[MathsOX]

Many in SV find it hard to grapple with traditional startups not penetrating health care to a greater degree; in Rise of the Robots (one of the Financial Times and The Economist books of the year) it's lamented for an entire chapter.

Traditionally the level of fundamental research and development displayed by Theranos - in areas of health or national defence - are done for years behind closed doors and then slowly rolled out to the public to mitigate any questioning of the underlying tech since the standards are understandably higher (i.e - it has to work from the start). This stands in contrast to the "move fast, break things" attitude pervasive in start-up culture.

I don't think there's anything necessarily fraudulent about Theranos, from what I've read, which seems to be the not-so-subtle undercurrent in much of the commentary. Rather they flipped the model startups should use in health, which is establish a business model that works and then work on preparatory tech in the background until it's ready to be rolled out. This seems to be largely what Theranos has done, but not what it's purposely chosen to articulate to the public and investors as it surely would have garnered less attention/funding. At this point Theranos seems to be playing the waiting game; waiting for their technology to reach a point where they can make a more transparent case for their business model and change the narrative once they've reached a point that's more aligned with the aspirations that have been articulated by Holmes for the past decade.

Once again, Peter Thiel's approach with Palantir looks to be extremely well executed and one that perhaps Theranos should have emulated.

[saretired]

Stating that your company has tech it does not have in order to lure investors and obtain contracts would be fraud. Whether that's in fact the case with Theranos will become clear eventually.

[MathsOX]

Yes, operating under the assumption early stage rounds were predicated on the technology existing and being sufficiently robust to carry out a certain percent of tests, that would be fraud.

[apalmer]

Thing is, the approach your describing is fundamental dishonest... Leading investors to believe that you have technology that will be ready in 2011 when in reality you expect it to be ready in 2016 is not flipping a start up business model... It's just lying to get investor money

[MathsOX]

The latter half of that paragraph is articulating what I think Theranos is currently doing, not what I think they should have done.

What I said they should have done is described to their investors the business model that would act as a stop gap measure (gain market share and revenues by using existing technology) while allowing them to develop their proprietary technology to a point where it can get regulatory approval and can replace the already existing tech they're currently using.

> Leading investors to believe that you have technology that will be ready in 2011 when in reality you expect it to be ready in 2016 is not flipping a start up business model... It's just lying to get investor money

I've not seen any indication that rounds were predicated on certain delivery dates of the tech (what tech? what is the "success" percent? can the tech be augmented with more traditional tools?). If terms did get that specific, then there would be grounds for potential fraud.

[WalterSear]

The strategies being played by Theranos's executive don't look like Silicon Valley, IMHO. They look like outsiders cargo-culting the startup process: outside-looking-in Silicon Valley.

[pbreit]

It's seems like there has been enough deception of investors, employees, partners and customers over the 12 years with little/nothing to show that "fraudulent" is probably the correct word.

[MathsOX]

Without knowing the term sheets and early investor negotiations that were held, I shy away from using the term fraudulent in the strict legal sense of the word.

Certainly you can argue more broadly that Theranos statements to the public over the past decade go beyond being disingenuous about their implementation of difficult technology and enter into fraudulent territory.

[sjg007]

Would you please qualify Peter Thiel's approach here? and why it would have been a better model? Palantir is pure software company. Theranos is a suite of biomedical tests. This has a major lab/hardware component.

Theranos exists in a regulated industry where at a minimum as a lab developed test you have to abide by CLIA regulations. In addition you have to have validation, verification, design history and a whole bunch of documentation to prove that what you developed does what it should do and actually works.

The thing about Theranos is that the rules are well established.. You just have to follow them. If you don't know the rules you have to be a quick study or you have to hire experienced folks who know the rules and how to guide you through the process.

[MathsOX]

I'm not equating them absolutely, however I'm pointing out the Planatir began utilizing existing tech to make in roads into national defence while using that cash flow to create more proprietary technology that, once released, allowed the company to grow much quicker and that tech became it's mainstay. Presumably initial funding rounds and contracts were predicated on this being the strategy, not novel tech being utilized immediately (which is inline with what Theranos has done). The comparison stops there, at a macro level not micro level as you're describing, thus why only a sentence was devoted to it.