Did investors who invested in Theranos do poor due diligence?
Of course not.
Having said that … doing diligence on truly disruptive changes in science is hard.
My first start-up as a founder, NanoGram Devices, made implantable batteries from proprietary nano-materials we created using industrial CO2 lasers.
These batteries did amazing things. They enabled implantable medical devices to delivery therapy faster, more reliably, over a longer period of time. The technology has gone on to save many lives.
No one really understood why they worked. There still isn’t a fully working model for a hundreds-of-years-old lead acid battery. You think there is one for a nano-silver-vanadium implantable battery? That was just invented?
In our due diligence for M&A, the acquirer flew out the world’s most renown experts. They did days of diligence each. All the data. All the access.
None of them understood how it worked, either.
And the answer, is turned out, was almost entirely counter-intuitive.
And certainly, none of our investors had any real idea how our technology worked, either. Nor really, did I.
Diligence here is hard. And I’ve found that the very best “life sciences” investors are substantially smarter than many “information technology” VCs. 🙂