Why Theranos’ fate in 2016 matters to Silicon Valley

For Theranos, the Palo Alto-based medical testing company, and its CEO Elizabeth Holmes, the next year will be crucial.

With an apparent valuation of $9 billion, the company has been under fire since a Wall Street Journal story alleged that the firm was not using proprietary technology on many tests. The Journal also questioned the accuracy of some of Theranos’ work.

Those accusations were the first in a series of salvos against the firm. The most recent from the Journal may be the most damning — an anecdote describing Holmes repeatedly poking herself to get a reading that would work on the company’s machine.

Other issues: Theranos’ deal with Safeway fell through; its tiny vessels for collecting blood may be considered “unclear medical devices” by the FDA; former employees calling into question “breaches in research protocol,” as the Journal reported recently.

Theranos failed to get a test approved fast enough to offer a cheap, easy diagnostic test for Ebola in time to help the crisis that tore through West Africa earlier this year, as the New York Times reported.

Theranos offered the promise that with its pinprick blood-testing technology, medical tests would be cheaper, more accessible and transparent. Once Theranos labs became widespread, consumers would be in the driver seat when it came to their health, as I wrote about in 2014.

There were then some oddities — such as why the board was stacked with former senators such as Bill Frist and diplomats such as Henry Kissinger and George Shultz? Could a Stanford dropout like Holmes pull off a company that would take on giants such as Quest?

And going to the premise of the company, what would the real-world impact be of people routinely and cheaply getting blood tests? Is this something we even want?

But what matters first is if the technology works. The company should create a panel of outside experts to review its work, I argued.

If Theranos continues to falter — and should it even fail — the credibility of many of the so-called unicorns, private tech firms valued at more than $1 billion, would be called into question, writes Robert Cyran in Reuters Breakingviews.

[graphiq id=”5kHxu0NYE1n” title=”Theranos Inc.’s Funding Rounds by Year” width=”600″ height=”514″ url=”https://w.graphiq.com/w/5kHxu0NYE1n” link=”http://listings.findthecompany.com/l/13627261/Theranos-Inc-in-Palo-Alto-CA” link_text=”Theranos Inc.’s Funding Rounds by Year | FindTheCompany”]

Staying private, which many tech companies strive to do along with Theranos, means not having to answer to the public and outside investors who want to understand what makes a company tick. Cyran went on:

The lack of disclosure means that investors must in many ways take what unicorns tell them on faith. That will be harder to do in the wake of Theranos’ self-inflicted wounds, a development that could hobble all single-horned creatures.

 

Above: Elizabeth Holmes, CEO of Theranos. (Karl Mondon/Bay Area News Group)

 

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  • If this spills over to other unicorns, it indicates problems with SV culture/methods. Any startup that promises the moon deserves a skeptical look. This is not new – do investors need to relearn the lesson every 5 years? Every 3 years? How are VCs adding value if they cannot or will not genuinely check technology claims before they pour in additional funding? Look up “Molten Metals.”

  • spro23

    Elizabeth was just a payoff to the liberal social justice warriors – so venture capital funds can say they don’t discriminate against women. Now that they gave her billions as a payoff, they can go back to only investing in men leading companies

    • ThatBadOpinionPerson

      Did you look at her board composition? rotflol.

  • Iggee Popp

    “Is this something we even want?” Referring to cheap blood tests. The author loses me here. Is he implying that what we really want is for medical tests to be expensive???

  • Joseph Alexander

    they gave her billions as a payoff, they can go back to only investing in men leading companies.Lakers Snapback Caps

 
 
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