[Someone]

If all other options have even lower odds, why wouldn’t they?

Also, there may be (somewhat) rational reasons for investors to invest more.

For existing investors, there’s the statistics. Let’s say you invested a billion in a company that says ”if you don’t pay 10 million now, you’ll lose all of it”.

If you think there is a 1% chance that 10 million will save them and bring back your money, you, statistically, play evens if you give them that money (paradoxically, if, a week later they say they need another 5 million, giving them that at that time is OK as long as you think you still have ½% chance of getting all your money back, but you shouldn’t give them 15 million up front when you thought you had a 1% chance)

Of course, some serious delusion may be needed to believe that, firstly, that 10 million will keep them afloat, and secondly, that it will enable them to recover all of your billion.

For potential new investors, it is almost as if that billion is a plus. It is really hard for a company to have spent a billion and not be worth at least 10 million. Fire sales _can_ be bargains. For the Theranos case, all that money should have produced some patents, some of which may be worth something.

[zxcmx]

Confirming have seen this play out before on a smaller scale.

Some call it the sunk cost fallacy... but actually when someone has invested enough money in you, you actually get leverage over them when the alternative is a smoking crater where their investment used to be.

[jlarocco]

There's also opportunity cost, though, and the fact that Theranos with a full staff and boatloads of money produced basically nothing.

And $10 million can fund a lot of smaller startups with better odds of success and less baggage.

IMO, the smart investors will move on and hope for some other sucker to give Theranos money. It's rough, but if they can't afford to lose sometimes they shouldn't be in venture capital.

Also, a new investor, giving only $10 million after they've raised nearly $1 billion, is going to be really far down the list of people getting their money back if Theranos turns it around somehow.

[int3]

> (paradoxically, if, a week later they say they need another 5 million, giving them that at that time is OK as long as you think you still have ½% chance of getting all your money back, but you shouldn’t give them 15 million up front when you thought you had a 1% chance)

No paradox here... the evaluation of the situation in the first week should be [EV of getting all your money back with the 10M investment + (negative) EV of needing to put in more money later to keep the company afloat].