Theranos reportedly laying off 41% of its workforce | Hacker News Reader

Theranos reportedly laying off 41% of its workforce

cnbc.com

154 pointsxyzzy495 comments

I guess my main question here, is if they have been banned by the FDA from doing any testing at all for two years, what exactly is remaining of the business, and why haven't they been completely shuttered?

Bloomberg seems to indicate there isn't much left for any employee to do.

https://www.bloomberg.com/news/articles/2016-07-08/theranos-...

I worked on a project where in the same building a startup was going under. It was totally clear that there was no hope but they kept burning through their VC money instead of closing.

Why not? Give your employees a life boat and some time to move on. I know some people who were at Ride well after it was clearly not going to work out. They all had breathing room to find good fits at new companies. Sure it burned a bunch of cash, but it lowered the human cost of the failure.

That's a good point and a nice side effect but in general nobody gives a damn about the employees. This is most likely not the real reason.

This is a pretty naive viewpoint. In many small startups, the founders and employees are close friends and have long personal histories, not to mention futures together. Founders are typically not stupid, and won't burn bridges just to role-play a capitalist caricature.

I don't know if I would describe Elizabeth Holmes as your typical founder...

At a company that size the founder and investors maybe care about the next one or two levels of management. The rest don't matter. They most likely don't even know people further down.

But Type-A would be fun, they said!

I think when the ship is sinking, even the captain(ceo) is trying to buy time to plan a next move.

The founders are employees too...

I'm pretty sure Elizabeth Holmes doesn't give a fuck about employee well-being.

I think that is fair. When a startup is successful a VC gets paid on 100% of their investment. When a startup is unsuccessful, why should VCs be allowed to cut bait and recoup the remaining investment? VCs get to have their cake and eat it too enough as it is already.

IANAL but continuing to operate a failed enterprise with no intention, let alone hope, of actually turning it into a successful business sounds like fraud if you're doing it with other people's money.

I don't think it's necessarily so. I presume there's a goodwill benefit to giving employees a bit of rope to bridge to the next phase of their life. An employee that moves to another company in the VC network will feel better and perform better... Or if they seek funding for their own company the freedom to fail without worrying about egregious losd probably results in better performance too.

I'm not saying it's not a charitable thing to do, I'm saying that (it sounds to me like) it's fraud.

Just because something has good intentions behind it doesn't make it more or less illegal. It might help at your sentencing when you tell the judge you were thinking about your employees families and not just lining your own pockets but it doesn't making it less of a crime. Just like stealing a loaf of bread is still stealing even if you're destitute.

> continuing to operate a failed enterprise with no intention, let alone hope, of actually turning it into a successful business sounds like fraud if you're doing it with other people's money.

How is this not "heads I win, tails you lose"?

The investor exchanged $ for % of the company. At the time of the $ for % trade, the founder probably had every intention of succeeding beyond everyone's wildest dreams. The seller's intent was never fraudulent, and buyer's remorse isn't fraud.

More to the point, keeping the company in-tact for as long as possible in hope of an aqui-hire is a justifiable end-game for a company in failure mode. If the VC wanted control over the failure mode end-game, they should've written that into the "$ for %" contract.

PG even has an essay encouraging founders to adopt this mindset: http://www.paulgraham.com/die.html "Startups rarely die in mid keystroke. So keep typing!"

If the founder legitimately believes that the company will go under and there's no chance of an aqui-hire or similar out, then maybe possibly it's fraud. But calling it fraud when a business fails and a founder makes a judgement call to "not stop typing"? Seems like "I get your money if you win, and sue you if you lose".

> How is this not "heads I win, tails you lose"?

Because the investor will not have 100% recovery rate.

> Because the investor will not have 100% recovery rate.

Says who? At which point in time is it "obvious" that there's "no intention, let alone hope, of actually turning it into a successful business"?

If you and I judge that point in time to be different, does that constitute fraud on the part of the person who's being less conservative? What if that person the investor? Presumably the founder also owns part of the company...

Futhermore, even "unsuccessful" ventures can have a greater than 100% recovery rate from a given point in time. An aqui-hire that loses investor money isn't a "successful" businesses, but it can end up losing a lot less cash than a company that folds a month or two before the deal is cut.

What if you force my hand and we fold but leaked confidential documents from BigCorp. indicate that if we had waited three weeks my company would've been aqui-hired for 1500% of the value of the liquidated assets? Does that make you guilty of fraud? And if not, then why is it fraud when you turn the tables?

Basically, it's really difficult for me to imagine any scenario in which the facts and intentions of all actors are clear enough to trigger koolba's scenario. And even then, it's still possible for a failed business to make it over the 100% recovery rate at the point in time when the investor things the plug should be pulled.

Because it is their company. They own it. They can do whatever they want with THEIR investment, including firing the CEO and putting someone else in charge to give back their money.

> They own it

Or, much more likely, they only own a part of it. Maybe even a minority of it.

> including firing the CEO

Maybe the can. And if they can, and they think that's the best course of action, then they should definitely do that. It's a must cleaner solution that waiting and then crying "fraud" over a difference of opinion on the future of the company.

I guess the real purpose of the business is to make money for the investors not to make revenue. From that angle it makes sense.

Because the point of a business is the make a return on an investment. If it's clear that a return is not possible then the business serves no purpose and should be shut down in an orderly manner including appropriate severance for employees.

The inherent privilege of capital. Not a legal export, but I'd imagine its hard to regulate companies that are going under, since there won't soon be anything left to sue.

Because they funded the thing and took on far more risk than anyone else? I'd want my money back to; I'm not in the business of paying out white collar welfare.

> took on far more risk than anyone else

Hahahahaha! Oh boy, that piece of Ayn Rand junk propaganda never gets old.

Yeah, they took on so much "risk" compared to everyone else. I wonder what are they going to do when the investment fails. Are they gonna be able to get health insurance? Not default on mortgage payments? Justify holes in the resume timeline to potential employers? Put food on the table for the kids, and a roof above their heads? Send their kids to college? These are tough to do when you're "risking" so much.

Poor things, they live so close to the edge, it breaks my heart.

Nope, they took on less risk than anyone else involved. Money is fungible, and they've likely got a lot of it.

The people there, day after day, they gave their time. That's something we all only have a limited amount of, and that's something you'll never get back.

They did not "give away" their time; they were compensated at a fair market value for their time. I believe this is what we call "employment."

At a fair market value -- except if it was an early stage startup it was discounted from market value, with subpar benefits, but with a "tonne" of (now worthless) equity.

It is in many ways personally more rewarding, but taking a job in a startup versus a well-established business is taking a risk, accepting subpar conditions today for a shot at a big prize later on.

The company has been around for 10 years, with hundreds of millions in funding through multiple rounds, so I would not consider this a "startup".

The employees were/are highly paid and not assuming any real risk.

If it was a fair salary. A lot of places try to pay low and give shares for payout in the future. Many young and techie people go for that if they are enthusiastic about the idea.

While philosophically time is invaluable, I bet people would rather spend their time earning money if they don't have other options.

Such a narrow definition of risk... Their money is the only risk invested?

What about employees who moved across the country, or who worked for two years of their lives here and lost the opportunity costs of working elsewhere, and now have nothing more than a failed company on their resume?

So, I assume the company paid for you to make that move, right? Yes, you took on some risk by moving cross country, but you likely did so because the work was interested and/or the compensation was worth it. Let's not pretend that you didn't get anything out of the deal.

So, it fails, as startups often do, and you find another job. During your time there you pocked over 200k + benefits. What a rough life. What did you lose exactly?

I'm so confused.

You think that the startup employee, who's placed a bet on their own personal value, doesn't deserve sympathy, but the VC, who gets to hedge their bets, does?

Both parties, investors and employees, should get sympathy and remediation. Employees have been paid a salary all along, but should still get a proper severance if the company is shut down. Investors who gave Theranos >$300M in 2015 also have a right to get some of their investment back if the company is hopeless. The investors are shareholders in the company and the board and CEO need to consider their interests along with the employees' interests.

I didn't say that. I said the VC is putting more skin in the game. Sucks for both, but were paid quite well for what we do and can walk away whenever we like.

Is "were" supposed to be "we're"? If it is, who's "we"? Not all startups pay "quite well" and there are varying levels of risk employees take. Some are certainly more extreme than others.

I think skin in the game is proportional to net worth... as a percentage of net worth, I'd bet employees put more skin in the game.

If some unfortunate VC tied 100% of their assets in this, which was tied to 100% of some direct persons money, then that'd suck for sure. Not likely though.

>I didn't say that. I said the VC is putting more skin in the game.

No, they don't. They are putting more money in the game, but way less skin -- since with "skin" we usually refer to actual personal consequences (it doesn't get any more personal that our own literal skin).

Why do you make these assumptions that they're well paid?

And aren't VCs well compensated as well? In many cases taking the bulk of reward despite not doing any of the work?

I don't buy that. Given that the VCs are not investing their own money, they have huge portfolios with many investments, and I'm investing something I can never get back: My time and energy, I'd say they're taking nowhere near the risk anyone else is.

They weren't banned by FDA, they were banned by CMS. And the ban was on conducting tests only. They're still allowed to develop test equipment to sell to other companies that will actually perform the tests. But the scrutiny they will get from FDA let alone any potential customer will be intense. No one in the diagnostics world will trust anything Holmes makes. Theranos is a dead company walking, provided Holmes remains in charge.

They don't really have any. It's likely that they're focusing their last bits of investor money back onto their hardware testing platforms, expecting to go back to market in two years and then ramp staffing back up as needed.

I've worked at a couple startups where the company was more-than-done out of business and we spent our last 6-12 months negotiating with creditors and trying to get rid of hardware, software, and various worthless IP.

But that takes a tiny skeleton crew, so maybe there's that.

Or, perhaps you're right and they're going to see if they can wait out the 2 year ban. Most likely they will change the name of the company to hide the bad reputation and then re-release the hardware testing platforms.

1 - they think they will need more than 2 years to be in a stage where they run tests. And I'd bet they can test in the meantime, just not do human diagnostic tests, ie no treatment decisions based on the test.

2 - they will sell the lab devices and so won't do any testing themselves

They were debarred by CMS, not FDA, since CMS regulates clinical labs (mostly). They can still theoretically sell medical devices that are cleared/approved by FDA.

The only surprising thing about this news is that its only 41%, i figured it would be closer to 100%

Still this sucks for all of the people she lured to work for her earlier on before it was realized to be (the edison blood tester) fraudulent / incorrect due to the low sample size.

I can only imagine being one of the researchers or engineers there really believing you would be able to change the world and getting crushing news like this. It would really suck.

> Still this sucks for all of the people she lured to work for her earlier on before it was realized to be (the edison blood tester) fraudulent / incorrect due to the low sample size.

Hardware is hard. Let's go shopping. :)

However, that doesn't have to be the end.

You can narrow the usage to something like "Use for routine visits to collect data quickly but not for diagnostic reasons". Being able to do a very fast test without drawing much blood for every time you visit the doctor would be useful information over time. There's also a "Hey, that number is a bit high. Let's pull a real amount of blood and see what's going on." I suspect that if you correlate the information over multiple tests it gets much more accurate very quickly.

In addition, I suspect that the engineers would have eventually worked out how to correlate things correctly and figured out how much blood was required for what level of certainty.

Finally, most people in the biotech sector understand that it's a "pump and dump" scam. You invest, wait for the company to get some good news, and sell to the next layer. Biotech often takes long timescales and different investors toss money in at different points.

However, what doomed the company was Elizabeth Holmes lying. I could make other comments, but, really, Theranos would still be fine if she had told the truth. People know that biotech always runs into problems. Always.

Your CEO is one of the people who must not lie (your CFO is the other). Your sales people can lie. Your marketing people can lie. Oddly, even your CTO can get away with some things, but normally the CTO is a shining beacon of truth compared to most people in a company. If your CEO always tells the truth, the CEO can say: "We've hit some snags, but the engineers think they can work around them" and people will believe because they want to believe.

But once your CEO is known as a liar, you are doomed.

However, I expect that Elizabeth Holmes will be back far too soon and will wreak havoc on an even larger scale. She is just Carly Fiorina writ 35 years later. She will fail upward because she is a not-unattractive blonde female with lots of rich family connections.

She's rich and will stay independently wealthy for the forseeable future due to this, however her name is heavily tarnished. Even if she does pull off the edison tech, she'll have a hard sell finding investors to the level she did for Theranos again.

> However, I expect that Elizabeth Holmes will be back far too soon and will wreak havoc on an even larger scale.

A larger scale than raising $10b for vaporware? No way. She's the biggest business fraud story of the decade, and in the top 5 for the 21st century thus far. I can't imagine she'll ever raise another penny of VC, for Theranos or anything else. Nor will she have a future in politics - Fiorina may have been controversial and destroyed jobs but she did so in a way that conservatives could frame as being a "pro-business" success. Even if most politicians are fraudsters of one kind or another (and ironically Holmes's skill at fraud, deception, secrecy and doublespeak might predict her being a skilled politician), there's no path to politics for someone whose life story is already so publicly toxic.

>>But once your CEO is known as a liar, you are doomed.

I used to think this and then look who we elected. In reality, you just have to keep making up lies on top of lies and somehow things seem to work out for you. Just never admit fault and reflect all your bad qualities on your critics and there is a good chance that at least you will muddle the waters.

What might suck more is trying to get another job with Theranos on your résumé, and having trouble because hiring managers suspect you might have been one of the employees who was involved in fraudulent research practices.

It sucks that the company probably has some decent IP that can change the world, but is (by my outside opinion) so top heavy business-wise that it'll just eventually end up locked away by competitors via some forced sale.

If I had to pivot a miniature lab that fails because of small sample size; I'd think of just making it invivo.

220 employees left, 155 in today's layoff, 340 cut in October. So, today there are only 30% of the employees who were there in October, or laying off 70% of the workforce.

It's possible they used a Theranos Edison machine to calculate their company's odds of survival.

This comes after October when they had let go half the company (340 people were let go then).

I think the word is out - I've talked to several candidates from there in the past week.

41% of those remaining. The percentages hurt more with each round.

Any news on Steve Jobs of Medical research?

Personally, I also thought it was surprising that Theranos still exists.

This leaves 220 people employees left at Theranos? Why? The company is over. The emperor has no black turtleneck. Move on.

I can't wait until this whole saga is made into a movie.

I also can't believe anyone is willing to give them the time of day with a new product.

Well, it is being made into a movie: http://www.vanityfair.com/news/2016/06/jennifer-lawrence-wil...

0 credibility left.

And, related: Trump’s pick for defense secretary has resigned from Theranos’s board [1]

[1] https://www.washingtonpost.com/news/wonk/wp/2017/01/06/trump...

Amazingly, I understand that the board had a lot of big and very well known names.

They'll probably have to change the name of the company if they want to get out from under the stink of sleaze.

The good ol' Blackwater/XE Services/Academi gambit.

How's Accenture doing these days? (Not quite the same I know, but I did just discover today that Arthur Andersen relaunched last year, huh!).

In a fit of irony, multiple partners left the smoking ruins of AA to found a firm called, of all things, Accuracy.

How far back does the practice of renaming something after an infamous debacle go? If it's smoking ruins you want, then i can recommend Windscale, which was renamed to Sellafield not long after this little bit of excitement in 1957:

https://en.wikipedia.org/wiki/Windscale_fire

Why is anyone even still sticking around voluntarily? There is no chance of a lucrative exit and the company will probably die off on its own within 1-2 years.

Why do people still work there?

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