> Current and former Safeway executives said Theranos missed deadlines for the blood-testing rollout. They also said several Safeway executives questioned the accuracy of results Theranos gave to Safeway employees tested at a clinic in the supermarket chain’s headquarters in Pleasanton, Calif.
> Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.
> The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.
> The concerns deepened when Theranos’s test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.
> One Safeway executive got a frighteningly high result from Theranos on a test to gauge his prostate-specific antigen, according to two former Safeway executives. They said the test suggested that the executive had prostate cancer. Retesting by another lab came back normal.
One of the most irritating things about Theranos's defenders is their argument about how Theranos should be given lesser scrutiny because of how important and noble its mission is...that's the exact opposite of how it should be, IMO.
Using Facebook as the archetypical unjustifiably-rich-startup (not my opinion, just well-repeated), in which the goal is to lower friction between friend-network-contacts...even if FB's news feed algorithm was corrupt, users have multiple ways of assessing the quality of their experience -- including out-of-band assessments (um, hanging out with friends IRL) and being able to defriend/filter lists...
The whole point of Theranos is to reduce the friction in personal health assessment...which is a great idea regardless of noble motives...but lowering friction essentially means being able to more frequently collect and analyze data about yourself. If the assessment process is bad, then using more of the product is fundamentally terrible for the person. But the bigger problem is that it isn't easy to compare health tests...if getting an old-fashioned blood draw test was trivial, then Theranos would have no purpose in the first place. So with Theranos, the easily imaginable bad-case scenario is literally that people die because of false positives and negatives, no matter the kind motives and ambitions of Holmes.
But I have to admit...at least Theranos believes in their own product? Because if it were just snake oil, they probably would've worked out a way to not use their flawed procedures for the Safeway executives, who have much interest and motive (and money) to do comparative quality testing. (unless of course the Safeway execs conducted their own blind tests...which is obviously what they should do but obviously, not all big money executives have been that skeptical of Theranos)
Never underestimate the collective self-delusion that can emerge in a situation like this. You have a wunderkind founder, the resident genius, who is telling everyone to believe and robotically dismissing critics--who is going to question her? You have insiders and investors who want to believe--keep your mouth shut! You have ex-employees who expressed doubt vilified. Mass willful suspension of disbelief seems much more likely.
To do something like secretly changing the procedure for the Safeway execs would require someone to openly address the elephant in the room in a culture where the elephant isn't to be discussed.
When are the insider stories about the culture going to start emerging?
> But the bigger problem is that it isn't easy to compare health tests...
It ought to be relatively easy. I mean, not easy for the average Joe, but easy for anyone seriously interested in doing it.
Draw blood twice: once with the finger prick, and once with a regular vein draw, and then test the two samples using the different methodologies. Compare the results. Seems like a fairly trivial experiment to run and reproduce.
By "compare health tests", I'm including the process of going to the clinic, waiting for the appointment, getting blood drawn via the vein, etc. etc. Apparently that's enough of a wait time and process to discourage a non-significant number of people from even getting prescribed tests. For those of us who don't have a problem with needles and can make time for the office, easier testing may open new avenues of inquiry and awareness for our health, if testing is as easy as a needle prick.
(yes, I'm leaving out the major issue of over-diagnosis...but that's an issue all kinds of testing and medical practice has to deal with)
> It ought to be relatively easy. ... Seems like a fairly trivial experiment to run and reproduce.
That depends on what you're testing. "Blood test" and "health test" are ridiculously ambiguous terms. Something like red blood cell counts don't vary much from day to day, but some things, like blood sugar and cortisol, vary hour to hour.
The positive predictive value for the prostate-specific antigen test for prostate cancer is only 30%. This means that only 30% of people who test positive for elevated levels of prostate-specific antigen actually have prostate cancer. This is an intrinsic problem with testing for prostate-specific antigen not with Theranos' testing.
The issue is not how accurate the PSA test is for detecting prostate cancer, but that Theranos’ tests give wildly different results to everyone else’s FDA approved tests.
Read the informed comments on Derek Lowe's blog about Theranos [1]. This is the money shot quote from johnnyboy
"@Pete: it is entirely justified to have doubts about the validity of blood results obtained from finger pricks. The blood you get from a prick will be a mixture of blood from small venules, small arterioles, capillaries and lymph vessels, mixed with whatever loose tissue and cells have been cut by the prick and carried over into the blood. No way you could ever get a reliable CBC from such a sample. Since the kind of general blood tests that this company is targeting are usually CBC + chem panel, even if you could get your chem results from the prick, you still need a normal blood draw for the CBC, so the competitive advantage that they are trying to push (quick sampling by patient at pharmacy, without need for phlebotomist) is lost. On top of that, the variability inherent in chem results from prick blood will be significant for several analytes, like CK and AST (present in muscle so could be raised from prick injury), glucose and lipids (different levels in venous or arterial blood or lymph), etc… They are focusing on their fancy technology without much consideration of the underlying biology, typical error of engineering types.”
No doubt that a blood sample from a finger prick is different than from a vein.
That said, diabetics just use finger pricks for their blood glucose tests. Is the result calibrated for a finger prick test or do we just assume it's close enough?
You don’t need the accuracy that you need for the other tests plus glucose is in really high concentrations relatively to the other compounds they want to measure. If you are out by 20% on the glucose concentration in diabetes it does not matter too much, but it does for everything else. It is not like the current machines are 100% accurate anyway even though the ISO threshold is +-20% [1].
What options are there for founders to liquidate shares in the process of fundraising but before going public? Are founders typically able to liquidate some amount of shares in funding rounds in order to take home cash, or do investors disallow that entirely until a company is sold or goes public?
Theranos is 12 years old at this point, and raised $400 million at a $4.5 billion valuation. Would a founder of a company in those circumstances have been able to liquidate - let's say - 1% of their ownership along the way, or in the last fundraising round, for cash? Or is that out of the question and founders are expected to retain their ownership aside from investment dilution until sale?
I suppose the answer depends on the terms the company is able to work out with their investors. But perhaps someone can comment on what terms are common in such situations.
Biggest example is Snapchat, they got and keep asking for millions of dollars money when fundraising.
Last year's big drama was Secret app's founder taking $6MM when they raised $25MM then proceeded to buy fancy cars. The product growth stalled and the company shut down in less than a year.
> So you might be wondering, why raise funding if everything is going so well and we’re in full control? Here are some of the reasons:
> 1. We’re removing pressure to sell, so we can go all in and keep building Buffer for the next 5-10 years. 2. Setting up a precedent for multiple regular liquidity events for investors and team members. 3. It’s a way to get partners on board who are excited about the unique way we’re running the company. 4. We want to add a little extra cushion to the bank to help us with any speed bumps that might arise [more details on each point in the article]
Happened with Basecamp (formerly 37 Signals), too -- they're bootstrapped but they took a small investment from Jeff Bezos so that they could cash out a little bit and enjoy themselves.
Not having been in that situation directly, I believe that it is fairly common for founder(s) to take some cash in exchange for their shares at the later stages, if only so that they don't feel the immediate need to cash out. It sucks to be cash poor while being worth $X billion on paper, so I believe investors would rather the founder turn some stock into $10m and not worry about money than to have a fidgety CEO.
Thank you. That makes sense. I suppose it happens with "hot" companies that have some negotiating leverage.
I'm curious because if Holmes has been able to convert even 0.1% - 1% of her shares' current value along the way, that's a life-changing amount of money ($4.5m - $45 million).
I'm very curious what the experience is like to be worth billions on paper via a private company. Can you get a mortgage? Can you borrow against stock in a private company? (Do banks recognize the valuation of a company as legitimate for that purpose?) It does make sense that investors would want founders to take something home so that they can live and buy a house, etc.
At the scale of Theranos / Holmes you can easily borrow against your huge wealth. She was pegged recently - before this mess - by Forbes as being worth $4.5 billion.
The best option would be to go to a giant firm like Goldman Sachs. They would have written her a check for $100+ million prior to all of this unfolding. They might still consider it, but Goldman would do a very thorough rectal exam of the company and its prospects now.
If you wanted to borrow against private wealth of the sort Holmes was sitting on, you'd avoid common banks. Not because they won't give you a mortgage on a house, but because it wouldn't be even remotely worth the hassle of going through them. If you just wanted $500k for a mortgage, your best bet would be to make a call to one of the big VCs backing you, they'd cut you that check under all sorts of arrangements with hardly any questions asked.
Last time I sat down with my mortgage broker (admittedly, in Australia where the private equity scene is abysmal) he advised me that none of the banks would take into account my shareholding in private companies as assets. Essentially, it's a crapshoot for them to justify the valuation so they aren't willing to attempt it.
I suspect there's a point where they will, somewhere before 'publicly listed companies' (which publish the market valuation on a moment by moment basis), but it's likely to be within established industries (partnership in a law firm, for example) not near my situation or most tech startups.
> Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.
> The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.
> The concerns deepened when Theranos’s test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.
> Theranos also backed away from putting its blood analyzers in Safeway’s clinics so patients could get the results quickly, the current and former executives said.
> Instead, Theranos said blood samples collected at Safeway would have to be shipped to a central lab for analysis, according to the former executives.
Where is the line between grossly exaggerating ones product and criminal fraud drawn?
Personally I view things where you give someone a false health diagnosis to be among the most egregious deceptions possible, a step beyond running a Ponzi scheme and in line with other things where users are severely hurt or killed.
I will be very surprised if Elizabeth hasn’t crossed the line over to fraud at some point. She is pulling down some very well connected people - she had better like orange.
>Safeway Inc. spent about $350 million to build clinics in more than 800 of its supermarkets to offer blood tests by startup Theranos Inc.
>The $350 million price tag was equivalent to more than half of Safeway’s net income of $596.5 million in 2012. Safeway had revenue of $44.21 billion. Safeway also invested more than $10 million in Theranos, one former Safeway executive said.
>Two of the former Safeway executives said they told Mr. Burd, Safeway’s chief executive, about the varying employee test results.
>The former executives said Mr. Burd told them he had been reassured by Ms. Holmes. Mr. Burd continued to support the partnership with Theranos, according to the former Safeway executives.
If he hadn't retired already, he should be fired for incompetence.
> >The former executives said Mr. Burd told them he had been reassured by Ms. Holmes. Mr. Burd continued to support the partnership with Theranos, according to the former Safeway executives.
How does she do it?
No, seriously. I mean, sometimes on my projects I get a really shitty result in the beginning... and I have to explain to my boss that it'll get better -- and I often fail (even though I'm really sure that the project will eventually be okay). How can Holmes reassure people of something that's clearly failing? What tricks is she using?
I strongly disagree... there is no very good explanation for the current situation other than sloppy decision-making and a dirty snowball of social proof. The awkward, inexperienced captain at the helm is however a puzzle.
Is having blood tests in grocery stores / pharmacies a newish thing in the US, or it existed for a long time? I lived in the US in 2004-2007, and had blood tests regularly, but it would have never occurred to me to go to a grocery store for one.
No, that's not typical. Blood tests are not usually offered in pharmacies either, and are reserved for clinics and hospitals. Blood tests typically involve needles, privacy, etc. They're the wrong atmosphere for a casual grocery store or pharmacy.
Theranos's vision was to make blood tests easier and more accessible by requiring only a finger prick instead of drawing from a vein and by giving results quickly instead of hours or days later from a lab. It sounds like Safeway got on board with that vision as a forward-looking opportunity.
If a full panel blood test was as easy as a finger prick, then I could see blood testing going mainstream in the way that Theranos is hoping, and Safeway was hoping, but it all depends on the technology actually working as advertised.
No, the idea of having fast-turnaround blood-tests is the central focus of Theranos, one which it looks more and more likely it's failing to (and will seemingly never) deliver.
Having pharmacies everywhere is becoming A Thing, since many Americans are on monthly prescriptions and it provides another contact point to come into the store. Budget department stores like Target and Wal-Mart have had them for years, grocery stores are just next in line.
Value-add services in pharmacies are A Thing. In many places, pharmacists can administer vaccinations, and a lot of stores are adding "minute clinics" where you can go for quick health advice, blood tests, etc. Again, offering these services brings patients into the store where they will likely buy something else, and staffing these locations with nurses, nurse practitioners, or even just pharmacists, undercuts the cost of a visit to a medical doctor.
Have the people who funded Theranos been calling the critics haters? That seems to be common with some VCs. Like calling HN "Hater News" because of harsh criticism of questionable claims of innovation.
We all understand that the VC narrative is about potentials. Sometimes we don't buy into the potential, may even have legit reasons to believe it is bogus. But if we don't support the narrative we are haters. Seems beneath someone in that position to resort to name-calling.
Click the "web" link in the header at the top of this page and it will google search the article, click on it in google and you'll see the whole thing.
> Current and former Safeway executives said Theranos missed deadlines for the blood-testing rollout. They also said several Safeway executives questioned the accuracy of results Theranos gave to Safeway employees tested at a clinic in the supermarket chain’s headquarters in Pleasanton, Calif.
> Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.
> The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.
> The concerns deepened when Theranos’s test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.
> One Safeway executive got a frighteningly high result from Theranos on a test to gauge his prostate-specific antigen, according to two former Safeway executives. They said the test suggested that the executive had prostate cancer. Retesting by another lab came back normal.