Safeway, Theranos Split After $350M Deal Fizzles
wsj.com
wsj.com
> Current and former Safeway executives said Theranos missed deadlines for the blood-testing rollout. They also said several Safeway executives questioned the accuracy of results Theranos gave to Safeway employees tested at a clinic in the supermarket chain’s headquarters in Pleasanton, Calif.
> Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.
> The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.
> The concerns deepened when Theranos’s test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.
> One Safeway executive got a frighteningly high result from Theranos on a test to gauge his prostate-specific antigen, according to two former Safeway executives. They said the test suggested that the executive had prostate cancer. Retesting by another lab came back normal.
Using Facebook as the archetypical unjustifiably-rich-startup (not my opinion, just well-repeated), in which the goal is to lower friction between friend-network-contacts...even if FB's news feed algorithm was corrupt, users have multiple ways of assessing the quality of their experience -- including out-of-band assessments (um, hanging out with friends IRL) and being able to defriend/filter lists...
The whole point of Theranos is to reduce the friction in personal health assessment...which is a great idea regardless of noble motives...but lowering friction essentially means being able to more frequently collect and analyze data about yourself. If the assessment process is bad, then using more of the product is fundamentally terrible for the person. But the bigger problem is that it isn't easy to compare health tests...if getting an old-fashioned blood draw test was trivial, then Theranos would have no purpose in the first place. So with Theranos, the easily imaginable bad-case scenario is literally that people die because of false positives and negatives, no matter the kind motives and ambitions of Holmes.
But I have to admit...at least Theranos believes in their own product? Because if it were just snake oil, they probably would've worked out a way to not use their flawed procedures for the Safeway executives, who have much interest and motive (and money) to do comparative quality testing. (unless of course the Safeway execs conducted their own blind tests...which is obviously what they should do but obviously, not all big money executives have been that skeptical of Theranos)
It ought to be relatively easy. I mean, not easy for the average Joe, but easy for anyone seriously interested in doing it.
Draw blood twice: once with the finger prick, and once with a regular vein draw, and then test the two samples using the different methodologies. Compare the results. Seems like a fairly trivial experiment to run and reproduce.
(yes, I'm leaving out the major issue of over-diagnosis...but that's an issue all kinds of testing and medical practice has to deal with)
That depends on what you're testing. "Blood test" and "health test" are ridiculously ambiguous terms. Something like red blood cell counts don't vary much from day to day, but some things, like blood sugar and cortisol, vary hour to hour.
To do something like secretly changing the procedure for the Safeway execs would require someone to openly address the elephant in the room in a culture where the elephant isn't to be discussed.
When are the insider stories about the culture going to start emerging?
glassdoor seems to be pretty clear on that company/culture (if you skip the obvious 5 star reviews :).
Podcast interview of the author, released yesterday: http://www.econtalk.org/archives/2015/11/robert_aronowit.htm...
"@Pete: it is entirely justified to have doubts about the validity of blood results obtained from finger pricks. The blood you get from a prick will be a mixture of blood from small venules, small arterioles, capillaries and lymph vessels, mixed with whatever loose tissue and cells have been cut by the prick and carried over into the blood. No way you could ever get a reliable CBC from such a sample. Since the kind of general blood tests that this company is targeting are usually CBC + chem panel, even if you could get your chem results from the prick, you still need a normal blood draw for the CBC, so the competitive advantage that they are trying to push (quick sampling by patient at pharmacy, without need for phlebotomist) is lost. On top of that, the variability inherent in chem results from prick blood will be significant for several analytes, like CK and AST (present in muscle so could be raised from prick injury), glucose and lipids (different levels in venous or arterial blood or lymph), etc… They are focusing on their fancy technology without much consideration of the underlying biology, typical error of engineering types.”
1. http://blogs.sciencemag.org/pipeline/archives/2015/10/15/the...
That said, diabetics just use finger pricks for their blood glucose tests. Is the result calibrated for a finger prick test or do we just assume it's close enough?
I expect a Theranos movie written by Aaron Sorkin by 2020.
Theranos is 12 years old at this point, and raised $400 million at a $4.5 billion valuation. Would a founder of a company in those circumstances have been able to liquidate - let's say - 1% of their ownership along the way, or in the last fundraising round, for cash? Or is that out of the question and founders are expected to retain their ownership aside from investment dilution until sale?
I suppose the answer depends on the terms the company is able to work out with their investors. But perhaps someone can comment on what terms are common in such situations.
Last year's big drama was Secret app's founder taking $6MM when they raised $25MM then proceeded to buy fancy cars. The product growth stalled and the company shut down in less than a year.
Happened with Buffer.
https://open.buffer.com/raising-3-5m-funding-valuation-term-...
> So you might be wondering, why raise funding if everything is going so well and we’re in full control? Here are some of the reasons:
> 1. We’re removing pressure to sell, so we can go all in and keep building Buffer for the next 5-10 years. 2. Setting up a precedent for multiple regular liquidity events for investors and team members. 3. It’s a way to get partners on board who are excited about the unique way we’re running the company. 4. We want to add a little extra cushion to the bank to help us with any speed bumps that might arise [more details on each point in the article]
Their reasons make sense to me.
I'm curious because if Holmes has been able to convert even 0.1% - 1% of her shares' current value along the way, that's a life-changing amount of money ($4.5m - $45 million).
I'm very curious what the experience is like to be worth billions on paper via a private company. Can you get a mortgage? Can you borrow against stock in a private company? (Do banks recognize the valuation of a company as legitimate for that purpose?) It does make sense that investors would want founders to take something home so that they can live and buy a house, etc.
I suspect there's a point where they will, somewhere before 'publicly listed companies' (which publish the market valuation on a moment by moment basis), but it's likely to be within established industries (partnership in a law firm, for example) not near my situation or most tech startups.
The best option would be to go to a giant firm like Goldman Sachs. They would have written her a check for $100+ million prior to all of this unfolding. They might still consider it, but Goldman would do a very thorough rectal exam of the company and its prospects now.
If you wanted to borrow against private wealth of the sort Holmes was sitting on, you'd avoid common banks. Not because they won't give you a mortgage on a house, but because it wouldn't be even remotely worth the hassle of going through them. If you just wanted $500k for a mortgage, your best bet would be to make a call to one of the big VCs backing you, they'd cut you that check under all sorts of arrangements with hardly any questions asked.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...
> The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.
> The concerns deepened when Theranos’s test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.
> Theranos also backed away from putting its blood analyzers in Safeway’s clinics so patients could get the results quickly, the current and former executives said.
> Instead, Theranos said blood samples collected at Safeway would have to be shipped to a central lab for analysis, according to the former executives.
Wow. The Theranos story just keeps getting worse.
Personally I view things where you give someone a false health diagnosis to be among the most egregious deceptions possible, a step beyond running a Ponzi scheme and in line with other things where users are severely hurt or killed.
She was 21 or so when Theranos got a $5.8m A round. She's now 31.
>The $350 million price tag was equivalent to more than half of Safeway’s net income of $596.5 million in 2012. Safeway had revenue of $44.21 billion. Safeway also invested more than $10 million in Theranos, one former Safeway executive said.
>Two of the former Safeway executives said they told Mr. Burd, Safeway’s chief executive, about the varying employee test results.
>The former executives said Mr. Burd told them he had been reassured by Ms. Holmes. Mr. Burd continued to support the partnership with Theranos, according to the former Safeway executives.
If he hadn't retired already, he should be fired for incompetence.
In seriousness, Safeway gets durable capital improvements to their stores for their $350mm, still useful without Project T-Rex.
How does she do it?
No, seriously. I mean, sometimes on my projects I get a really shitty result in the beginning... and I have to explain to my boss that it'll get better -- and I often fail (even though I'm really sure that the project will eventually be okay). How can Holmes reassure people of something that's clearly failing? What tricks is she using?
Theranos's vision was to make blood tests easier and more accessible by requiring only a finger prick instead of drawing from a vein and by giving results quickly instead of hours or days later from a lab. It sounds like Safeway got on board with that vision as a forward-looking opportunity.
If a full panel blood test was as easy as a finger prick, then I could see blood testing going mainstream in the way that Theranos is hoping, and Safeway was hoping, but it all depends on the technology actually working as advertised.
Value-add services in pharmacies are A Thing. In many places, pharmacists can administer vaccinations, and a lot of stores are adding "minute clinics" where you can go for quick health advice, blood tests, etc. Again, offering these services brings patients into the store where they will likely buy something else, and staffing these locations with nurses, nurse practitioners, or even just pharmacists, undercuts the cost of a visit to a medical doctor.
If it comes out that Andreessen backed Theranos, I suspect there'll be a lot of schadenfreude in the Valley.
PS: This is true for most of the news websites that require subscription.