It wasn’t the best week for startups. In case you missed it, Beacon, the all-you-can-fly travel startup that raised $8.5M, and which promised to transform aviation, was permanently grounded last week, as was Shuddle, the Uber for getting kids around, who had raised over $12M in hopes of, we guess, disrupting soccer moms.
Then there’s Theranos, which, we believe, is the only female-founded unicorn, and which promised better, faster lab tests, supposedly using revolutionary, proprietary blood-testing technology that the company said required only a few drops of blood, instead of the usual vial. And speaking of drops, while the company was valued at $9B at one point, Theranos may well reach zero in not too long a time. The company’s troubles started a few months back, with a Wall Street Journal expose (Hot Startup Theranos Has Struggled With Its Blood-Test Technology, which claimed that the company exaggerated the precision of some of its diagnostic tests, and used machines from other companies rather than its own technology for many of the tests. Now regulators may bar CEO Elizabeth Holmes and the company’s president, Sunny Balwani, from the blood-testing business for two years, for having failed to fix the problems.
And there’s more: Theranos Is Under Investigation by SEC, U.S. Attorney’s Office.
Holmes did not choose an easy industry – lab tests – but rather, one that’s highly regulated and rife with very entrenched, cash-rich competitors. Worse, according to the Bloomberg piece, “CMS said in late January that faults at the lab were so severe that they jeopardized patients’ health.”
As we said, sometimes it’s disrupt or die, and when you’re up against some very serious players, make no mistake about it: the knives are out. Or worse, the big guns. And the powers that be will do everything to kill you off. They have their fiefdoms to protect. We’re not going to speculate as to whether or not the fact that Elizabeth Holmes is female, that she tended to be in certain people’s sites. From all reports, the technology just didn’t work. Or at the very least, did not deliver accurate results. And this is a case where lives are literally at stake.
In fact, according to the Journal piece, “In 2005, Ms. Holmes hired Ian Gibbons, a British biochemist who had researched systems to handle and process tiny quantities of fluids. His collaboration with other Theranos scientists produced 23 patents, according to records filed with the U.S. Patent and Trademark Office. Ms. Holmes is listed as a co-inventor on 19 of the patents.
The patents show how Ms. Holmes’s original idea morphed into the company’s business model. But progress was slow. Dr. Gibbons “told me nothing was working,” says his widow, Rochelle.
In May 2013, Dr. Gibbons committed suicide. Thermos’s (spokesperson) Ms. King says the scientist “was frequently absent from work in the last years of his life, due to health and other problems.” Theranos disputes the claim that its technology was failing.”
Theranos did, however, threaten to revoke Gibbons’ widow’s shares of the company, if she continued to talk to the press or discuss the company, and now Theranos Is Subject of Criminal Probe by U.S. (Federal prosecutors are investigating whether the blood-testing company misled investors about the state of its technology and operations), according to this latest Wall Street Journal piece.
Elizabeth Holmes may well be a cautionary tale. Not that it’s more difficult to be a woman in technology and that you may well be held to a higher standard – that’s a fact, and if/since that is the case and you’re going to be that public (press, TED talks), you’d better be able to deliver. Instead, Elizabeth Holmes may instead be a case of what happens when you believe you can ride on taking a page from the Silicon Valley/Tech Playbook: drop out of an Ivy League school (or in Holmes’s case, Stanford), come up with a big, disruptive idea, get some great press, and get some powerful players on your board/playbill (which Holmes did, including former Secretary of Defense Bill Perry, former Secretary of State, Treasury, and Labor George Schultz, former Secretary of State and National Security Adviser Henry Kissinger, former U.S. Senators Sam Nunn and Bill Frist (a heart-transplant surgeon), former Wells Fargo CEO and chairman Dick Kovacevich, and former Bechtel Group CEO Riley Bechtel, and nice board, but were you anticipating problems with the Feds much, and just asking).
You know: fake it till you make it. But in a highly regulated industry, that doesn’t always play out so well.
“I think a lot of young people have incredible ideas and incredible insights, but sometimes they wait before they go give their life to something…What I did was just to start a little earlier,” said Holmes in a CNNMoney profile, She’s America’s youngest female billionaire – and a dropout.
And sometimes it’s better to wait and get some life/subject matter experience – or stay in school and take a few advanced courses in the subject you intend to tackle.
Note to wannabe unicorns:
- Getting press is great, but as we’ve always said, it’s not always all about eyeballs
- If you’re following a playbook, you’re not a true disruptor: you’re a follower
- Learn something about the business/vertical you intend to take on before you plunge headlong into the fray
- Try to avoid focusing on sectors that are impractical, unscalable or impossible/the tech’s not there yet
- True disruptors are on a mission, not a quest
Being a media darling is great, but if you’re going to be a very public figure, you’d also better be the real deal. Being able to draw blood with a pin prick for lab tests, rather than having to go through the whole ordeal of the needle is a great idea, but if you’re going to go the fake it till you make it route and rely on what may well be deception in the meantime, careful there. Eventually, someone’s going to stick it to you. Onward and forward.