Extreme secrecy seems to be a bad thing in unicorns.
Subprime ‘unicorns’ that do not look a billion dollars
61–70 of 91 posts
Re: Subprime ‘unicorns’ that do not look a billion dollars
#62It'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.
Look at the investors in today's later rounds and the structures of the late-stage investments.
This has nothing to do with consumer demand. There was consumer demand for subprime mortgages too. What we're talking about is where the late-stage money is coming from and how the valuations are being manufactured.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#63I 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 and several engineers I know had recruiters from Theranos contact us. They would not tell us anything about what we'd be working on, what kind of people we'd work with or how much we'd be paid. Needless to say we were not interested.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#64Earlier 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?
The strike price for common stock is lower. So a company whose valuation might had been trumpeted in the media as $50 bil would issue common stock at, let's say, $15 bil valuation.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#65Earlier 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's not quite true. They don't need expensive clinical trials like a drug developer would, but there is a regulatory process for getting FDA approval for diagnostic tests that lets companies self-regulate, as long as an FDA approved "lab manager" signs off on the internal validation process run by the company. They would only have to fall back to regular approval processes if there is no "golden standard" diagnostic test which to compare their test with.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#66"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 someone please explain this?
Not my field - but it was talked about recently here. I'll do my best, but help me out here guys...
Essentially, the money VC invests can be invested with a 'first-out' kind of option. So that were the company to fail, or sell for less than expected, that the very first people paid out of whatever pot of money is left would be the VCs. So imagine they say the company is worth $1B and a VC put in $200M. Company sells for a 'dismal' $210M. VC exits with their $200M back, and founders, team, other investors etc. all fight over the $10M that on paper seemed like $800M. As I recall, sometimes the investments are not just 'preferred' but are '2x preferred' or such things.
In the end it distorts the incentives of the VC. The want the company to be worth a billion dollars, but if they say it, it's not true, the company crashes, and loses nearly everything, they in reality only lost the time-value of their investment, not actually any cash.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#67I want to like this article, but it seems pretty short on supporting evidence, besides Theranos in particular. Is there a reason to believe that Theranos is typical of the unicorns?
Re: Subprime ‘unicorns’ that do not look a billion dollars
#68Extreme secrecy seems to be a bad thing in unicorns.
Sam Altman tweeted the same thing about YC applicants too: https://twitter.com/sama/status/654708548237066243
Re: Subprime ‘unicorns’ that do not look a billion dollars
#69I 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…
I'm not entirely convinced that what Theranos is promising is even that great.
A couple weeks ago I got a blood test. I walked into the test center, which was staffed by a single person. I waited in line (there was one person in front of me), and told the person my name. She walked me over to a chair, drew enough blood for a whole bunch of tests, and that was it. I was in and out in 12 minutes (I timed it), and it was almost completely painless.
This wasn't Theranos. It was "Lab Corporation", an utterly non-unicornish testing center, and the local branch was staffed by a competent phlebotomist. It turns out that, once you stick a tiny IV needle in, you can draw a few vials of blood very quickly and painlessly.
In contrast, I once had a test at Theranos. The tech poked my finger with the magic lance (which stung more than the IV needle), put the little magic capillary collection widget over the drop of blood on my finger, and squeezed REALLY FUCKING HARD, repeatedly. My finger tingled weirdly for a few hours, because the REALLY FUCKING HARD squeeze hurt and probably broke a few capillaries. And the process took considerably longer than the blood draw at Lab Corporation. See, a little needle with a vacutainer at the other end draws quite a few mL of blood very easily, but a little finger prick struggles for more than a drop or two.
(Next time you give blood and get the finger-prick hematocrit test first, look at the tiny amount of blood that they get. Then imagine the rather large multiple of that amount that you'd need to fill the little Theranos collection widget. Ouch!)
I suppose if I were afraid of needles, then maybe the squeeze-the-finger-really-hard approach would have been an acceptable idea.
Re: Subprime ‘unicorns’ that do not look a billion dollars
#70I really like the label "sub-prime Unicorn".
I really hope Theranos is not a fraud, I think the concept of rapid diagnostics with minimal source material is critical to scaling health care to the planet as a whole. But having watched people like Affymetrix and other "silicon-meets-organics" concepts go through the process of validation, I have always felt Theranos talks too much about how great they are going to be and how cool their founder is, and not enough about how they are going to get there. My observation is that companies that far ahead of the hype wave are more likely to flame out than ones that start very quietly and intercept the hype wave at or just after product introduction.
Someone is going to figure this space (instant diagnostics through direct inspection) at some point. Still wondering if someone has.