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Subprime ‘unicorns’ that do not look a billion dollars

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Re: Subprime ‘unicorns’ that do not look a billion dollars

#31

Post by user_001 »

pen2l wrote: post #24
pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

It is putting a lot of effort on PR. I went to https://www.theranos.com/ for curiosity's sake, and was surprised to see that... well, the big center image has absolutely nothing to do with Theranos' technology, it's about "empowering women" (which is of course a laudable effort). My best guess is this is just 'fake it till you make it'. If they've got a 9 bil valuation, at least they can hire some smart folks who wou…

Not sure if you noticed, it's a carousel, the second slide mentions FDA clearance, the third mentions about the CLIA waiver.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#32

Post by dbcooper »

pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

George Church [1] said the following about their board:

http://www.washingtonpost.com/news/wonkblog/wp/2015/10/15/th...

"Usually such deficits in the board of directors would be offset by an equally stellar scientific advisory board and/or medical advisory board," Church said in an e-mail. "I don't see either for Theranos."

[1] https://en.wikipedia.org/wiki/George_M._Church

Re: Subprime ‘unicorns’ that do not look a billion dollars

#33

Post by d_welsman »

akiselev wrote: post #28
pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

I am on board with your skepticism, but I don't believe your concerns are valid in the context of what Theranos is promising and what they have done ($400 million is nothing to scoff at in an industry where you have $0 revenue until a real breakthrough passes the FDA). The global pharmavertical industry is about $900 billion a year and has a very wide variance in types of products so the normal idea of what what valu…

Fantastic comment. Totally agree. Biotech, pharma, you're a zero revenue company until that massively expensive FDA approval comes through. Investors are aware of this, and it is an all or nothing play.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#34

Post by adventured »

pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

Beyond the things you point out, my biggest point of skepticism on Theranos is its business and the potential value of it.

Lab Corp is worth $11 billion. With $6 billion in sales (and having generated ~$1.6 billion in profit over the last three years). The market Theranos is tackling is not as huge as some people apparently would like to think. Lab Corp is a monster in the field, and they're merely doing $11 billion. It's not an Uber situation, where a company blindsides an entire industry, and that industry stands still - Lab Corp has the resources and scale to respond to anything Theranos can do.

In the perfect scenario, Theranos is doing little more than pulling at least a decade of future returns forward at a $9 billion valuation. There's nothing they can do that will generate $6 billion in sales in the next five or six years. Their business model is partially built on neutering the high margins that companies like Lab Corp enjoy.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#35

Post by hkmurakami »

throwaway13337 wrote: post #27
hkmurakami wrote: post #25

Earlier quoted context omitted.

I think SV is even more perverse because there are plenty of cases where people are chasing some nebulous definition of "success" that is not tied to financial success. If it's just financial success and you're a very sharp, bright person, be a quant trader at a prop trading firm or something similar.

People say this - that being a founder isn't a the best path to being rich - and it's definitely true. The popular culture, however, points to the tech area as the source of the new rich. If you want to be the new rich today, you found a tech company. You're right, though, that there is also an element of success is more than about financial success today. Not just in the valley but in the privileged world that it is…

Completely agree. Being rich isn't good enough. You have to be rich and have had to done something to "change the world" (barf) along the way to be truly cool.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#36

Post by adventured »

pbreit wrote: post #20
birken wrote: post #13

Earlier quoted context omitted.

A low strike price only matters if there is some eventual liquidity for the shares. For common stock this means IPO, acquisition or some other share buyback. Both IPOs and acquisitions generally don't apply to companies "treading water", only the extremely successful and growing ones manage to IPO (and even then it doesn't work out so great for shareholders: see YELP or BOX) or get acquired. Get acquired for less tha…

Both YELP and BOX made a lot of people very rich.

Box clearly did not make a lot of people very rich. They made a tiny group of people richer (very early investors). Employees have not done well, as the stock has been a disaster. All of the big rounds that Box raised basically valued them at or above where their stock is now. They're worth $1.6 billion and raised $558 million; their last round was at $2.5 billion.

Their latest quarter they did $73m in sales and lost $50m, with rapidly slowing growth. Even worse, they're bleeding significantly on an operating basis, implying the business may never be capable of making money. They might be lucky if they have four or five quarters of cash left before disaster hits. The near future returns for employees holding stock, is not likely to be pretty.

Even the primary founder didn't get very rich in SV terms, after he had to be diluted down to a sliver of ownership to keep the lights on.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#37

Post by rgbrenner »

AndrewKemendo wrote: post #18
dsugarman wrote: post #6

Earlier quoted context omitted.

The rate of suicide for founders is significant, it is not talked about enough.

As a (not yet suicidal) founder, I'd love to see some numbers if you have access to any.

This study covered mental health issues of entrepreneurs (results summary starts on page 13): http://www.michaelafreemanmd.com/Research_files/Are%20Entrep...

From the study, if you're an entrepreneur, you are more likely to have a mental health issue (49%) than not (48%). Significantly higher rates of suicide, depression, etc.

It's higher across the board.

But it isn't just from the stress of starting a company.. entrepreneurs are more likely to have close relatives with mental health issues too.

I wasn't able to find much other than that... so if anyone else has more links, I would be interested in reading them.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#38

Post by cycrutchfield »

akiselev wrote: post #28
pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

I am on board with your skepticism, but I don't believe your concerns are valid in the context of what Theranos is promising and what they have done ($400 million is nothing to scoff at in an industry where you have $0 revenue until a real breakthrough passes the FDA). The global pharmavertical industry is about $900 billion a year and has a very wide variance in types of products so the normal idea of what what valu…

Uh, 25x revenue? Are you conflating money raised with revenue? Because Theranos has not made anywhere close to 400m over the entire life of their company...

Re: Subprime ‘unicorns’ that do not look a billion dollars

#39

Post by adventured »

7Figures2Commas wrote: post #3

It's kind of amusing that so many in Silicon Valley rail against Wall Street and "financial engineering" when the biggest "winners" of this tech boom are products of Wall Street and "financial engineering."

If we're talking only about start-ups that have gotten big during this boom, then you're very wrong.

Uber, Xiaomi, Airbnb, Palantir, Snapchat, Didi Kuaidi, Flipkart, WhatsApp, Pinterest, and Dropbox are among the biggest winners so far. There's nothing Wall St or financial engineering about any of those. They're all legitimate businesses and or services that consumers blatantly want.

Re: Subprime ‘unicorns’ that do not look a billion dollars

#40

Post by dbcooper »

adventured wrote: post #34
pbreit wrote: post #9

I don't know what to think of Theranos. On one hand, it is tackling a huge, important market and appears or appeared to have something legitimate. On the other, so many of its tactics seem designed more to increase valuation than successfully bring its technology to market. It's obscenely celebrity board completely devoid of any relevant experience. A ridiculous $9b valuation on a paltry (relatively) $400m raised. 10…

Beyond the things you point out, my biggest point of skepticism on Theranos is its business and the potential value of it. Lab Corp is worth $11 billion. With $6 billion in sales (and having generated ~$1.6 billion in profit over the last three years). The market Theranos is tackling is not as huge as some people apparently would like to think. Lab Corp is a monster in the field, and they're merely doing $11 billion.…

Abaxis (manufacturers of the "Piccolo" systems, which seem to be lab-on-disc based and offer point-of-care operation) are an interesting company to compare to Theranos. They seem to be able to perform small panels of assays (up to 14) on 100 µL samples [1] obtained by venipuncture.[2]

They are valued at $880M, and had ~ $200M revenue and $27M profit in the last financial year.

http://www.abaxis.com/about_us/history.html

[1] http://www.piccoloxpress.com/products/panels/function/

[2] http://www.piccoloxpress.com/wp-content/uploads/2015Revision...

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