Tim Draper keeps defending Theranos - Axios
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Tim Draper keeps defending Theranos

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Theranos has become compagnia non grata in Silicon Valley, a troubled reminder that not even multi-billion dollar valuations can save a startup from its own short-cuts. But it still has at least one vocal defender: Venture capitalist Tim Draper, an old family friend of Theranos founder and CEO Elizabeth Holmes, who led an early $1 million investment into the company (split between two investment firms). In short, he believes the attacks on Theranos are "a witch hunt."

If you don't know Theranos, here's the nutshell:

  • Blood-testing company founded in 2003 by Stanford drop-out Elizabeth Holmes, promising it needed just a few drops to conduct hundreds of tests.
  • Valued by private investors at $9 billion by 2014, and signed a major partnership with Walgreens. Board members included Henry Kissinger and incoming Defense Sec. James Mattis.
  • Subject of a series of critical Wall Street Journal articles by John Carreyrou, the first of which showed that the company's technology was so troubled that it regularly used third-party machines that required standard blood draws.
  • Regulators have banned Holmes from owning or operating a lab (something she's appealing) and the company now wants to sell "mini-labs" to other providers instead of offering blood tests itself. More than 500 employees have been laid off. Walgreens is suing for breach of contract and certain investors are suing for fraud.
  • Carreyrou is now writing a book about Theranos, which has been optioned for a film that will star Jennifer Lawrence.

Draper recently spoke to Axios about why he believes Holmes, not his fellow investors or the company's users, are the real victims. Here's the interview (slightly edited for clarity):

Axios: Did you primarily invest in Theranos because of Elizabeth Holmes, or because of the technology?

Draper: "There are a lot of things that go through our minds when we're making investments in new startups and what I tend to do is focus on great opportunities that can transform industries. In this case, Elizabeth came in and said, 'I'm going to transform healthcare as we know it.' She was very dynamic and answered all of our questions to our satisfaction. It was just getting started, which is why our investment was so small."

Did you pass up the chance to reinvest, or did she not give you the option?"

"No, we never really had another opportunity."

The first Wall Street Journal story critical of Theranos was published in October 2015. What was your initial reaction?

"I dismissed it because there are always writers who want to take down big successes. Then after the next one I realized there was some strange vendetta. Maybe it had to do with money. The guy is getting $4 million to continue this charade."

Don't journalists sometimes dig into something that only looks like a big success, but actually is fraudulent in some way?

"Elizabeth started an amazing company that is so disruptive to various industries, so I think there were competitors fueling this fire. She was delivering 50 blood tests for $30. Her competitors are delivering the same thing for hundreds, sometimes thousands of dollars. They were hugely threatened by this. Her product allowed consumers to have a baseline and then measure all of the changes in their blood over time. That technology is going to happen and I'm hoping it happens with Theranos.

It's like other industries that get threatened by new technology. Like Bitcoin when all of the banks lined up against it. Or Uber being attacked by the taxi companies or Tesla by the car companies or Skype by the telecom companies. In this case, the competitors got a mouthpiece. I believe Elizabeth is the victim of a witch hunt."

You said something similar to Bloomberg TV last summer, adding that the competitors in this case included pharma and health insurers. How so?

"My argument there is a little more abstract. If you're big pharma, you like this relationship you have with doctors. You like that you can drive what people are prescribed. Theranos allows people to take more control over their own health, which would end up creating smaller markets for drug companies and health insurance companies."

Isn't there intrinsic value in having a trained medical professional involved in some level of decision-making? If Theranos makes a mistake, a doctor is more likely to spot the abnormality than a layperson.

"Do you know how many mistakes Labcorp makes?"

No, but I do know that Theranos was making errors in excess of its own internal standards.

"I like that they're self-policing."

They have to be, by law. But you weren't concerned that they were sometimes several standard deviations off of where they believed they needed to be? Or that they didn't quickly inform patients when results were incorrect?

"There are plenty of customer service groups that don't respond to calls right away, and this is a small company. Maybe they were distracted because they're under attack. But, obviously, you need to be a really good communicator when you're a startup in the medical field, and that's something they'll learn over time.

Dan, you've been covering startups for years. They make a big impact on the world, make all of our lives so much better. When an industry gets transformed, people who work for the status quo have lives that get challenged. They will do whatever it takes to take down the source of the transformation. In this case, that Wall Street Journal writer keeps pounding away but there isn't anything there."

Much of his reporting was based on findings of federal regulators.

"Those regulators were compelled to go in there and find something because of the Journal."

But Theranos then voided thousands of its own tests. Isn't that an obvious admission of messing up with people's health?

"Voiding the tests was a business decision. Look, Tylenol once had to recall capsules because someone had been poisoning them. If things aren't working, you retrench and then return to market. Attacking a company like this is awful."

Would you at least concede that Theranos was sloppy?

"I don't think so. If it wasn't for all this I could have had a really nice trend-line of 50 blood tests, which would have been a great opportunity for me to have better healthcare. It's not something my doctor is doing."

You've said in this interview that the WSJ has a vendetta against Theranos. Leaving aside that Rupert Murdoch was an investor, why would it be out to get Elizabeth Holmes or her company?

"Well, they first say: 'There's a great woman entrepreneur and she's on the cover of Forbes. Let's see what we can do to take her down.' Then there are competitors who want to help take the company down and soon it becomes like the Heisenberg Uncertainty Principle, because the Journal is involved in the experiment so it's no longer a pure experiment. By continuing to publish negative stories about Theranos, it created negative effects. It's like that old thing when NBC News caused a truck to catch fire -- it's the press creating a series of events that negatively impact technology, progress and our economy. And [Carreyrou] ends up getting $4 million."

But that's not the reporting chronology, according to Carreyrou. He says a disgruntled employee came to them.

"Oh, a disgruntled employee. Well why was he disgruntled? Could that be why he decided to attack the company?"

He was the grandson of a board member, and believed there were serious problems with what was happening in the Theranos lab. Have you read the piece about that?

"No, I haven't."

Can Theranos survive, and would you invest again if given the opportunity?

"Sorry, I only had 30 minutes for this and really need to go."

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One big caveat: Russia is known to create false intelligence reports to sow confusion in the U.S., and Kislyak may have exaggerated his meetings.

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What to know about Anthony Scaramucci

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Today, Anthony Scaramucci was appointed as director of communications and Sean Spicer was kicked off the team. Here's some fast facts about "Mooch":
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  • He graduated from Harvard Law School and got his undergrad in Economics at Tufts University.
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  • Last November, he joined Trump's Presidential Transition Team Executive Committee.
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Sarah Sanders replaces Sean Spicer as press secretary

Lazaro Gamio / Axios

Deputy Press Secretary Sarah Sanders briefed reporters on-camera (for the first time in 22 days) following Sean Spicer's resignation from the White House. Sanders then brought Anthony Scaramucci, the newly appointed WH Communications Director, up to the podium, where he announced that Sanders will replace Spicer moving forward. "The president loves Sarah. He think she's doing a phenomenal job," said Scaramucci.

Highlights from Friday's on-camera briefing:

Anthony Scaramucci

  • Spicer's resignation: "Sean is a true American Patriot...I love the guy, and I wish him well. I hope he goes on to make a tremendous amount of money."
  • On rumored tension with Reince Priebus: "I don't have any friction with Reince... we are a little bit like brothers... we rough each other up once in a while... I have no problem reporting to him."
  • On friction with Bannon: "I have a huge enormous amount of respect for him... He's got a strong personality. I have a strong personality...I want to keep my ego low and work with Steve Bannon as much as I can."
  • WH infighting: "If we have a little bit of friction inside the WH... it's OK, we can deal with that, I'm a business person, I'm used to that."
  • Trump's performance as POTUS: "I think he's got some of the best political insights in the world, probably in history." He later added, "He's a winner. We're going to do a lot of winning."
  • On Trump's claim of 2-3 million fraudulent votes: "If the president said it, there's probably some level of truth to it."
  • Most repeated line: "I love the president."
Sarah Sanders
  • How is Spicer feeling? "He understood that the president wanted to bring in new people... and he thought it would be best for the team to start with a totally clean slate... he's served the president loyally and admirably."
  • Trump pardons: "The president retains pardon authority as any other president would, but has no plans."
  • Does Trump have confidence in Mueller? "I don't have any reason to see otherwise."
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The last three months brought record-high lobbying spending from four major tech companies:

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What they're requesting: emails, text messages, notes, voicemails, and any other documents about that June 9 meeting, as well as any communications about it since then.

Why this matters: This notice further confirms Mueller and his team are investigating Trump Jr.'s meeting, which was first suggested when he requested an interview from Ike Kaveladze, the 8th person who was revealed to have been in the meeting. And Axios previously learned that Trump's legal counsel advised him to avoid any discussions of the Russia probes with Jared Kushner, ultimately as a way to protect Trump since Kushner is so wrapped up in them. This all suggests the Russia probes are getting closer to Trump by way of those who are rather close to him, ultimately making it harder for him to avoid addressing.

Part of the letter, per CNN:

"As you are aware the Special Counsel's office is investigating the Russian government's efforts to interfere in the 2016 presidential election, including any links or coordination between the Russian government and individuals associated with the campaign of Donald Trump. Information concerning the June 2016 meeting between Donald J Trump Jr and Natalia Veselnitskaya is relevant to the investigation."
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Reince Priebus and Anthony Scaramucci told the White House comms team earlier today that they were old friends and have known each other forever. While the length of their relationship is a fact, Reince, with the support of Steve Bannon and Sean Spicer, tried to block Scaramucci from getting the job, telling people he was woefully unqualified for the position.

At a 10 a.m. meeting this morning, President Trump offered Scaramucci the job as White House Communications Director.

Spicer quit after that meeting, according to the NYT's Glenn Thrush.

  • "This was the last straw," said a source close to Spicer. The objection of the press secretary and his allies was that Scaramucci would hold the title, while Spicer would be expect to continue to carry out many of the duties related to strategy and planning.
  • "Sean was going to be expected to serve as press secretary while also being the quasi-comms director," the source said.

After the Oval Office meeting: Spicer, Priebus and Scaramucci stood in a row behind Sean's desk in the corner of the press secretary's office. A wall of TVs playing cable news was in the background. Some 40 staff gathered, according to a source in the room.

Spicer started off:

  • "A lot of you are hearing the news, and I want you to hear it directly from us."
  • He praised Scaramucci, said he's a fighter and can do a great job. Everyone applauded for Scaramucci.
  • Spicer added: "I want you all to be the first to hear that I told the president that I'm going to step down, but that I'm going to be very involved in the transition to make sure that Anthony can be very successful."
  • Sean framed the decision as wanting to give Mooch a clean slate.
  • A source in the room said he was very gracious about it, and everyone applauded for Sean.
Reince: "The president had decided to bring Anthony in, and it's going to be a great thing, he's a self-made man. He knows what it takes to run an organization... has built several businesses.... it was a great choice...."
Scaramucci's comments, after praising Spicer and the comms team:
  • He and Reince have a long relationship that started at a Koch brothers conference.
  • He'd actually tried to hire Reince to be COO with ownership stake of Skybridge, the firm he sold while waiting on a White House job.
  • They've worked closely together since the Romney campaign.

What's next: Scaramucci will spend the next week transitioning into the role and meeting his new staff.