Tech Tent: Has Theranos changed Silicon Valley?

By James Clayton
North America technology reporter

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Image source, Reuters

Elizabeth Holmes told investors she could diagnose hundreds of diseases with just a few drops of blood. She couldn't.

Last week she was found guilty of fraud. But with so much money sloshing around in Silicon Valley, will the verdict change anything?

On this week's Tech Tent, we speak to people who think the Theranos debacle could be good for Silicon Valley in the long term - and to some who don't.

"There's a cynical view out there that everybody lies, and everybody knows everybody lies," says Robert Weisberg, a legal expert from Stanford University.

"I think this will scare some entrepreneurs into being very, very careful."

Others believe that Theranos is a sort of parable to investors - only put money in what you know.

"Certainly most VCs [venture capitalists] are very averse to having headlines in the Wall Street Journal," says Patricia Nakache, from venture capital firm Trinity Ventures.

"I think the message that VCs are taking away is 'stay in your lane, invest in things you know something about'," she says.

But there are clearly still some investors who put pressure on start-ups to exaggerate.

One of the key Theranos whistleblowers who exposed the deception was Tyler Shultz. He has started his own biotech company, but says he's faced pressure to overstate growth potential.

"I am under pressure to exaggerate technology claims. Sometimes investors will straight up tell you, you need to double, quadruple or 10x whatever revenue projection you think is realistic," he says.

He said that in an interview with NPR's Bobby Allyn, who is also sceptical of the view that Theranos will change much in Silicon Valley.

He emphasises how the methodical approach that scientists bring to research can rub up against investors' desire for fast growth.

"Venture capital wants what they call hockey-stick growth, more and more and more growth…. And science moves at this slow, peer-reviewed pace. They're sort of incompatible," says Mr Shultz.

The idea behind Theranos wasn't a bad one. In fact there are many Silicon Valley companies in the biotech space that work in blood diagnostics.

Karius is one such company, which is developing technology to identify around 1,500 different types of bacteria, viruses, fungi and parasites in the blood.

I spoke to one of its founders, Tim Blauwkamp, who told me how hard it was to get investors to take the company seriously after the Theranos scandal broke.

He believes Theranos has led to more scrutiny from investors - a good thing. But he also says the scandal has led to delays in innovation in blood diagnostics.

"I believe it has changed our sector. There is no way that that much capital could go up in smoke without leaving a scar," he says.

"In some circles there's a scepticism of investing in the space altogether... I don't think it's been a win for scientists. I don't think it's been a win for patients."

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