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TwiceHorn

Theranos' Death Rattle

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Since I used to be a consultant in the biotech industry, I can give a little insight. I was pretty skeptical about the technology when I first became aware of it. So, I can guarantee that a lot of scientists were also skeptical.

But that is fairly unimportant in the investment world. There are many investors who want to get in and out of investments. They are not investing for the long-run. Shoot, when most biotech companies have products that hit the market their stock goes down. Their valuation is based on hype not on product and their valuations often far exceed the market value of their product. So in the Silicon Valley many just ride the wave of the hype and get out before any of it materializes. They let other investors ride the company once the company becomes revenue driven.

And companies like Walgreens don't know shit. They don't have a team of scientists evaluating technologies. Roche, Abbott and the like do have teams of scientists evaluating technologies so I would follow who they are betting on if I was an investor.

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8 minutes ago, Bevo said:

Since I used to be a consultant in the biotech industry, I can give a little insight. I was pretty skeptical about the technology when I first became aware of it. So, I can guarantee that a lot of scientists were also skeptical.

But that is fairly unimportant in the investment world. There are many investors who want to get in and out of investments. They are not investing for the long-run. Shoot, when most biotech companies have products that hit the market their stock goes down. Their valuation is based on hype not on product and their valuations often far exceed the market value of their product. So in the Silicon Valley many just ride the wave of the hype and get out before any of it materializes. They let other investors ride the company once the company becomes revenue driven.

And companies like Walgreens don't know shit. They don't have a team of scientists evaluating technologies. Roche, Abbott and the like do have teams of scientists evaluating technologies so I would follow who they are betting on if I was an investor.

Said better than I did.  Yes, there are companies that are technology driven and will invest in or acquire other companies or patent portfolios or some combination thereof because they are interested in the technology, not the owner as an ongoing concern, usually.  Even those companies have an at least psychological aversion to "licensing in" technologies that were not invented in-house.

 

But pure investors go on something other than technical merit, or even feasibility, most of the time.

Edited by TwiceHorn

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Am I the only one whose first thought was "why is the avengers thread on this board and not the movie one?"

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1 hour ago, OatmealRaisinCookie said:

Am I the only one whose first thought was "why is the avengers thread on this board and not the movie one?"

well, someone snapped their fingers and theranos (the company) disappeared.

 

I've read some analysis of the theranos ran itself too much like a internet/tech firm, which can exist as vaporware for a certain amount of time.  And vaporware can ultimately turn into a product or service with the right people, resources and timing.  Inventing a new blood testing device doesn't just seem like a problem that can be solved with TED talks and a bunch of cash.  

 

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8 minutes ago, Nice Guy Eddie said:

well, someone snapped their fingers and theranos (the company) disappeared.

 

I've read some analysis of the theranos ran itself too much like a internet/tech firm, which can exist as vaporware for a certain amount of time.  And vaporware can ultimately turn into a product or service with the right people, resources and timing.  Inventing a new blood testing device doesn't just seem like a problem that can be solved with TED talks and a bunch of cash.  

 

Yeah, getting into medial and biotech is a lot different than useless dating apps.  There is real regulation and people can die.

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On 6/16/2018 at 11:24 PM, Gardner Barnes said:

That book got some some of the best amazon reviews I have seen. Definitely on my list.

 

On 6/16/2018 at 10:09 PM, TwiceHorn said:

Ohhh nice find.  Adding it to mine.

The author is the WSJ reporter who has been on the case since 2015.  Stories were very in-depth and extremely well written.  Long form journalism still has a place in this world and we need contrarian media that digs into facts.  He deserves a Pulitzer.

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But still. How did they think this would end? Did they actually think they could come up with a test that works? Hubris could make you think that I guess.

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4 minutes ago, Aqua Buddha said:

Yeah, getting into medial and biotech is a lot different than useless dating apps.  There is real regulation and people can die.

Not hot dog.  I have always been extremely annoyed by the conflation of internet apps and vaporware with actual technology, especially in the patent arena, where "big tech" frequently acts like it's the only player affected by patent policy.  Got news for ya, Google, actual companies with actual technology have been "playing the patent game" for a century or more before you ignored them until your ox got gored.

 

And yeah, I enjoyed Carreyrou's reportage (what of it I could read), and was excited to see that he actually had a book.

Edited by TwiceHorn

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8 hours ago, The Dog said:

Just finished the book. Highly recommended. Amazing the pile of lies that company was built on.

Anything in there surprise you?  Was there any incidents that were particularly egregious?  

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Blonde hottie bats eyes at old powerful men and flatters them. Has cool "invention." They sign on, giving her credibility. Cynical Silicon Valley vultures realize they can make some quick bucks, even though they know she's full of shit. Whole thing collapses. Vultures make millions, everyone else is either looking stupid or heading to jail.

Did I miss anything?

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Early stage investors are used to putting money into an entity where all of the industry “experts” are skeptical. Can you imagine SpaceX for example? I bet every single aerospace expert thought they were nuts. I was.

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Blonde hottie bats eyes at old powerful men and flatters them. Has cool "invention." They sign on, giving her credibility. Cynical Silicon Valley vultures realize they can make some quick bucks, even though they know she's full of shit. Whole thing collapses. Vultures make millions, everyone else is either looking stupid or heading to jail.
Did I miss anything?

Explain to me how Silicon Valley vultures made millions.

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17 minutes ago, MaybeACoordinator said:

Blonde hottie bats eyes at old powerful men and flatters them. Has cool "invention." They sign on, giving her credibility. Cynical Silicon Valley vultures realize they can make some quick bucks, even though they know she's full of shit. Whole thing collapses. Vultures make millions, everyone else is either looking stupid or heading to jail.

Did I miss anything?

She definitely seemed to bring in a few non-industry but well known men, who then gave her company credibility by joining their board.  But why would George Schultz, Henry Kissinger, James Mattis know anything about this business or offer guidance?  They were successful in their own fields but are some of them (Kissinger, Schultz) really active enough to help?

Side note (SIAP), I didn't realize that the second-in-command is a Longhorn:  Ramesh "Sunny" Balwani has an undergrad degree from UT in Info systems/AI.  Or at least that is what his wikipedia bio states: https://en.wikipedia.org/wiki/Ramesh_Balwani    Given that his wiki bio has him born in 1966, there has to be a few posters here that ran across him at some point in Austin.  Edit:  he may be much older than 51.  Pics make him look closer to 60+ and some biographies have him being born in the mid-50s.  Who knows.

Edited by Nice Guy Eddie

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Investing early, dumping fast. 


The venture capitalists never dumped. They couldn’t. The company was never publicly traded and money raised went to the company not investors. These “vultures” lost hundreds of millions.

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8 minutes ago, TonyTexas said:

 


The venture capitalists never dumped. They couldn’t. The company was never publicly traded and money raised went to the company not investors. These “vultures” lost hundreds of millions.

 

Yep, they never got the IPO cash out.  Boom went bust.

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Here’s how this all happened. The founder had a simple idea that was easy to understand, with some basic science behind the idea that made it feasible. The company got funding on that basis, started filing patents and trying to get the science to work.

Along the way people wanted to throw money at them because of the idea and the pedigree of investors. Somewhere, someone realized the science wasn’t working. “No problem,” says the CEO. “Keep working on it.” The team says they need more money, perhaps way more money. “No problem,” says the ceo. “I’ll go get some. There’s plenty out there for us. “ The cycle continues for a long, long time. Up until this point, no one has done anything wrong. They are just trying to get the science to work.

But then a fateful decision is made. Investors and partners become tired of waiting for the science to work and start putting extreme pressure on the team. The team decides to fake a tiny little thing to get the pressure off. For you software people, think “demo”. Over time, the faking continues and expands, all the while they are raising money and putting impressive people on the Board. Inevitably, it all comes to a head and crashes because someone uncovers the faking.

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Even thought their base product doesn't work, I wonder how many patents Theranos has piled up over the past decade.  Those would seem to be potentially valuable.

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14 minutes ago, Nice Guy Eddie said:

Even thought their base product doesn't work, I wonder how many patents Theranos has piled up over the past decade.  Those would seem to be potentially valuable.

That was my understanding.  The base product didn't work from the beginning, she knew that, and still pushed to investors, Walgreens, and the like.  By the time Walgreens came along, it was massive, full scale fraud.  They were wasn't anything subtle about it behind the scenes.

It was a fraud from the beginning.

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21 minutes ago, Aqua Buddha said:

That was my understanding.  The base product didn't work from the beginning, she knew that, and still pushed to investors, Walgreens, and the like.  By the time Walgreens came along, it was massive, full scale fraud.  They were wasn't anything subtle about it behind the scenes.

It was a fraud from the beginning.

Not to split hairs, but I don't know if I agree with the phrase, "fraud from the beginning" as in 2003.  That phrase sounds like she started the company only to defraud investors.  That doesn't seem to be the intent.  I haven't heard anyone say this was fraud from Day 1 but rather they couldn't deliver on their promise but still moved forward as if they did.  She lied to her investors, clients and ultimately the public seeking healthcare.   I also don't think that she claimed to have a working product in 2003, 2004, etc.   I thought the company was about 10 years old before they started producing their "working product."   

Finally in terms of profiting from the fraud, the WSJ reporter/book author has stated that she earned very little.  The SEC fine was relatively low because I understand she basically handed over her entire net worth to the SEC.  With all that being said, I think she belongs in prison.  This isn't a buggy social media app but something that patients would rely on to diagnose their illness.  like everyone else, I have zero sympathy for her.

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5 hours ago, Aqua Buddha said:

Anything in there surprise you?  Was there any incidents that were particularly egregious?  

I think the biggest surprise was that they continued to double and triple down on the coverup and intimidation even after it was clear they were going to be exposed and the gig was up. And their attempts to try to intimidate the WSJ were hilarious. They never heard of the old saying "don't pick a fight with people who buy ink by the barrel."

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1 hour ago, TonyTexas said:

 


The venture capitalists never dumped. They couldn’t. The company was never publicly traded and money raised went to the company not investors. These “vultures” lost hundreds of millions.

 

while no IPO, people made a lot of money.  don't think otherwise

Edited by bularry1

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I think this whole episode is an amazing indictment of our corporate wealth/fame system.  How it is better to drop out of Stanford than continue to, you know, get an elite education in science if you are planning a potentially groundbreaking science/tech product?  Pic of her around dropout time, because rules:

Elizabeth-Holmes-II.jpg

 

Why do people bother to listen to someone that doesn't yet have a product on the market, yet alone invite them to give well-attended talks, provide commencement addressees and seek them out for political advice?  This baffles me.  I mean seriously, why do we give the time of day to someone who hasn't really done anything other than sweet talk people out of their money?  Based on that skill, she was palling around with celebrities, meeting elite politicians--some of whom went out of their way to attend her speeches--and getting TV interviews and magazine articles as if she was a "real" CEO with a viable product.  Why are we so in awe of startup founders, especially when they haven't even proven their big idea can work?

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while no IPO, people made a lot of money.  don't think otherwise

Tell me who and how. Sure, Investment bankers made some fees but not much. Money raised was mostly private placements with the Waltons, Murdoch, Slim, Cox, Oppenheimer, DeVos. There were no investor shares sold in secondary raises, only capital stock. . Holmes salary was mid six figures. I’m sure 3rd party sales were severely restricted if allowed at all.

 

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34 minutes ago, TonyTexas said:

Tell me who and how. Sure, Investment bankers made some fees but not much. Money raised was mostly private placements with the Waltons, Murdoch, Slim, Cox, Oppenheimer, DeVos. There were no investor shares sold in secondary raises, only capital stock. . Holmes salary was mid six figures. I’m sure 3rd party sales were severely restricted if allowed at all.

 

WERE. YOU. THERE.

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1 hour ago, bularry1 said:

while no IPO, people made a lot of money.  don't think otherwise

No, they didn't. Pretty much everyone who invested in this lost their ass. 

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11 minutes ago, woohorn said:

I don't know the answer-where did all the money go? Luxury corporate campus, glossy brochure publishers?

Believe it or not, that's pretty accurate. 

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Just finished it.

 

Ho Lee fuk

 

Also, of you haven't heard her very deep voice you should search her on YouTube. The book harped endlessly on her deep voice.

 

She sounds like Kylo Ren.

 

I'd subscribe to that Schultz kid's newsletter.

 

Good book by the way.

 

Also, I'm convinced she is a sociopath.

 

And if I ever need a lawyer I want David Bois.

 

 

 

 

 

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1 hour ago, The Dog said:

No, they didn't. Pretty much everyone who invested in this lost their ass. 

so advisors and lawyers weren't billing their time during those rounds of fundraising?  certain investors weren't selling their stakes or portions of in those rounds?

 

I'm not involved but would be surprised if either of the above were not true.

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2 hours ago, TonyTexas said:

Tell me who and how. Sure, Investment bankers made some fees but not much. Money raised was mostly private placements with the Waltons, Murdoch, Slim, Cox, Oppenheimer, DeVos. There were no investor shares sold in secondary raises, only capital stock. . Holmes salary was mid six figures. I’m sure 3rd party sales were severely restricted if allowed at all.

 

you may be right.  I was assuming advisor and legal fees to be huge on the fundings.  if all private placement as you say, then maybe not as much.  usually in these deals (my knowledge is limited, admittedly), initial investors are releasing stakes to the following groups.

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2 minutes ago, bularry1 said:

so advisors and lawyers weren't billing their time during those rounds of fundraising?  certain investors weren't selling their stakes or portions of in those rounds?

 

I'm not involved but would be surprised if either of the above were not true.

Boies accepted payment in Theranos stock, which ended up being worthless. 

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6 hours ago, Nice Guy Eddie said:

Even thought their base product doesn't work, I wonder how many patents Theranos has piled up over the past decade.  Those would seem to be potentially valuable.

I have actually taken a cursory look at the portfolio, seems underwhelming.  Havent read the book yet, but from what I gather there were two main aspects to the technology:  testing a very small sample (finger prick size rather than multiple tubes) and "remote processing," or having the testing/analysis occur remotely from the sample site (e.g. data transmitted back and forth over the intergoogles).  Most of their patents seem to be focused on the latter, and more mundane aspects of the customer kiosk.

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3 hours ago, BearSchlong said:

Just finished it.

 

Ho Lee fuk

 

Also, of you haven't heard her very deep voice you should search her on YouTube. The book harped endlessly on her deep voice.

 

She sounds like Kylo Ren.

 

I'd subscribe to that Schultz kid's newsletter.

 

Good book by the way.

 

Also, I'm convinced she is a sociopath.

 

And if I ever need a lawyer I want David Bois.

 

 

 

 

 

Boies is very, very talented, with both a great mind and excellent persuasive skills and instincts.  One of those skills seems to be picking winners to represent (of course, he has some influence on whether his clients win or not, but I mean outside the legal arena as well).  I was somewhat surprised by his involvement with Theranos and even took it as a sign that maybe there was more than met the eye.  Also surprised at some of his allegedly bully-boy tactics.  That wasn't my impression of him.

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Even more fascinated about where the cash went if advisors took stock.

Theranos has been in business since 2003. That’s 150+ months of outflow with no revenue. At it’s peak, it had 800 employees and an estimated burn rate of $10mm/mo. Adds up quickly.

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Theranos has been in business since 2003. That’s 150+ months of outflow with no revenue. At it’s peak, it had 800 employees and an estimated burn rate of $10mm/mo. Adds up quickly.
Damn. Didn't realize they only had 800 employees at the peak.

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3 hours ago, TonyTexas said:

Theranos has been in business since 2003. That’s 150+ months of outflow with no revenue. At it’s peak, it had 800 employees and an estimated burn rate of $10mm/mo. Adds up quickly.

I was surprised they had been around as long as well. Thought they were relatively new.  Only in Silicon Valley can a company exist for 12 years with no revenue and still be taken seriously.

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On 6/21/2018 at 2:42 PM, BearSchlong said:

Just finished it.

 

Ho Lee fuk

 

Also, of you haven't heard her very deep voice you should search her on YouTube. The book harped endlessly on her deep voice.

 

She sounds like Kylo Ren.

 

I'd subscribe to that Schultz kid's newsletter.

 

Good book by the way.

 

Also, I'm convinced she is a sociopath.

 

And if I ever need a lawyer I want David Bois.

 

 

 

 

 

Yeah, it's really pretty shocking.  I even tried to assume that Carreyrou was pretty biased, but the material is highly factual.  She's a real piece of work, human paraquat.  And other than the fraud, the fact that people who met her seemed to be really impressed and carried away with her.

 

Frankly, I lost respect for Boies.  Yes, he went hard in the paint for his client, but I am quite fond of this quote from Elihu Root:

Quote

About half the practice of a decent lawyer consists in telling would-be clients that they are damned fools and should stop.

Flabbergasting on so many levels.

 

I'm a tech lawyer, but I have never represented a Silicon Valley type vaporware company.  Still, I have been involved with companies where the tech didn't go well and yes it is typical to oversell the product and technically underperform, but the two usually even out to a degree (the product starts to match the hype, at least somewhat, and the overselling starts to match the actual performance), even in companies that fail.

But this was gross fraud on an epic, epic scale.  From a technical standpoint, they made nearly zero progress on the core technology over the long haul.

I don't say this lightly, because I am pro-defendant and think we oversentence almost across the board ("white collar" crime such as this being an exception), but she deserves significant jail time.

Edited by TwiceHorn

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On 6/21/2018 at 1:02 PM, J.R. Juniors Junior Jr. said:

Why do people bother to listen to someone that doesn't yet have a product on the market, yet alone invite them to give well-attended talks, provide commencement addressees and seek them out for political advice?

Old men turn foolish over girls like that because they're scared of death and they want to live forever.

But Cosmo? No matter what you do, you're still gonna die.

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On 6/21/2018 at 3:41 PM, The Dog said:

Boies accepted payment in Theranos stock, which ended up being worthless. 

Wonder if he accepted some man-voice pound town payment.

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Nobody made money on that deal. Rarely do you see subsequent rounds in venture capital letting earlier investors cash out. Capital is out into the business to attempt to grow it or, in this case, continue to pay salaries and rent.

She’s a psycho. Patents are worthless. People got fucked.

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On 6/21/2018 at 11:11 AM, Dbeasy said:

Here’s how this all happened. The founder had a simple idea that was easy to understand, with some basic science behind the idea that made it feasible. The company got funding on that basis, started filing patents and trying to get the science to work.

 

her first idea was an arm patch that provided real-time analysis to dispense necessary medication and quantities to patients.  not only was the monitoring equipment in the arm patch, but the medicine was also in the arm patch.  that was never realistic on any level.  she leveraged personal connections to get initial funding-  her friend's dad and her chemistry professor at stanford.  

On 6/21/2018 at 5:46 PM, woohorn said:

Even more fascinated about where the cash went if advisors took stock.

i believe the highest yearly revenue anyone has actually been able to pinpoint was $100,000.  with a burn rate of between 4-10 million a month from 2011-2016 that adds up.  

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The book was great. Thanks to whoever recommended it.

The most shocking thing is how many incompetent CEOs there are that just swing at anything for fear of missing the next big thing. They weren’t even surrounded by yes men. Everyone under them told them to bail and they refused.

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On 6/21/2018 at 10:36 AM, Nice Guy Eddie said:

She definitely seemed to bring in a few non-industry but well known men, who then gave her company credibility by joining their board.  But why would George Schultz, Henry Kissinger, James Mattis know anything about this business or offer guidance?  They were successful in their own fields but are some of them (Kissinger, Schultz) really active enough to help?

Side note (SIAP), I didn't realize that the second-in-command is a Longhorn:  Ramesh "Sunny" Balwani has an undergrad degree from UT in Info systems/AI.  Or at least that is what his wikipedia bio states: https://en.wikipedia.org/wiki/Ramesh_Balwani    Given that his wiki bio has him born in 1966, there has to be a few posters here that ran across him at some point in Austin.  Edit:  he may be much older than 51.  Pics make him look closer to 60+ and some biographies have him being born in the mid-50s.  Who knows.

Fuuuuuuu.   Took the sumbitch 10 years, though.

 
BALWANI, RAMESH first semester Spring 1987 last semester Summer 1997
BACHELOR OF BUSINESS ADMINISTRATION major MANAGEMENT INFORMATION SYSTEMS

Aug 18, 1997

Edited by TwiceHorn

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On 6/29/2018 at 11:40 AM, CooterBrown said:

The book was great. Thanks to whoever recommended it.

The most shocking thing is how many incompetent CEOs there are that just swing at anything for fear of missing the next big thing. They weren’t even surrounded by yes men. Everyone under them told them to bail and they refused.

Some Silicon Valley companies look to throw around stock in an attempt to not miss that next thing.  Facebook bought some teenage social media app (tbh) last fall only to announce they are shutting it down this week.  It was so good 8 months ago that it was worth acquiring, but now it's worthless? I suppose the purchase could have been to acquire some patents or great talent or it could have just been a huge mistake.

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