Theranos Sued for Alleged Fraud by Robertson Stephens Co-Founder Colman
wsj.com
wsj.com
Because in a bankruptcy judgments are given priority over debt, if you holding Theranos' debt you can try to jump to the front of the line by suing for fraud (etc), in the hopes that you can get a judgement in your favor.
So the real takeaway is, it seems all these companies have concluded that bankruptcy is inevitable.
It's been reported that Theranos still has $400M in cash. And the founder has majority control.
So this is a very rare condition, where there is still assets in the company (so a judgement can be paid) but the company has no business plan. So you have a founder who's best play now is sit around for the next 10 years spending down that $400M on new business plans to see if something hits.
Go ahead, halve all my numbers and argue that Theranos actually has a burn rate of 4 years: It still doesn't matter, there is no way they'll get something through the FDA (especially given recent history) in 4 years.
Technically, the board could have fired me, and it would taken something like 2 or 3 months to have forced my way back on. (Calling a major shareholder meeting to elect the board out of cycle, plus calling a new board meeting to vote myself in, takes time and organization.) The political cost of overruling the board in that manner also wouldn't be null for me, and likely would've caused key staff to quit and key backers to stop supporting the project. I definitely would have had to do a lot of explaining for such a power play, and it's likely my reputation never would recover at the company.
As a lot of kings have learned: your word may be law, but nobles pay the taxes, provide the swords, etc. You can't make enemies of everyone.
In all fairness, though generally lawsuits represent a failure on some level, this kind of situation is kind of why we have courts. That's a proper venue to determine what to do next in this unusual and extraordinary situation.
Keeping only the "best" 50 engineers of course.
that's what complete voting control means!
i'd not say so. Originally they tried to sell their tech to DoD (in 2012), and Mattis, a 4 star general back then, was the key figure in trying to push the deal through (no surprise that he ended on their board :). Given that he may become new defense secretary under Trump this old plan becomes new and shiny again. Also consider how FDA actions toward Theranos may be spun out in the new political regime as an example of egregious regulation overreach strangulating revolutionary innovations and entrepreneurship ...
So Theranos need to survive only until the January 21st.
Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. For example, somebody coming straight out of university vs. the daughter of a CEO at a large company who also attends the same country_club/religious functions, suddenly looks like a safer bet.
It looks like a pretty hopeless situation for Theranos but it also exposes the crony capitalism that you'd find in other parts of the world with ease, with heavy hitters like Henry Kissinger (wtf) sitting on the board.
He will most likely never see that money again because he thought he was mitigating risk by piggybacking behind a powerful individual with powerful connections that's accessible by blood.
It's hard to feel any sympathy.
This one blows up and then, to a certain extent, it exposes the cozy interconnections of "socioeconomic lineage"
Is a great example of just how much you can get away with if the right person just assumes you're rich.
That comparison isn't apples to apples as there are 299 other seemingly viable ideas that you're including in the latter category. Assuming they're good enough to warrant someone investing $50K, they have an inherent value as well.
> It's hard to feel any sympathy.
I believe the emotion most feel in regards to all things Theranos is schadenfreude[1].
That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. I'm sure people can scrape by on that, but don't pretend it'd be doing them a huge favor.
The more I think about it, the more exploitive it seems. Great for tricking recent college grads into wasting a few years to build a website, but not so great for actually developing new technology.
Who's being naive?
The median net compensation last year in the U.S. was $29,930.13, meaning half of all wage earners earned less.
Median income for an entire household (ie more than one person) in the US is about $51k. Meaning about half of all households make less than that.
Assuming half the population of the country doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable"
Consider that YC will throw you 200k but you're going to be moving to an area where the median income is $90k
This of course wouldn't be an issue if people didn't insist on living in the bay area, but nobody takes you as seriously if you're remote.
Sure, but that doesn't change the actual...you know... averages the parent cited. For every household with over $51k, there was a household with under $51k.
Pointing out that some corner of the US is expensive hardly changes the point.
Prices in San Jose aren't brought down by prices being lower elsewhere because location is basically the most important dimension in real estate.
The median house being 188k in america means nothing when all the houses you can choose from cost over 1mil. And you're stuck there because the bay area has a near monopoly on startups, especially if you receive funding from a bay area accelerator.
Let me take the parent's comment to the next level:
"The median net compensation last year in the world was around $1,200, meaning half of all wage earners earned less. Assuming half the population of the planet doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable""
Equally inapplicable to someone who lives in the bay area.
We're all edge cases in the world as a whole.
Even if a person does live in part of the country where $50k is a decent salary, it still doesn't leave them much left over to start a company. And living away from urban areas will bring its own challenges, like networking, marketing, advertising, etc.
Just an example, how do you think Uber would have turned out if they started in Pierre, South Dakota?
And good luck buying any kind of machinery, expanding beyond a lone developer, etc. with only $50k.
Plenty of people would jump at being paid $35k for a year plus have $15k in tooling + materials. Lots of craftsmen would be able to establish a new business with that level of funding.
I think you have unrealistic beliefs about how things work.
Do I? What percentage of VC money goes to people living in areas where $50k would be a good year's salary? It's practically 0. YCombinator won't even invest in companies that won't move to the valley. http://www.ycombinator.com/faq/#q21
However, most people are just commenting that you're wrong about 50k/year not being livable for most of the country. Almost everywhere, including places like Seattle, 50k/year is what half the households make, so works for an individual salary. It's the vast minority where 50k/year isnt livable for a single person.
Of course, that's also partly what people are calling out elsewhere in the thread: high VC spending close to them is about social connections rather than what makes economic sense.
I expect that if you had the capital, you could eat most VC's lunch by just spending everywhere but those hyper expensive areas.
This doesn't make sense. I'm fairly certain that a random person graduating college is a worse bet than a random person who is graduating college and is also socially well-connected. I imagine that 300 startups started by people who are both college graduates and socially well-connected have better odds of success than 300 startups started by randomly-chosen college graduates.
Startups aren't immune to fraud, stupidity and waste. In fact, regarding the latter two, startups are probably more prone. With hindsight it's easy to say throwing money at Theranos was a bad idea, but the same can be said for the vast majority of startups.
Colman et al v. Theranos, Inc. Docket: http://www.plainsite.org/dockets/3350guyw8/california-northe...
People's medical diagnoses and health is on the line here. The cavalier attitude of "getting caught up in taking nothing feasible to market" makes me sick.
Audacious like...mass fraud (potentially)? If you say so.
>Elizabeth got really caught up in taking absolutely nothing feasible to market, and that's a damn shame.
What is shameful about it? She was a well-connected person who leveraged contacts to raise money. The fewer people we have like that in the startup world, the better.
I'm not going to armchair psychologist and suggest a diagnosis... but she's gotta be something...