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Silicon Valley's Ultimate Insider Warns Of "Subprime Unicorns... Managements Are Deluded"
The private and public worlds of technology collided this week with a set of stories about two very different companies: one a large business in its fourth decade, seeking to adjust to a new world; the other a much touted Silicon Valley start-up whose ambitious scientific claims were questioned in a devastating newspaper article. The former, Dell, and the latter, Theranos, illustrate the benefits and perils of life as a private company.
Michael Dell had experienced many years as the head of a publicly traded company, which included some close encounters of the worst kind and a bruising battle with some dissident shareholders, before delisting in a leveraged buyout in 2013.
Since then, relieved from the merciless roasting of the quarterly earnings call, he has had the freedom to undertake a long-term restructuring of his business. Mr Dell emerged from the shadows this week to announce his intention to purchase EMC, the large storage provider, in what would be the biggest technology takeover in history.
If Mr Dell illustrated the benefits of privacy, Elizabeth Holmes, the chief executive and founder of Theranos, has just learnt that even for the head of a high-profile, secretive Silicon Valley company valued at $9bn, a light will eventually illuminate dark places.
Ms Holmes formed Theranos in 2003 to provide health tests from a few drops of blood rather than what gushes out of several tubes. Ms Holmes ingeniously convinced some very accomplished people (including Oracle’s Larry Ellison) to furnish her company with about $400m and has persuaded two former US secretaries of state, a former US defence secretary and the former chairman of the Senate Armed Services Committee to join her board of directors.
That feat of persuasion may have been even more impressive than it seemed. The Wall Street Journal this week reported claims that the company’s proprietary technology — whose co-inventor committed suicide two years ago after telling his wife that it was not effective — is used only in a small fraction of the company’s tests, with others performed using standard laboratory equipment in a way that might produce inaccurate results. Former employees of Theranos told the newspaper they had been instructed to deal with regulatory checks on its test results in a way that might amount to cheating.
Theranos contests these suggestions of scientific trickery and legerdemain. However, if they turn out to be true, the company could be mortally wounded — a development that might make technology investors sit up straight and be less credulous as they scrutinise investments.
Life in the shadows of the private market has many benefits for emerging companies. It allows them to experiment, work out kinks in a product, lure talented people with attractively priced stock options, shield themselves from the scrutiny of predatory competitors and stutter in private until they can speak fluently in public. It is also a refuge to which people such as Mr Dell can retreat once their companies no longer offer public investors either the growth or predictably for which they yearn.
But there is also a false sense of security provided by the private markets at a time when interest rates are negligible and many investors, particularly those who are either new to technology or have short memories, are all too willing to back start-ups whose premises house several baristas and where a dozen blends of tea (not to mention the sea-salt flavoured chocolate bars and bio-dynamically raised Anjou pears) are de rigueur. It is easier to conceal weaknesses, present an aura of invincibility and confound investors as a private company that can escape by making few disclosures than as a publicly traded one.
One glance at the list of so-called unicorns — those private technology companies valued at more than $1bn — illustrates this point. A handful of these businesses will become the great, enduring companies of tomorrow. But a good number seem the flimsiest of edifices. Forget the fact that some of these valuations are illusory because the most recent investors have structured their investments as debt in all but name, meaning that they will stand to profit even if the company is worth far less.
The more salient point is that for the past three or four years private investors have just been more forgiving than their public market counterparts, who, had they been presented with the most recent financial reports of a good number of these companies, would have decimated the stocks. In the past few quarters, the founders of several technology companies have discovered a far chillier reception as they tramped around on initial public offering roadshows than they were accorded in the private shadows.
Most of the leaders of the subprime unicorns who continue to enjoy the fruits of the private market delude themselves about the difference between control and discipline. Some say that if their companies become public they will lose control. Google, Facebook and a raft of other companies with dual-class stocks put paid to that argument. What the heads of the subprime unicorns really mean is that the sort of disclosure required of a public company is the picture they do not want to view. But as Ms Holmes of Theranos discovered this week, eventually there is no place to hide.
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We did R and D for a tech company a few years ago and it was really clear that the actual product didn't matter. The powers that be were convinced that it all worked because they were so much better than everyone else. Of course, none of them had any background in tech. They all got wealthy by being at the right place at he right time or by inheriting it yet they were all now tech experts.
no shit. half these companies are selling 1 for $.80. Losing money on every deal
I have PROOF that we are not deluded!!! Have you even SEEN our whitepapers?!?!?
Probably Jew-ish, connected all th eway up the wazoo and good looking to boot....
All the hall marks of SillyCON valley suck-cess story...
From Wickedpedia...
Holmes was born in February 1984 in Washington, D.C. Her father, Christian Holmes IV, worked in theUnited States, Africa, and China as part of government agencies such as USAID.[1] Her mother, Noel Anne (Daoust),[11] worked as a Congressional committee staffer. She has a brother, Christian Holmes V, who is the director of product management at Theranos. One of her ancestors was a founder of the Fleischmann's Yeast company.[6] She is related to actress Katherine MacDonald who was married to Christian Rasmus Holmes II (1898-1944).
This "company" and it's "product" are an example of the absolute stupidity in San Francisco and the Bay Area in general, have fun laughing (or crying): www.ifonly.com
Some of its hits include "Skating with Brian Boitano," "review a Restaraunt," "make cupcakes," I'm not making this up. Ridiculous....
The "idle rich and their money to blow on "moments and life time experiences," always amaze me.
Actually, I will give a tip of the cap and props to the owners, for coming up with a unique way of getting these celebrities and "chic" people on board, to offer these kinds of packages to the rich and shameless...always a good market to tap into.
"...always a good market to tap into." Really? What happens when your economy collapses?
The rich and shameless are not dependent on the economy, they are almost recession proof, which is why they are the purrrrfect market to sell things to...no financing, all cash baby.
When Americans have had enough, we'll go after them with pikes. They can have that "experience" for free.
If a pre IPO blows up, does it make a sound?
I swear to God, I read it iFelony.com
Holy crap.
I live a few miles from the new Theranos building. I'm in health care and this was the only promising pre-IPO "unicorn" health care company that I'd heard of. I would have spend a lot of Bernanke Bux trying to get in on an IPO if I were able, since their claims seemed truly revolutionary.
If you look at their board, it has a lot of heavy hitters like kissinger and some former military brass.
Does anyone have any links to those questionable studies and promises by the company?
this came in my email today:
http://www.mddionline.com/blog/devicetalk/there-will-be-blood-10-16-15?c...
Try this one:
Hot Startup Theranos Has Struggled With Its Blood-Test Technologyhttp://www.wsj.com/article_email/theranos-has-struggled-with-blood-tests...
It is different this time - because of crowdfunding...
LOL.
I'll repeat myself a little -
One way to save the nations is for the technocrats to overthrow the psychopaths by crashing the systems that serve them and for the veterans to overthrow the oligarchs (a la Hienlien).
Not taking a side here but what Theranos is doing is hard, they have 10 years into the R and D and it's not like one of the usual crap apps that flips out of Silicon Valley to "score" and limit access to poor consumers, those guys I hate and they are big data sellers.
I think give it a little time with Theranos and see what comes out next. 10 years is a long time and their hard ware machine, Edison, is at the heart of this so they had problems, but who in the heck has not in the tech field. I do get this is critical as well and so they had to go out perhaps and buy some back up machines from Siemens to fill in? See what the FDA comes up with. With this technology though, theft is hot and you may have had investors pushing to get the company out functioning before it was ready, and we have seen that over and over as well.
In the meantime, look what all the jerks in Silicon Valley are putting out there by comparison...crap apps that will work more and more with consumer scoring to sell more of your data and we'll end up like China with Citizen Score models. If you don't think we have some of this already, wake up. Goes on big time when you get your prescriptions right now. Flawed data and you are scored as an outlier..one example.
http://ducknetweb.blogspot.com/2015/10/citizen-score-in-china-huge-warning-for.html
I'm willing to wait a bit on Theranos and see what else comes out, as 10 years is a lot of time and what they are doing is truly hard.
Elizabeth, pls go
Why are you mixing together shit and vomit and calling it soup?
While I understand your point, if something doesn't work, it doesn't work. If I am a responsible investor, what I want to hear is "The tech path we are taking isn't working, let's figure out how to pivot" and not "Everything is awesome, just wire another billion please"
Indeed, Medicalquacklet, "it's not like one of the usual crap apps that flips out of Silicon Valley to "score" and limit access to poor consumers, those guys I hate and they are big data sellers."
--> Theranos is likely much more sophisticated than that. How else but the Theranos way of 'collection, reach and distribution' to surreptitiously build a really big blood bank, a huge data base, of the general public, but by wrapping it all up without (apparently) using so much as a big nasty needle, and sell it as 'merely a tiny vial' of the 'poor consumer's' lifeblood' It is a beautiful business model. It it elegant beyond belief. It makes the original Helen of Troy and all the wild horses positively pale in comparison, in terms of a strategy. So, yes: "what they are doing is truly hard".
Silicon Valley is acting like a rogue mafia-style org with gov's silent blessing (for well publicized reasons, of course).
They literally pump-n-dump nonsense start-ups to billion dollar valuations just to launder some more $$$$, and fast.
Total bullshit, them, their agenda and their tech.
When I saw Elizabeth Holmes going all Marissa Mayer, with the makeovers and slick photo sessions, high profile symposiums . . .this should quell any IPO envy. She obviously has a beauty idea which may or may not ever work.
I got the sense that she was being groomed (or grooming herself) into a female version of Elon Musk. In other words, a strong enough brand to overcome annual losses or a shitty product.
She went on Cramer to defend herself, so she must be legit.
Can someone please name ONE high profile female CEO who hasn't run their company straight into the fucking ground?
Oprah?
It's a mad house up there in SV. Exponential ponzi schemes spread across all technological fields and replaced solid R&D with feeding frenzy off the great plastic faces, fashionable pretenders who know nothing.
Those psychotic, cash bloated, inbred retards and Wall Street perverts, in their wet dreams are fornicating with those mentally challenged Silicon Valley megalomaniacs, squirting “green” feces off their rotten minds onto faces of hard working US taxpayers, during their cerebral herpes induced seizures of sick imagination, calling it creative disruption.
I guess, unable to get hard on with sex, booze and drugs they get high of gigantic lies, orgasmic chaos, blow up toys and inhumane exploitation of their cheerleading, greed addicted serfs funded by Hindu and Chinese VC firms and stealing whatever left and throwing american engineers out on the streets with nothing.
Interesting take on those parasites of reasonable mind I found at:
https://sostratusworks.wordpress.com/2015/01/08/smell-of-silicon-madness/
Now we should now understand that scientist are like everyone else, they lie for a buck. We should also learn that Science based on "consensus" is not science, but advertising a desired narrative for profit. The best example is "Global Warming" repackaged as "Climate Change". In the 70's the same consensus for profit was the coming "Ice Age", which made several covers of TIME magazine; the same people continue to spend billions on advertising because they know the science doesn't add up. Tell a lie long enough and have "experts say" and you get people to believe anything as we already know.
Another example was a commercial I saw yesterday attacking supplements and having a shill doctor (likely an actor with a PHD) state that 20k emergency room visits YEAR were because of supplements; mostly of the diet variety. They neglected the fact that 20k per DAY go to the emergency room because of Prescription medications.
Always attack the threat for the profit at any cost and never give the people a cure where there is no profit. Pink October shows just how gullible people are; they will never give the cure for breast cancer or any other money making disease and if the donations were audited, people would be more than appalled.
Have you even been to fucking silicon valley? You have diarrhea of the mouth about something you have no fucking clue about... talk about a bunch of hyperbole nonsense... here's a tip. Come here and meet someof the people here before you blanket the whole area with your garbage nonsense... it become the thing to to do bash SF and the Bay Area, mostly by people who cant fucking hang here and have been priced out or by people like this dufus...
BTW this is more diarrhea of the mouth... how many billionaires to you dipshits actually know?
"Many feeble-minded college dropout Silicon Valley billionaires, hailed as brilliant entrepreneurs by M.S.M. propaganda, and financed by speculative capital, publicly indulge themselves into pure madness of absolute disruption, conceived by their brains under altered states of consciousness resulted from overdose on greed and self-aggrandizement."
In obviously related news, there is finally a version of Lucky Charms with just the marshmallows.
Just walk 1 block in downtown Mountain View and gaze upon a the revival of the 90's "burn-rate" valuation logic.
pull it