?
I didn't find the right video earlier. This was actually what I was looking for and since he said in the more recent video that he hasn't changed his mind on this, he probably still feels that Holmes is in some way a victim in all of this: https://www.cnbc.com/video/2018/05/10/vc-draper-theranos-fou...
I hadn't seen that before. Draper completely out of line there.
Just like how George Shultz comes off in the book, it feels like Draper is still brainwashed and living in denial.
I'd argue that Tim Draper / DFJ going in early for $500k, and not following on, is a really strong signal.
Interesting... That crunchbase article directly links to 3 other VC/private equity firms that invested heavily: ATA Ventures, Partner Fund Mgmt, Fortress Investment Group. Usually I only hear about George Shultz, Henry Kissinger (and I was thinking the wal-mart family, but they're not listed).
At any rate it's either close the "loophole" or accept the fact that proving intent to defraud is much harder than proving stupid. But at least we get to call them stupid.
At any rate it's either close the "loophole" or accept the fact that proving intent to defraud is much harder than proving stupid. But at least we get to call them stupid.
/s/bypassed/overloaded
Overloading the opponent's radar with false signals is a good jamming method, after all.
The article doesn't seem to be about hating "Silicon Valley" type VCs, but more VCs in general so not sure where this comment comes from, or why you'd have to repeat a comeback so many times to an argument that doesn't even seem to be made in the first place.
When people talk about VCs here, they normally mean venture capital firms, who are relatively sophisticated, do due diligence, etc. The vast bulk of Theranos's investment came from, for want of a better term, elderly rich people operating in a personal capacity. I mean, you _could_ call Betsy DeVos or Rupert Murdoch VCs, but it's not how people typically understand the term.
Doing due diligence and doing due diligence well are separate things. I have seen so many fictional or peri-impossible (impossible or "extremely implausible at current tech levels") tech get venture in silicon valley.
For example, there was a company called blue turtle that claimed to want to build a bacterium that provided gaucher's disease enzyme as a probiotic supplement. I mean technically speaking it's not impossible, but there are so many things that 'dont exist yet and would need to be engineered' that I couldn't see it making it as a company.
For example, there was a company called blue turtle that claimed to want to build a bacterium that provided gaucher's disease enzyme as a probiotic supplement. I mean technically speaking it's not impossible, but there are so many things that 'dont exist yet and would need to be engineered' that I couldn't see it making it as a company.
Oh, absolutely. A lot of VC firms are quite bad at due diligence. However, if you believe John Carreyrou, the big investors mostly weren't thinking along those lines, and some attempts to get investment from real VCs were stymied by the most basic due diligence (one pulled out when Theranos was unable to produce audited accounts, for instance).
Notably, one early investor said, in interviews, that he was comfortable investing because Holmes' grandfather was a businessman, and another relative was a famous doctor (presumably the theory was that she was thus _genetically_ good at medical tech businesses?!). These were, by and large, very much the opposite of sophisticated investors.
Notably, one early investor said, in interviews, that he was comfortable investing because Holmes' grandfather was a businessman, and another relative was a famous doctor (presumably the theory was that she was thus _genetically_ good at medical tech businesses?!). These were, by and large, very much the opposite of sophisticated investors.
To be fair, engineering bacteria to produce a single enzyme as an MVP is an afternoon activity for a single person. You can watch it done on youtube. (you do have to wait some weeks to get your gene sequences or plasmids or whatever manufactured then you have to culture etc. and it doesn’t always work…) But in general it’s not out of the ordinary to think you could do the engineering part in a day.
Even a trivial due dill on cerezyme which is the gaucher's disease enzyme that blue turtle was proposing would have revealed that approved formulation is encapsulated in a membrane, has a membrane anchor (which bacteria cannot natively produce), has glycosylated protein (which bacteria cannot natively produce), not to mention "how the hell do you deliver a protein through the intestinal barrier" and "how do you target probiotic to the intestine", "how do you keep intestinal probiotics there", "what is the plan to measure uptake variations in the population" etc. etc.
Like seriously, i was able to look this up on wikipedia in the timespan of their demo pitch.
Like seriously, i was able to look this up on wikipedia in the timespan of their demo pitch.
This article is a hot mess for the reason you said, but also for saying Elizabeth Holmes is the scapegoat of investors (who didn't do due diligence) for the endangering people's health. If she was selling death machines that's one thing, but she (through her company) made fraudulent claims about the accuracy of their device not only to investors but also the doctors and patients.
The fraudlent claims to doctors and patients is the bit that really makes me fume about the company. I really could care less about VC money being squandered. But people made critical health decisions based on these results.
How many SV startups does a VC have to invest in before they become associated?
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