The co-founders of lab testing startup uBiome are under indictment for fraud and are currently on the run. Listening to a podcast about uBiome this morning, the parallels between it and Theranos struck me as uncanny:
- The two co-founders were romantically involved, just as Theranos CEO Elizabeth Holmes was with COO Sunny Balwani. Perhaps its easier to keep secrets in the context of a romantic relationship?
- Both companies surrounded themselves with high profile advisors with little scientific expertise. People like this create a halo of legitimacy but don’t have the background to ask the tough questions.
- Unlike most Silicon Valley startups, it was in the hard sciences. It’s a lot harder for investors to verify the technology works than with an app they could download and play with themselves. And fewer investors have expertise in that area.
There are some incredible tidbits in this podcast, including the fact that the photos used in patient testimonials were Shutterstock stock images. It occurs to me that savvy investors could do a Google reverse image search of any such photos from a company’s slide deck and find out if they’re doing the same. It would only take a few minutes. I think I’ll do the same in the future with startups that pitch me.
Another important point is that this company went through the very prestigious accelerator Y Combinator. But accelerators don’t do deep due diligence. The checks they’re writing, usually in the $100,000 range, are too small to justify it. So don’t take that as an indication a company isn’t a fraud.
For more on Theranos and startups in general, check out these posts:
- How We Could’ve Known Theranos Was a Fraud
- 7 Companies Had 3 Minutes Each to Pitch Us. This Is What Happened.
- What I Learned From an Investor Who Turned $100,000 into $100,000,000
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Photo: “LEWEB 2014 – CONFERENCE – LEWEB TRENDS – THE REINVENTION OF HEALTHCARE – JESSICA RICHMAN (UBIOME)” by LeWeb14 is licensed under CC BY 2.0