Theranos Blew It. But It Didn't Ruin Biotech Startups For Everyone
IN THE LATE 1990s, Elizabeth Holmes was in middle school. Her scandal-beset company Theranos—which promised to use amazing advances in a hybrid scientific field of microfluidics to detect multiple conditions from a single drop of blood—didn’t exist.
But at the University of Washington, bioengineer Paul Yager was using microfluidics to develop paper-based assays that he hoped would detect pathogens with just a nasal swab. And like Holmes did later, he also saw the potential in making these tests directly accessible to patients. He was ahead of his time. Investment dollars and talented post-docs went instead to big labs working on big, traditional testing machinery. And now he worries that his life’s work will suffer collateral damage from Theranos’ abuse of trust. Investors, he says, are already acting cagier towards him. He calls it, “the Theranos crater.”
The crater analogy is apt: Theranos blew up in the middle of the biotech world. Anybody looking to raise capital for their new diagnostic technology will likely have to answer tougher questions from more skeptical investors. And nobody working on point-of-care diagnostics can make a promise like Holmes’ 70-tests-from-one-drop rhetoric. But even without magic blood machines, point-of-care diagnostic investing is looking up. So while Theranos may have made it harder for some researchers to fund their ideas, the company also proved that the biotech market is ripe for point-of-care diagnostics.
John Waldeisen is the CEO and Co-founder of Diassess, a diagnostics start-up that raised an undisclosed but “significant” amount in its Series A last October—right around the time the Wall Street Journal exposed Theranos’ internal struggles to the world. He sees the (now) ex-deals with Walgreens and Safeway as a sign that things aren’t as bad as they seem. “These two huge giants clearly see the opportunity here,” he says. “And you have to believe that Theranos catalyzed that excitement. Now that they’re relinquishing their position, it’s anyone’s game.”