(NYT Opinion Pages) "Donâ€™t Blame Silicon Valley for Theranos"
Marlene Breverman stashed this in Theranos
It is tempting to see Theranos as another example of Silicon Valley hype â€” a company based on a wisp of an unproven idea becomes a multibillion-dollar phenomenon with the backing of pump-and-dump venture capitalists.
In fact, however, Silicon Valleyâ€™s most experienced investors in start-ups saw red flags at Theranos before anyone else. The Theranos saga shows just how well Silicon Valley does its homework, especially when considering medical technology, in which the risks of doing real harm to people are higher than those posed by the next photo-sharing app.
Theranos did make presentations to many, if not most, of the top life sciences firms. Part of the companyâ€™s appeal was the familiar origin myth of Theranosâ€™s founder, Elizabeth Holmes, who, like Bill Gates and Mark Zuckerberg before her, dropped out of college in order to found her company.
That might impress some social media investors, but in life sciences, everyone puts in years of formal study just to earn a seat at the table. For example, at MPM Capital, a venture firm that invests in life sciences, almost every one of its 20 investing directors and partners has either a Ph.D. or M.D., and one has both. Even the general counsel has a Ph.D. in cell, molecular and developmental biology.
GV, formerly Google Ventures, has a five-person investment team for Life Science & Health that includes two members with Ph.D.s in bioengineering; another with both an M.D. and a Ph.D. in biophysics; and a partner who, unlike Ms. Holmes, finished at Stanford, then went on to earn an M.D. and M.B.A. at Harvard.
Theranos approached GV twice and was turned down twice because of what one partner called â€śso much hand-waving.â€ť People I have talked to at other investment firms said they turned down Theranos for similar reasons, unsatisfied with Theranosâ€™s attempt to substitute its intangible â€ścoolnessâ€ť in place of technical details needed to validate its diagnostic technology.
Another tipoff? Theranos wouldnâ€™t publish in peer-reviewed journals. Guy Cavet, chief technology officer for the biotech firm Atreca, said: â€śEvery smart prospective partner of a life sciences start-up looks for strong peer-reviewed publications. Itâ€™s a way of getting expert due diligence at zero cost.â€ť
Experience in health care is critical for a company like Theranos, which has to comply with government regulations. Instead, even the board of directors was weighted during most of the companyâ€™s life with older political figures like George P. Shultz and Henry A. Kissinger.
Luke Evnin, a co-founder at MPM Capital, said he had never met with Theranos or Ms. Holmes, but he found the makeup of the board puzzling: â€śIt is pretty weird that if you look at her board, thereâ€™s not a single person who knows what theyâ€™re doing in the business.â€ť
Fascinating perspective because there are also many Silicon Valley people who not only bought into the Theranos hype but helped to create it.Â
Forbes/Entrepreneurs/My SayÂ "The Theranos Crisis: Where Was The Board?â€ť
The Makeup of the Board
The makeup of Theranosâ€™ boardroom has done very little for its credibility in the medical technology industry. The boardÂ appearsÂ to have been assembled primarily to secure influential government connections, rather than to govern with solid industry insight, product knowledge and operational expertise. AsÂ statedÂ byÂ FortuneÂ senior editor Jennifer Reingold,
[W]hile itâ€™s probably useful to have a retired government official or two toÂ teach and offer goodÂ leadershipÂ skills, when there are six with no medical or technology experienceâ€”with an average age, get this, of 80â€”one wonders just how plugged in they are to Theranosâ€™ day-to-day activities. Nor is there anyone with formal accounting or auditing expertise or legal expertise [â€¦]â€ť
The original twelve-member Board of Directors was stacked with two former Secretaries of State, two former senators and several high-level former military officers.
Theranos has sinceÂ changedÂ its board structure to include a smaller board of directors, a new board of counselors and a medical advisory board staffed with physicians and researchers. However, these changes came too late for Theranos to win the benefit of the doubt when it comes to standards of good governance.
Ironic that a board with so many government officials could be guilty of having poor governance.Â