It’s Not That Hard to Build a Real Theranos 2.0

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Wired Global Editorial Director Katie Drummond at 11:50 AM
Kleiner Perkins Chief Product Officer and Advisor Bing Gordon at 12:00 PM
Greptile Co-Founder & CEO Daksh Gupta at 12:30 PM
Town Co-Founder & CEO Jean-Denis Greze at 12:35 PM
Tolan Founder & CEO Quinten Farmer at 12:45 PM

Run of Show

It’s Not That Hard to Build a Real Theranos 2.0

In all the back and forth about You Can See Everything, there’s been a bit of a rumbling around the idea that Elizabeth Holmes might be less guilty than previously understood. John Carreyrou, the WSJ reporter who exposed the original Theranos scandal, took to the NYT to double-down on his account of the story.

There’s a deeper layer to the story that’s maybe underdiscussed. Holmes was a “TED-talk entrepreneur.”

The thing that sticks out to me is how often real companies got built and sold in the exact same category as Theranos, during the same time period. A basic search of M&A activity across specialty testing laboratories, diagnostic platforms, and medical devices yielded 62 completed acquisitions since 2003 each with disclosed deal values above $100m. There are too many successful companies in the category to even list out here, they are just sort of boring businesses that never touch consumers directly, so they don’t develop fan bases. And they are also strictly regulated by the FDA, so marketing prior to authorization is off the table, which leads to founders being more under the radar. There’s a whole playbook and pipeline of these companies, funded by VCs who specialize in the category.

When I went through YC in 2018, the visiting partner in my group was Diego Rey, co-founder and CTO of GeneWEAVE. Realistically, you’ve probably never heard of the company, but it’s a beautiful example of what great execution looks like in biotech.

GeneWEAVE built an automated lab testing machine (see, it’s not impossible) called vivoDx. They also designed proprietary tests used inside the box to detect antibiotic-resistant bacteria in patient samples. Normally, hospitals send patient samples out to external labs, but that takes time. The goal was to progress medical capability in a safe and incremental way that integrates with the current system.

The company invented new testing chemistry, called “Smarticles” (ridiculous name imo but a real product). Put simply these particles make target bacteria produce luciferase, an enzyme that produces light. So the machine can measure the glow to detect the level of this particular bacteria.

The company followed a pretty traditional fundraising path, a $1m seed round in 2010, a $12m Series A in 2012, and a $12m Series B in 2014. Then Roche acquired GeneWEAVE in August 2015 for $190m upfront, plus up to $235m in product-related milestones, for a maximum potential price of $425m.

The product was still undergoing clinical evaluation and had not received FDA authorization but eventually did get authorized in 2019 for the “cobas vivoDx MRSA test.” Every press release is filled with technical jargon and doesn’t exactly light up the Ted-talk booking team’s eyes, but it’s still an important story.

The story is so simple from a Silicon Valley startup perspective, a great outcome for founders, employees, and investors. Medical devices can be built and sold, in a matter of years, this isn’t magical science fiction technology. Yet, Elizabeth Holmes seems completely unaware that this industry exists and is thriving. That’s what makes her such a disappointing founder and so unequipped to run it back a second time. Total capital destruction machine in the name of a LARP. Sad.

Clip Spotlight: Walter Isaacson on Elon Musk going “demon mode”:

For two years, Walter Isaacson lived in an Airstream next to Elon Musk while writing his biography.

Isaacson didn’t want a book built on a series of interviews. Instead, he got near-constant access to observe Musk firsthand.

That’s how he saw Musk’s “demon mode” up close.

Here’s how he describes the mood swings:

“He gets really dark and really difficult. He just goes silent.”

“There are people like Gwynne Shotwell and [Tesla design chief] Franz von Holzhausen who know how to push him out of demon mode. He also knows how to get himself together when he goes on stage.”

“It depends on what’s crossing his mind at the moment. It’s almost like a storm cloud coming in off the Gulf.”

“There’d be times I’d watch him go into demon mode. I’d be sitting at dinner at a restaurant in Austin and Grimes would be next to me, and she’d say, ‘Oh, demon mode’s about to come.’”

“I’d watch people text Gwynne to come run into the conference room when he’s about to kill Falcon Heavy or something.”

And he doesn’t think Musk has gotten any less mercurial, either.