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January 25 - January 28, 2023
Besides, the venture capitalists startups courted for funding knew that startup founders overstated these forecasts. It was part of the game. VCs even had a term for it: the hockey-stick forecast. It showed revenue stagnating for a few years and then magically shooting up in a straight line.
To raise the money she needed, she leveraged her family connections. She convinced Tim Draper, the father of her childhood friend and former neighbor Jesse Draper, to invest $1 million. The Draper name carried a lot of weight and helped give Elizabeth some credibility: Tim’s grandfather had founded Silicon Valley’s first venture capital firm in the late 1950s, and Tim’s own firm, DFJ, was known for lucrative early investments in companies like the web-based email service Hotmail.
It made for an unnerving work environment: a colleague might be there one day and gone the next and you had no idea why.
Ellison might be one of the richest people in the world, with a net worth of some $25 billion, but he wasn’t necessarily the ideal role model. In Oracle’s early years, he had famously exaggerated his database software’s capabilities and shipped versions of it crawling with bugs. That’s not something you could do with a medical device.
Appearances in the Valley are paramount and for three years Theranos had been operating on the wrong side of the tracks. The “tracks” in this case were Route 101, otherwise known as the Bayshore Freeway. It separates Palo Alto, one of the most affluent towns in America, from its poorer sibling East Palo Alto, which once held the dubious distinction of being the country’s murder capital.
Commerce One acquired the startup for $232 million in cash and stock. It was a breathtaking price for a company that had just three clients testing its software and barely any revenues.
To rescue the economy, the Federal Reserve had slashed rates to close to zero, making traditional investments like bonds unattractive and sending investors searching for higher returns elsewhere. One of the places they turned to was Silicon Valley.
A highly agitated Sunny told the officer that an employee had quit and departed with company property. When the officer asked what he’d taken, Sunny blurted out in his accented English, “He stole property in his mind.”
🤣
Elizabeth had stated on several occasions that the army was using her technology on the battlefield in Afghanistan and that it was saving soldiers’ lives. Stan wondered if Theranos was funded by the Pentagon. That would help explain the level of secrecy.
Patrick’s experience, all tech startups were chaotic and secretive. He saw nothing unusual or worrisome in that.
Besides Theranos’s supposed scientific accomplishments, what helped win James and Grossman over was its board of directors. In addition to Shultz and Mattis, it now included former secretary of state Henry Kissinger, former secretary of defense William Perry, former Senate Armed Services Committee chairman Sam Nunn, and former navy admiral Gary Roughead. These were men with sterling, larger-than-life reputations who gave Theranos a stamp of legitimacy.
At first, I thought he was referring to its board of directors, but that was the least of his concerns. He pointed out how chummy Holmes had gotten with the Obama administration.
During the roundtable discussion, Biden called what he had just seen “the laboratory of the future.”
One of them was former Netscape cofounder Marc Andreessen, whose wife had just profiled Holmes in a cover story for the New York Times’s style magazine headlined “Five Visionary Tech Entrepreneurs Who Are Changing the World.”
Why had she never recruited a board member with even basic knowledge of blood science? And why hadn’t a single venture capital firm with expertise in health care put money into the company?
Holmes would be hosting a fund-raiser for Hillary Clinton’s presidential campaign at Theranos’s headquarters in Palo Alto. She had long cultivated a relationship with the Clintons, appearing at several Clinton Foundation events and forging a friendship with their daughter.
Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.
THE TERM “VAPORWARE” was coined in the early 1980s to describe new computer software or hardware that was announced with great fanfare only to take years to materialize, if it did at all. It was a reflection of the computer industry’s tendency to play it fast and loose when it came to marketing. Microsoft, Apple, and Oracle were all accused of engaging in the practice at one point or another. Such overpromising became a defining feature of Silicon Valley. The harm done to consumers was minor, measured in frustration and deflated expectations.
Employees were prohibited from putting “Theranos” on their LinkedIn profiles. Instead, they were told to write that they worked for a “private biotechnology company.”
“The board is just a placeholder,” he recalls her saying. “I make all the decisions here.”
In December 2013, she forced through a resolution that assigned one hundred votes to every share she owned, giving her 99.7 percent of the voting rights.
Greed, she knew, was a powerful motivator, even in the twilight of a man’s life.
