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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

#51

Post by nl »

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…

It's worth noting that (many) blood tests don't need FDA approval. This makes Theranos' approach unusual: they are getting FDA approval, but not publishing the (easier and cheaper to do) tests.

I don't know enough to judge this one in any sensible way. I thought this Forbes article[1] was good, and the author said:

How much is real and how much is hype? I’m not going to provide a final answer here. I still have no idea how Theranos’ technology works. But I’m more confident than I was before after spending a day talking to the company’s partners.

Here are a few reasons for that confidence: The Food and Drug Administration has just posted a detailed explanation of its decision to clear Theranos’ one approved test, and, to my eyes, it does give some validation of their technology

[1] http://www.forbes.com/sites/matthewherper/2015/07/15/giving-...

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

#52

Post by mcintyre1994 »

danielrhodes wrote: post #50
mcintyre1994 wrote: post #44

> Forget the fact that some of these valuations are illusory because the most recent investors have structured their investments as debt in all but name, meaning that they will stand to profit even if the company is worth far less. Can anyone recommend anything to read to get an insight into how one of these deals works? It's always seemed like liquidation preferences push a deal a fair way toward debt because (I thi…

A lot of these big rounds these unicorns are raising have crappy liquidation preferences, making the signal they give off of confidence in the company look much different.

Don't Sequoia do this too though? They had 4x and 2.7x in Zappos rounds [0], they were in Stripe's reportedly >2x Series C [1].

Not trying to call out the author or Sequoia but this doesn't seem like anything new. Are the current deals even worse than 4x?

[0] http://www.wac6.com/wac6/2009/08/sequoias-liquidation-prefer... [1] https://pando.com/2014/01/24/memo-to-stripe-winning-the-hear...

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

#53

Post by dbcooper »

nl wrote: post #51
akiselev wrote: post #28

Earlier quoted context omitted.

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…

It's worth noting that (many) blood tests don't need FDA approval. This makes Theranos' approach unusual: they are getting FDA approval, but not publishing the (easier and cheaper to do) tests. I don't know enough to judge this one in any sensible way. I thought this Forbes article[1] was good, and the author said: How much is real and how much is hype? I’m not going to provide a final answer here. I still have no id…

That test is for a herpes simplex virus? That is positive/negative result, rather than a quantitative assay.

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

#54

Post by LukeB_UK »

jimjimjam wrote: post #26

Simple search on LinkedIn for Theranos: 139 current employees. 239 past employees. This company may technically be 10 years old, but lots of these churned employees listed Theranos as their last or second to last employer. That is a terrible ratio for a company of that size and age.

You're assuming that LinkedIn is a reliable source.

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

#55

Post by cavisne »

nl wrote: post #51
akiselev wrote: post #28

Earlier quoted context omitted.

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…

It's worth noting that (many) blood tests don't need FDA approval. This makes Theranos' approach unusual: they are getting FDA approval, but not publishing the (easier and cheaper to do) tests. I don't know enough to judge this one in any sensible way. I thought this Forbes article[1] was good, and the author said: How much is real and how much is hype? I’m not going to provide a final answer here. I still have no id…

I'm a bit dubious of using their partners as a source for the technologies effectiveness though. From the insurer's point of view they are getting extremely cheap blood tests from a company using the same equipment and methods as any other lab. Thats a great thing for the customer and the insurer but why would either care whether shifting to the proprietary technology gets approved?

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

#56

Post by [deleted] »

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…

[deleted]

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

#57

Post by bcherry »

andreyf wrote: post #43
prostoalex wrote: post #12

Earlier quoted context omitted.

Typically employees get options for common stock, which is discounted to preferred. Media report of valuations, though, typically multiplies the per-share price of latest preferred round by total number of shares outstanding, ignoring the layers upon layers of liquidity preferences, board seats or ratchet provisions thrown into the deal.

What do you mean common stock is discounted to preferred? If all goes to plan, does liquidity preference matter?

they mean that the purchase price is discounted. a company with 5M shares outstanding might sell 1M shares for $5 each to Series A investor. Now they have 6M shares and a "30M valuation". But they're still giving common grants at a $1 strike price because common shares aren't as valuable as preferred shares at this stage. In sufficient liquidity, the gap will close.

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

#58

Post by potatolicious »

AndrewKemendo wrote: post #19
kzhahou wrote: post #16

Earlier quoted context omitted.

Just a couple of days we all dissected Square's upcoming IPO. Valued at $6 billion, the average employee ( ) stock value is at $294K, or $73.5K per year of vesting. Not super awesome. ( ) Not a founder or executive/director, who'll get up to 5000x that.

How is that not super awesome? All of those employees had market wages well before the IPO.

Opportunity cost - assuming everyone has fair market cash wages, the BigCos are offering more in bonuses and stock - at GOOG/FB it's not uncommon to see $150-200k+ per year in stock, with less uncertainty.

You'd expect that for taking on the risk (relatively low as it may be for a unicorn) you'd do better than the extremely low-risk public stock packages being offered by BigCos.

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

#59

Post by pen2l »

user_001 wrote: post #31
pen2l wrote: post #24

Earlier quoted context omitted.

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.

They got FDA clearance for JUST ONE test, the herpes one. It's not clear if it'll work for the many hundred others, as Theranos has suggested it can.

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

#60

Post by wavefunction »

nl wrote: post #51
akiselev wrote: post #28

Earlier quoted context omitted.

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…

It's worth noting that (many) blood tests don't need FDA approval. This makes Theranos' approach unusual: they are getting FDA approval, but not publishing the (easier and cheaper to do) tests. I don't know enough to judge this one in any sensible way. I thought this Forbes article[1] was good, and the author said: How much is real and how much is hype? I’m not going to provide a final answer here. I still have no id…

According to this, they are being forced to seek FDA approval as well as go under review from other regulatory bodies:

http://www.wsj.com/articles/hot-startup-theranos-dials-back-...

I say forced because you made it sound like they had gone out of their way to seek approval when actually they were not.

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