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Comment by notacoward | Hacker News Reader

This company is looking less and less like they're struggling to develop new technology, more and more like a deliberate sham. Given that so much of their support thus far has been due solely to the Cult of Disruption, I can't help but wonder if news like this might make at least a few investors consider a return to good old-fashioned due diligence before placing their bets.

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What's interesting is that venture capitalists are slamming media outlets for reporting on the issue.

Here's a rather silly rebuttal to a recent Theranos piece on The Information from Dave Morin: https://twitter.com/williamalden/status/658705178523258880

"Isn't it time as Millenials that we try to use the Internet to unearth deeper facts and see through these traditional smear campaigns?"

Morin's rebuttal is all the more laughable in the light that Theranos may be deficient in their quality systems: https://www.theverge.com/2015/10/27/9621026/fda-theranos-lab...

These aren't trivial problems that can be fixed "at the time of, or within a week of, the inspection", as Theranos claims.

It's also laughable that he thinks the volume of blood drawn for a standard test is what makes him pass out. Nope, that's a purely psychological reaction. If we're talking about donating blood, I'd believe it could be a physical effect, but that's equal to 50 vials in a blood test...

It's a conflict of interest only if there actually is a conflict of interest. Tell me, what "conflict of interest" does Dave Morin have with Theranos?

Not a conflict of interest in the legal sense, but more of a conflict of interest in the ethical sense since venture capitalists have a lot to lose if the allegations have any truth.

I edited the parent post for clarity.

It doesn't look like there's a conflict of interest (Morin, as far as I can tell, is not a Theranos investor), but I think you're overlooking the fact that a lot of prominent tech investors are sitting on investments in companies that have been significantly overvalued, and the cracks in some of these companies are starting to become apparent.

There's a decent discussion on this here[1]. Red flags, like reports of late-stage investors marking down the value of some of their unicorn investments, are starting to mount and I think that has to be worrisome for investors who are sitting on large unrealized gains that could easily evaporate.

Expect to see a lot more hand-waving on the part of investors as prominent unicorns come apart at the seams.

Morin, according to his AngelList profile, is an investor in a number of unicorns, including AirBnB, Dropbox, Evernote and Slack. Two of the mutual funds that invested in Dropbox have reportedly marked down their investments[2] and some media reports suggest Evernote is in trouble[3].

[1] https://pando.com/2015/10/27/techpocalypse-coming/

[2] https://www.theinformation.com/mutual-funds-mark-down-dropbo...

[3] http://www.businessinsider.com/evernote-is-in-deep-trouble-2...

Search for Theranos (and related terms) in HN history with the search bar at the bottom of the page.

A lot of high profile posters making very embarrassing defences of Theranos. Lots of thinly veiled accusations of ageism, sexism, ludditism, etc. I fear few will learn any lasting lessons from this saga.

There were also others who were making pointed and substantive critiques of Theranos on HN many months before any of these stories broke.

Edit: Some examples: https://news.ycombinator.com/item?id=8182026

This is true. There were in fact people voicing their suspicion that Theranos was all a crock of shit in the very first discussions on Theranos on HN.

Warning signs were there. People were voicing specific technical concerns, as well as less specific concerns over the technical expertise of those involved. For the most part, these critics were brushed off. HN's voting system did not promote their comments; rather it promoted the apologetics.

Random thought: maybe "gratuitous positivity" is as damaging as "gratuitous negativity" and should be treated the same way. Only seems fair, doesn't it?

There's an alternative philosophy to consider, stoicism:

http://aeon.co/magazine/philosophy/why-stoicism-is-one-of-th...

I knew there was a word that described my attitude towards tech journalism.

Perhaps Dave can shine a light on a path forward for Elizabeth, by introducing her to his friends in Indonesia.

My take on it is that Elizabeth Holmes set out to make this idea a reality, but has been unable to do so. Sadly, all signs point to her trying to buy time via smoke and mirrors. If she has misled investors in the same way she has misled the media, given that she has raised $400 million, she's looking at decades in federal prison.

I see this whole thing ending in tragedy, whether that just means the loss of $400 million that could have gone to other startups, a full-scale criminal prosecution, or some other dramatic end. Whatever happens, a happy ending no longer seems to be in the cards.

Prosecution seems fabulously unlikely, given how infrequently founders have gotten in trouble with the law for misleading their investors. Holmes won't be close to the most lurid bad-faith founder claim (if that's how the story indeed ends).

This is why we have investor "accreditation".

You'd be amazed at the seemingly minor misrepresentations that a federal prosecutor can turn into a fraud case. That said, whether or not it gets that far depends entirely on the how the investors feel about it, exactly what they were told, whether they choose to report it as a crime to the FBI, etc.

I wouldn't be too sure about that. Investor fraud isn't the only thing we're talking about here. There are questions about the accuracy of the blood tests themselves.

Indeed. I wouldn't be surprised if prosecutors take a particularly unkind view of the possibility that Holmes has potentially put lives at stake.

That said, her board is a veritable who's who of DC powerbrokers. That will definitely be a factor.

http://techcrunch.com/2015/04/01/cuzyolo/

You're right, it is possible that people started with good intentions and sincere beliefs, then got desperate. That does happen. I do feel bad for the many innocent and even idealistic people who will suffer the consequences along with the true miscreants. On the other hand, there are others who had information the rest of us don't have, and a specific duty (to their own investors) to blow the whistle early if they saw anything amiss. It's a lot harder for them to claim innocence.

Given how loaded her board is with insanely high-ranking ex-government officials, you can pretty almost certain that any federal prosecution will not happen.

The same was true of Enron's board and they still saw prison time.

edit: Apparently I wasn't clear. Enron's board was also stacked with high-ranking politicians and many executives still saw jail time.

My point was that a well-connected board won't necessarily shield executives from prosecution.

Enron's board wasn't just outfoxing accredited investors, it was taking advantage of the company's accounting fraud to engage in insider trading.

Enron defrauded the public, not just accredited investors.

accounting fraud, not "optimism" (various definitions of optimism)

The more dirty it is, the faster the support will drop from these ex-officials, so it's actually the opposite.

Pfizer, on the other hand, told the Financial Times that the company's dealings with Theranos were limited. "We've done only very limited historical exploratory work with Theranos through a few pilot projects,

So, the root of this could simply have been poor reporting not deception. I mean you generally don't do multiple pilot projects with vaporware and Pfizer is a huge drug company.

PS: 400M is a lot of money, but probably not enough to do much R&D and start jumping though the hoops if the FDA get's picky.

A prototype device probably costs $150k to $200k to build, so $400M should buy an enormous amount of R&D!

Matthew Herper recently totaled R&D spending from the 12 leading pharmaceutical companies from 1997 to 2011, and found that they had spent $802 billion to gain approval for just 139 drugs: a staggering $5.8 billion per drug.

Granted, we are talking about medical devices, but as soon as the FDA wants clinical trials things get damm expencive and 400M is a drop in the bucket. 200K is about a weeks budget for a well staffed modern lab. Sure, you can get a minor iteration in a week, but nobody is going to send anything down the pipeline without a lot more research than that.

Seeing this story slightly riles me up.

My favorite uncle has a brother who is rich behind wildest dreams. He invested in this supposed unicorn. What did or does she do to get rich people to pull out their wallets and possibly dump their money down the drain?

I, on the other hand have so much opportunity knocking at my door (demoing my tech to Google, Samsung, about to go onto an inventor reality tv show and tons more), yet am unable to connect with the same rich people including my uncle's brother.

As they say it only takes one wealthy person to invest in you and others will follow. Not sure what other signals that need to happen to show him and or others that based on my history I should be given a similar shot. Been at this for 8 years and these amazing opportunities continue to knock and knock. All opportunities are a huge honor, yet extremely frustrating when you don't have the resources to take advantage of it all!

You're being modded down for whining, no doubt, but I can see where you're coming from. Every dollar that goes to Theranos (or Enron, or any number of other slickly-packaged plays) is a dollar that doesn't go to someone else's company. Gotta be frustrating to watch that happen over and over when you're personally sure you're a better bet.

im not surprised of being downvoted ... i sound like a whiner no doubt. Whining that if your born rich and affluent or have strong ties to such then getting your startup funded is a ton easier.

Pardon my whining about how getting funding works for a good majority of start-uppers. Like how many Ivy Leaguers has YC funded? Is it a majority or minority amount?

Excuse the bafflement. But wouldn't your uncles brother be your father? Unless you meant to use brother-in-law instead of brother in your post?

Also it sounds like you have some good tech, but need a partner who is able and experienced in dealing with investors.

My 8 year history indicates my strong points are ideas, marketing the ideas and building them out some with teams of consultants who are not 500% vested as I.

I'd love to find a true startup partner who has connections and is vested the same as I. One who will and drop everything to help me take advantage of all this opportunity.

My favorite uncle is my father's cousins husband. His brother was the CEO of large well know retail store.

$400 million down the drain. Great job VCs.

"She's a Stanford dropout with an idea!!!" Is not due diligence.

as history shows one have to be either a Harvard dropout or a Stanford graduate. Not understanding the difference here is like not understanding a difference between finger-prick and venous blood samples :)

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