All Here founder's arrest shows it's easy for startups to scam investors

CEOs seem to be expected to be optimistic and over-confident - and perhaps rewarded for that too.

Finger capillary blood is fundamentally unrepresentative of blood samples taken from veins with few exceptions. Doctors and scientists have known this for a long time. Theranos’ technology was never going to work the way they sold it, and if they sold it as a faster on-site diagnostic device with standard blood draws they would have been just another in a sea of diagnostics startups that few care about.

That is a very poor analogy to Theranos' situation. In SpaceX's case, there is obviously nothing fundamentally impossible about using rockets to get stuff into space - humans have obviously been doing that for quite some time now. I'm guessing the experts you talked to were more making economic arguments, or making arguments that the stuff SpaceX was proposing doing would be too phenomenally difficult before the money ran out.

That's very, very different from "physically impossible". Getting accurate quantitative tests from finger pricks is not "technical risk". It is physically impossible because capillary blood is simply not homogeneous enough at the proposed volumes. There was literally nothing of value that came out of any of Theranos' technology - it wasn't just a case of them not reaching sustainability before their runway ran out.

Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise. Biotech VCs have a stable of expert consultants in many subfields of science and medicine to do the reviews for them, as well as accountants to go to for financials.

That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer.

Theranos’ investors did not do their due diligence and paid the price.

Risk Rules:

1. Only take significant risks in domains in which you have substantial first-hand experience, expertise and which you understand deeply.

2. Spend significant time deep diving on the specific opportunity (due diligence).

3. Write out your investment thesis in detail including calculating the risk and return. Include a bullet point list titled "Everything that has to be true for this to work." Put percentage odds next to each bullet.

4. Before leaping always ask yourself "If this goes completely bust, will I not regret it because it was for reasons I knew about and I can honestly say 'given the same opportunity, I'd make the same bet again'?" This is important because the nature of risk is that sometimes it doesn't pay out but the potential reward is worth the potential loss when averaged over multiple bets.

The people I know who tend to have 'regrettable losses' also tend not to have a well-grounded understanding of how economic value works in principle. They're the kind of people who assume others get rich by "getting in on the new thing before everyone else does." While it's true this can happen, it's not what I'd consider a workable long-term plan.

It's true that these rules have resulted in "missing out" on some opportunities which turned out very well for others. For example, I had some friends who were fairly early into bitcoin and did quite well. I looked into it at the time and I understood the principle while also liking the idea of decentralized currency in concept. But I ultimately passed because I just didn't feel I had enough background knowledge of the cryptocurrency domain and, because I'd recently launched a startup, I wasn't at a place where I had the time/mental energy to devote to learning and tracking the evolution of the crypto marketplace to know when to sell. Essentially, my "risk bandwidth" was already committed to a high-risk, high-return bet (and the startup bet worked out very well - in part because I was 100% focused on it). I have zero regrets about "missing out" on early bitcoin because I'm confident that pursuing bitcoin would have put my startup at (greater) risk. Also, when I made the choice to pass on bitcoin, I acknowledged that it very well might "go to the moon" and I'd be missing out, but I was confident both then and now that I was making a difficult but well-informed choice. I think that's why, when I reflect on that choice, it's never evoked a feeling of regret. The same principles and strategy that minimizes regret on losing bets that were properly taken, should also minimize regret on winning bets that were properly not taken.

Another example is that during my multi-decade career as a serial tech startup entrepreneur I had most of my net worth tied up in my startups but as I made enough to set aside some into investments, those investments were entirely in a relatively conservative, long-term diversified portfolio (eg standard 'bogglehead' investing strategy). And I only looked at the portfolio once a year. My reasoning was simply that I was already exposed to more than enough financial risk (and potential reward) in my startups to take on any more volatility. Another way to put it is to evaluate, revise and optimize your risk strategy, not individual bets. As long as each bet is properly executed under the strategy, you don't regret individual bets, only the execution or strategy - which can be changed or improved going forward.

It was about how to bait VCs using a pitch deck.