[RangerScience]

The story of Theranos makes me think about where the "great filter" lines for startups are.

My prior company - who I was with from ~20 people to the current 300+ - has been going through some shakeups that make me wonder. This adds to my thinking.

I'd have thought that both were past those lines - hundreds of people, multiple offices? Seems like it'd be solid at that point.

The common factor is that both have yet to release their "flagship" product, although they've released products.

Then you can think about small products with small teams - Sidekiq, Cards Against Humanity - that achieve substantial success.

It seems like this is the most telling "filter" - did you release your core product?

Thoughts?

[ChuckMcM]

The filter line is typically execution risk, which is to say that once you've demonstrated that people will pay enough money for the product that you can fund the business, growing the company to the point where it is net cash flow positive flips the switch.

The thing about Theranos was, as we found out, that they had yet to prove their fundamental thesis which was that you could do a useful number of diagnostic tests with a small amount of blood to the same confidence levels as the same test done the existing way. Fundamentally they could not show that to be true.

So in a more critical (or perhaps skeptical) investing environment, they should have stalled out several years ago when they couldn't demonstrate to new investors that they had a viable blood diagnostic process[1]. But for what ever reason that didn't happen.

[1] And yes there are stories that they simply lied about what was happening.

[JimboOmega]

You could say Theranos' core product was "released" - they were doing blood testing. Maybe badly. Maybe clandestinely on other equipment. But as far as the rest of the world was concerned it was "working".

Plus you have to define what "core product" means. Is it the bit that makes money? A lot of startups have slotted the money making bit in later and gone alright; others never really could figure that out.

And... relatively boring companies with real business can transform themselves into "house of cards built on lies" type businesses pretty easily, too. Think about Enron, or any financial firm that went heavily in on the subprime mortgages.

[RangerScience]

Maybe their core product, but not their flagship product.

Theranos was built on the promise of an amazing new tech for blood testing, not on the promise of blood testing.

By "flagship product" I mean the thing you're basing your corporate identity on. Like the stereotypical waiter in LA, they're actually an actor; their identity (flagship product) is actor, but their day job (released/core products) is something else.

[petra]

It kinds of depends what your goals are: if your goals are to make a card game? sure, a small team should suffice.

But if your goals are to make rockets ? well having 500+ employees and having your product fail, as it happen to spaceX in 2008, maybe not so bad ?

And it could be that for theranos, in order to sell laboratory services(assuming their competitors bundle stuff), they have to offer the whole service array , meaning thousands of tests, so it takes a lot of work for their core product - altough they did already have product based on the same tech for pharma r&d.

[throwaway90001]

How do you scale to 300+ employees in multiple offices without having released a product?

It sounds like both companies were just money-burning machines, where the only thing keeping them afloat is VC funding. If you aren't selling something for more than it costs you to make (or deliver, in the case of services), you're not going to have anywhere to sit when the music stops.

[RangerScience]

Products were released, but they were all side offerings, not the main dish.

[droopyEyelids]

The "Great Filter" is a concept that doesn't cleanly map to business success.