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90% of success in any business is marketing. That drops to 40% in a heavily regulated industry, with the other 50% being who you know.

Holmes is really smart for connecting with the right people early. Every account I've read of the woman is that she is incredibly smart and a relentlessly hard worker. Chances are she was able to impress a number of powerful people who backed her early, and she has been able to build a functional company (no small feat in itself) that is attempting to disrupt the medical testing industry.

A large part of successful disruption in heavily regulated industries is building a popular brand. Uber and Square are perfect examples of this: regulatory agencies are willing to bend over backwards to accommodate them in ways that they have never done. A large part of this is their popularity. I'm guessing that's why we're hearing so much about Theranos -- this is an industry that's largely hidden from the public eye, and she feels the best chance to disrupt the industry is if it's brought into the spotlight with Theranos at the forefront.

It could all be marketing fluff, but it's likely to be effective.

I also have worked in the Clinical Laboratory field and the above poster is right. The laboratory business is already very competitive, and unless they have some crazy technological revolution going on this is a lot of hot air. Getting these tests approved by the FDA for diagnostic use is HARD and in addition to have the consumer send in a sample the tests need to be CLIA waived. What that means is that there is an even higher burden to prove the test is not very prone to error.

One thing that is good here is pricing transparency and legislation is moving now in states requiring that lab results have to be delivered from the lab directly to the patient if the patient requests it (New York recently did this). BUT that does not mean you can draw your own blood. You still need to have your blood drawn in the traditional way and sent out to a reference lab. So while direct to patient testing will certainly pan out, I do not see how this hot start up has any advantage over the many very large reference labs out there. With competition over HMO contracts for testing so fierce, testing margins have gone down a lot.

Currently Quest Diagnostics has a market cap of 8.4 billion, and is the largest reference lab in the USA. Valuation of 9.5 billion for a company with no specifics, no actual product and huge risks is absolutely ridiculous.

Where do you see room for improvement, if any, for blood testing? As far as I can tell based on what I've read and what you've said, they've basically made certain types of blood tests easier, cheaper(?), and accessible via an app? Is that accurate? If so, even without any new technology, that seems like it could be interesting, if only as a business with a marketable product. Not sure about $10B interesting, but hey...

The 10b valuation is nuts. That's more than LabCorp or Quest, two companies that already do lab actual lab tests on real instruments for hundreds of millions of people. Yes, it looks like you can get results online from Theranos, but you can do this for lots of labs, as well. Theranos' app is undoubtedly slicker...Silicon Valley can afford better software people than labs can. As for improvements in labs today.... Our financial structure is crazy. Fee for service drives more testing, when in fact the main problem in US medicine right now is that we do too much testing (overall...there are still some areas where we need to do more). The solution to test overutilization is not making tests cheaper so folks can get more tests at Walgreens. One answer could be the current ACO model (or it's logical extension, single payer or socialized medicine) in which the goal of care is the health of the patient, not the profit. Once hospitals and labs are payed by the person, not by the test, we're gonna find lots of surprising ways to stop letting folks get tests they don't need, since the answers to those tests will often be misleading, require expensive follow up, etc... To the folks on this discussion who think that they would prefer to be able to go and get frequent tests (or, god forbid, get frequent Lyme serologies, which borders on outright quackery), I would say this: you can't handle the truth. Really. There is a reason why we put doctors as gatekeepers between patients and medical services like MRIs, lab tests, and chemotherapy. It's called Bayes Theorem (it's on Wikipedia). If it's exceedingly unlikely that something is wrong with you before you get a test, then it's still exceedingly unlikely you have the condition even when you get a positive test for it. This breaks down when the doctor does a bad job, since it's the doctor's job to select tests only in those with higher pretest probabilities, but it is an inescapable issue. I realize also that suggesting that laypeople are too ignorant to take their own health into their own hands sounds not even a little elitist, but it is sorta true. One of the main concerns for healthy people should be staying OUT of the medical care system, because we hurt people sometimes, even when we help them. The lab is a gateway to the medical care system, so unless you want to go through the gate, stay away.

If you have tests that don't provide information, that's the problem of the test, not the person getting it. Doctors are still the people actually handing out prescriptions, so if they start telling people, "Look, this $10 test from Theranos isn't reliable as a predictor, stop doing it.", it will create a feedback loop that will stop people from doing those tests that, as you say "border on quackery".

Meanwhile, if I suspect that, for example, that my BMI veers into the obesity range when my TSH is high, it should be perfectly fine for me to try and get a $50 test to examine if there's a correlation. Better than spending that on a DVD of Keeping Up With the Kardashians, don't you think? Might even increase awareness about general health in the US.

You misunderstand Bayes. The point is that the test is the test, and the information value is all dependent on the person getting it, not the test.

>Silicon Valley can afford better software people than labs can.

LabCorp made (income) $600 million last year. Quest made $1.5 billion.

They can afford teams of very capable developers. They can have the best software, the best presentation, slick mobile apps, speedy information systems.

They don't not because they can't afford it, but because they don't want to afford it. As is the case with many of these companies that get disrupted by tech startups, they see it as a cost center and minimize it.

Software rules the world. Any business that doesn't adapt to this will see strange little upstarts steal all of their thunder.

Is there really an over-utilization of blood tests? MRIs, yes, but I'm not sure that right now we're really doing too many blood tests.

Regarding your point on Bayes Theorem, that's valid in some ways and invalid in some ways. Suppose someone gets a vitamin D test back at 8 ng/mL. There's not really a chance of a false positive. He's deficient and needs supplementation. Making the test cheaper, faster, and more accessible can really only improve the health of the population. It will likely also drive down the cost of healthcare overall, because vitamin D deficiency has all sorts of unpleasant effects.

Furthermore, the literature suggests that the vast majority of doctors do not understand Bayes Theorem. Source: http://yudkowsky.net/rational/bayes

You are demonstrably wrong about the vitamin d. What if it was a specimen swap, and the lab screwed up and tested someone else's blood instead of yours? This happens.

The cheaper and faster the tests, the easier it is to reorder a confirmation (or two or three).

And then what.... Rock Paper Scissors for which one is correct?

Let's be real, the vast majority, even much of what is and comes out of YC is barely more than what used to be snake oil salesmen and infomercial scam artists. (sorry, YCers, for causing that cognitive dissonance, but I would also like YC to focus on primary products that produce value in and of themselves and not just as, e.g., a dependency on something else)

There is maybe some marginal streamlining or process improvement possible, but you can already get blood drawn and a little while later have the results accessible on a mobile device. Sure, maybe the blood can be processed faster and those results should be available sooner and available to outside parties so you can use various apps and services; but that a policy and political problem, not really a technology challenge.

This company is just another one of those paper tiger companies... or maybe paper unicorn is a better metaphor ... who make something that is wholly unnecessary and the only thing they are good at is manufacturing buzz. Their technology solution seems to be an unnecessarily complex solution to a simple problem. We don't need to "know what your body is doing so you can live a healthier life", we just need to eat better and exercise far more. It's that focus on symptoms rather than causes that annoys the heck out of me. But I guess they have learned from the perpetual dependency model. You don't get to be a paper billionaire by telling people to stop being unhealthy, you become a paper billionaire by selling unnecessary stuff.

"make blood tests simple, timely, unalarming and cheap" sounds pretty valuable to me. I suspect there are billions of people who rarely, if ever, have blood tests (impoverished areas, children). And then in developed areas, I could easily see blood tests becoming a daily thing (or multiples daily). Athletes might do them every few minutes. Etc.

"I think what is important is the LACK of critical articles out there. Where was the counterpoint in this article, or the recent Fortune article."

This is a very good point. My guess would be that we're seeing -- in this article, and in the Fortune profile linked on HN a few months ago -- the results of an incredibly well orchestrated and tightly controlled PR strategy. Say what you will about Elizabeth Holmes, but she is no dummy. She knows exactly what she is doing. The comparisons to Steve Jobs that seem to pop up in all of these articles are no accident. They feel intentionally cultivated, and perhaps to some degree, they're warranted. [1] Jobs also had a knack for image-making, be it in the tight control he exercised over the flow of information inside and outside his company, and in the image he ensured that the media portray.

Does the emperor wear no clothes here? I have no idea. I know next to nothing about the inner workings of the company, or about the medtech world (though I do find it fascinating). I do know that marketing matters a great deal, and traditional biotech and medtech companies don't seem to care too much about consumer image. They rely on time-tested sales channels and retail strategies. Theranos is different in the respect that it's running an Apple-esque marketing and PR playbook in an industry that traditionally does not.

"what these people are doing for lab testing, in terms of technology, sounds totally revolutionary IF YOU DON'T KNOW ANYTHING ABOUT CLINICAL LABS."

Yes, and I think Theranos/Holmes are well aware of that fact. If anything, they see it as an opportunity to seize a beachhead in consumer consciousness. The thinking process seems to be: most consumers know virtually nothing about how this all works, ergo, we can appear as gods before them. That is a speculative and perhaps cynical read, but at the same time, I admire their savvy. I admire it a great deal.

[1] Preemptive note: I am saying "to some" degree here. :) I'm not saying she is Steve Jobs, or that the comparison need extend any further, to any other dimensions, than in the specific area I'm talking about in this case. But I think you can make the case that someone who always appears in black turtlenecks, and has a way of invoking the name "Steve Jobs" in almost every major article about her, is intentionally aiming for the comparison. Which is exactly what Steve Jobs himself would have done, in a manner of speaking. (Cf., his intentional evocations of Edison, Ford, Picasso, etc.)

> The comparisons to Steve Jobs that seem to pop up in all of these articles are no accident.

She's literally dressing like him for her self-promotional photos, in a way that was specifically mocked in HBO's "Silicon Valley" series recently.

Yes, hence my point about how the comparisons feel "intentionally cultivated." She may be going a little too far in that direction, and I'd agree that the black turtlenecks are a little too on-the-nose. Anyone who's ever worn a black turtleneck knows they're not the most comfortable garments in the world, least of all in Palo Alto in the summer. If you're always posing in black turtlenecks, you're doing it for a reason. :)

Image does not mean anything when you are entering a business that is already super competitive, and is amongst the most highly regulated industries. Suppose they actually do get direct to patient testing going, what is to stop Quest/LabCorp for doing the same thing for cheaper? They have massive volume and price advantages.

"Image does not mean anything when you are entering a business that is already super competitive, and is amongst the most highly regulated industries."

I'd say it matters a great deal. Theranos has assembled a board with very strong ties to the government and, presumably, with an eye toward overcoming -- prophylactically or reactively -- any regulatory challenges that may arise. So, with the regulatory "defensive line" in place, so to speak, Theranos is free to focus on image, consumer marketing, and a steadily growing media blitz.

I would presume that its strategies right now include business development and channel alliances. As such, growing its mindshare and establishing itself as a breakthrough company -- and courting emotional comparisons to Apple -- will help with those goals. They will help by establishing awareness among partners, and indirectly, they'll help by fueling consumer demand. That's a time-tested channel marketing strategy. Companies as diverse as Apple, Nike, and Procter & Gamble are very good at running that playbook. Theranos is in a very differently industry, with a very different rulebook, and very different competitors. And it remains to be seen to what degree these efforts will matter. But they're not wasted efforts.

This comment isn't an article, but here's some criticism anyway: seems like an AWFUL place to work. I phone-interviewed there, and the thing the guy on the phone stressed the most is that they work 60+ hour weeks and would I be okay with that. He said they were especially proud that it used to be 80 hour weeks but they had gotten it down to 60.

Working 60+/80 hours a week for a health sector company is not really a good idea. Every mistake could cost a lot (lives?)

And I think people who work that much are more likely to make mistakes.

Glad someone is pointing this out. I just wrapped my biomedical engineering undergrad at Johns Hopkins.

Theranos' technology is likely not going to blow my mind but I have to give them a lot of credit for incredible PR and (depending on how good the product actually ends up being) execution.

I always felt the big story was not the tech but the business. Publishing prices and distributing to retail pharmacies is revolutionary. Sure, it's been possible in the past, but this appears to come at a totally new level of transparency and availability.

The FDA question is still really vital, of course.

Seemed like a big advert to me even without knowing all the things above but you certainly confirmed it.

The only thing interesting here is the amount of founding she has however the comparison with other start-ups and Steve Jobs is a very obvious marketing plot.

Point 2, 4 & 5 are just spot-on. I guess either Quest Diagnostic, LabCorp, or even automatic analyzer makers should at least start to study about Theranos.