To me it is obvious that medical device experience needs to be present in sr. and middle management of every company that wants to be in healthcare.

Julie Omohundro Herman, I was thinking about how this issue really isn't limited to software device start-ups. It's not that uncommon to see traditional device start-ups that lack medical device experience, and even more with experience that doesn't include how to develop a medical device, but only on the money side. Kind of all dressed up and no way to go.

Software device startups concern me more, for some reason. Perhaps its because they often do have deep experience in product development, just not in medical device development. And "it's not what you don't know that gets you into trouble, but what you think you know that you don't know."

I'm not sure most device startups actually want to "be in healthcare." I think most of them just want to be acquired. Perhaps that's at the heart of the matter?

Rodney Chin, PhD The medical device culture must be fully embraced in all facets led by an appropriate management team & board experienced in both worlds. The prevalent SW culture has some traits incongruent with the medical device culture. Harmonizing process & culture is key for success. It's hard enough in either start-up worlds & there will always be failures. So a Theranos II? Probably, yes.

I think back to the theories that were presented while I was in college. Theory vs. real life experience needs to have a healthy balance.

Julie Omohundro Rodney, when you refer to the prevalent SW culture, are you talking about "real programmers," or is there some other aspect of SW culture these days that is poorly aligned with the medical device culture?

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From a society-wide view, it's probably beneficial for a wave of fresh perspective to wash through the medical device industry. That said, many of those efforts will likely fail. Both because making good medical devices is hard and because it's a heavily-regulated market.

No one should cry over those failures, though. Such entrepreneurs actively seek it out high-risk efforts, and pen tributes in praise of the inevitable “failures” that result.

The challenge for the rest of us is to *listen* to those “software types”, and learn what we may from their experiences, without necessarily buying into their self-promotions.

Ken Powell As I have mentioned in previous comments regarding Theranos, Holmes was approximately 17 years old when both Quest Diagnostics (2001) and LabCorp launched Direct-to-Consumer (DTC) testing programs. Quest quietly exited DTC in 2006, but has subsequently launched it given the public's interest in personal DNA and other novel diagnostic applications. I doubt that she, the Board of Directors and/or investors were not aware, nor monitoring the early DTC businesses and their outcomes. Which is why I believe that regardless of start-up creativity talent, there is no substitute for industry historical knowledge. I also believe that Theranos' fascination with non-FDA approved "nanotainer" sample collection devices would have been avoided by using FDA approved micro-collection from many companies such as BD, Starstedt and others. There are now over 30 companies offering DTC sample analysis, mostly in the area of genetics. Although the largest OTC market segment continues to be SBGM.

Julie Omohundro Ken, what are your thoughts on the shift to developing minilabs?

Ken Powell Julie - "minilabs" as stated by Holmes is a misnomer. The standard IVD name for this large and growing diagnostics market segment is Point-of-Care (POC). POC is further divided into sub-segments such as Physician Office Lab (POL), Over-the-Counter (OTC), mini-clinics in drugstores, alternate site such as nursing homes, the battlefield for bio-warfare identification, home testing and I'm sure you can add more such as veterinary, agriculture and others. POC is very, very large and growing. Examples include: $14 billion dollar Self Blood Glucose Testing (driven by the diabetes epidemic which is systemically driven by obesity), $800 million OTC pregnancy test market and the POL segment is seeing double digit growth as POC molecular diagnostics are approved and launched on almost a weekly basis. So POC will see significant and long term growth in both developed and especially in developing countries. I've been involved in POC testing since 1976 and know it extremely well.

Marc Timothy Smith I believe the Theranos disaster was caused by greed and simply not caring, along with not-so unusual basic mis-management. It doesn't matter how much a person knows about their industry, not to mentions its rules & regulations, if that person is greedy and isn't a "good citizen" that cares as much about all people.

William Storage Maintaining the convenient fiction that such a thing as root causes exists, it might be useful to come up with a term for the kind of Silicon Valley startup arrogance that attracts investors who fail to perform due diligence and have very little knowledge of the science that underlies (would underlie) scientific inventions. Praise from investors fuels press that amplifies the arrogance. Whether Holmes was truly fraudulent or just terribly overconfident seems a pointless distinction; CEOs should subject themselves to peer review.

Your point that mgmt teams are heavy on s/w with no domain experience is a good one. Investors and the press believe that software developers are “engineers” because the label has stuck. In aerospace, where use of s/w to control devices was born, no one would mistake the engineering of systems that include s/w with designing firmware for devices. Yet many in tech startups equate these 2 concepts of “systems engineering.” This may well lead to Theranos II.

Here's the formula for disaster: a narcissistic, secretive leader who does not hire experienced people with market knowledge; dumb money (investors); continually deceive (lie?) to all stakeholders; have a clause in the CEO's contract that precludes the Board from firing her. If you want to throw in the fact that SW people don't know much about medical device product development...OK.

i would guess when its again driven by hype, with little respect for people who know the science and technical aspects. i don't know if holmes really understood the science behind what she claim she could do.

Julie Omohundro Ken, thanks for the additional info. I also anticipate significant growth in POC devices.

Marc, true, but whether driven by greed or good intentions, start-ups that don't have the expertise needed are not likely to come to a happy end. And most of them don't.

Julie Omohundro William, I would be interested to hear more about your perspective on root causes.

Is it arrogance? Or is it strategy?

If you really have no ability to develop useful technology, aren't those just the kind of investors you want to attract/fleece? And if you are a really knowledgeable investor, isn't this the perfect opportunity to get in early, ride the wave of hype to the top, and then cash in before it cashes?

And what about the savvy operators who pump up clueless developers into thinking their technology is the next unicorn, so they will have something to set as bait for clueless investors?

As for Homes, her management team, and her investors, I don't know what happened there, but I can't help but wonder why everyone so easily accepts that a 17-year-old college dropout was in a position to pick, instead of a target ripe for picking.

Marc Timothy Smith Julie O. - I certainly do not disagree with you. My only point is a person totally ignorant of an area such as medical devices can successfully run a medical device company. I can't count the times over the years I have called in experts to advise me on things I was ignorant on. For example, if I have a GD&T issue, I have to consult with an expert because it is to my field of expertise. Same with data analysis. I'm OK with statistics, but I'm certainly not an expert so if I need important data analyzed I'll get a professional statistician involved. If a startup is so stupid as to not get the appropriate professionals on board, I would expect failure.

I have been following the Theranos situation for quite a while now. It's just my opinion that greed and hubris was the essential reason for the Theranos "fail". Many people saw it coming.

Julie Omohundro Marc, no, I don't think we are in disagreement, just focusing on different aspects.

William Storage Julie O. - On the question of arrogance vs strategy, can we only pick one? We can view it as a system (startups and their investors) that selects for arrogance in CEOs. Silicon Valley perpetuates the notion that narcissism is inherent in innovative genius. Arrogance interpreted as confidence and determination shows much better than intimate knowledge of ISO 14971.