Notes for TWiST ep.619 — News Roundtable! Marketplace’s Molly Wood & Guardian’s Nellie Bowles: Theranos, LinkedIn, Yahoo, YC

Nelly Bowles, Guardian and Molly Wood, Marketplace

It’s news roundtable edition again at ThisWeekInStartups (Ep. audio, video links) where host Jason Calacanis discusses with journalists what’s on the news.

Todays journalists are Molly Wood, formerly at CNET and The New York Times, now senior tech correspondent at Marketplace and Nellie Bowles formerly at The San Francisco Chronicle and Recode, now at The Guardian.

They cover several topics: Theranos and the need for biotech-specific FDA regulations, the state of financial markets and Linkedin’s and Yahoo’s free fall of market value, the war of Ycombination on other incubators and what Jason thinks of DemoDay.

In a nutshell: they let their favorite investors meet with the graduating startups privately before Demo Day, front-running the market. The top 10 companies get funded before Demo Day, leaving the less interesting startups to the rest of investors.

You should really subscribe to TWiST podcast not to miss any more of these nuggets.

Theranos

• Molly Wood spoke with the guy that runs the digital tech office for the FDA advise them on policy
• The culture of disruption was fantastic when it was about video games, email, chat and productivity apps, it’s not when it comes down to blood testing and human health
• When it’s about bio tech, human lives are on the line and you can’t have the same “move fast and break things” approach
• New policies for it are required, new regulations for the biotech industry are needed, it can’t be left to self-regulating startups with dubious ethics
• Nellie Bowles recently went to a big biotech event for biotech startups and it was a crazy party with lots of drinking
• Biotech is a sector where there’s still silly money from investors who don’t really know what they are doing and what’s real and what’s not, even if the tech sometimes is there (they aren’t all charlatans, but it’s hard to tell if you don’t have the expertise)
• You can understand a lot about how good a startup is by looking at who’s investing in it
• If the investors are not investors who usually invest in biotech companies and know what they are doing, it’s not a good sign
• Theranos is an example of that: all kind of people investing and on the board (e.g. Henry Kissinger) but none with a background as investor in biotech
• Only Tim Draper from SV, the rest came from private equity firms
• There’s a god complex in SV: investors believe they understand everything, no matter the field, just because they had success in their field in the past and were probably quite lucky
• The FDA raised concerns when they visited Theranos labs but went ahead anyway, with that God Complex of know-it-all-we-are-going-to-change-the-world
• Journalists went along with it, giving Elizabeth Holmes first cover after first cover
• The press loves charismatic people to slap on their first covers, without questioning whether the science backing their product is legit — they don’t have scientific backgrounds to go deeper and the funding to do research so they are basically rewriting press releases
• Entrepreneurs are sometimes too arrogant: they do a party round, everybody invests 50k and nobody gets on the board cause they don’t want a board or giving up control, they don’t want supervision until they realize they are getting nowhere and regret not having somebody to discuss issues with and ask for help
• Matt Galligan’s (CEO and founder of the shut down Circa) #1 regret: not having a board
• Entrepreneurs sometimes need more adult guidance to avoid sad endings
• When Jason invests in startups, in the papers founders sign he has the right to request any data (Google Analytics, Itunes etc) from the company at any time

Sheril Samberg

• She will run for the presidency of the United States of America, eventually (Jason)
• She wrote a book, did a tour and her staff has often been described as a campaign staff
• He would love to see her or Bloomberg as president/vice president

Bloomberg

• He’s so loved in SV cause he is a “get shit done” guy

Ycombinator vs other incubators

• Ycombinator has always had a sharp elbow/bullish approach with VCs: if you don’t like how they run things and you speak your mind, they say “maybe you shouldn’t come to Demo Day”
• Ever since they have been accepting more and more companies after Sam Altman took over, the lower the quality of those company has gone down
• They are having 120 companies per cohort now, receiving less attention from the top partners than companies used to get when there were less going through the program
• Demo Day is now over 2 days, each company has 2 minutes to do the pitch
• They have also raised a continuity fund for later stage rounds and VCs feel threatened by that, especially due to the evaluations they are demanding for their companies
• It looks like they want to play the game by themselves
• They say “If you go to another incubator, it decreases your chances of being accepted at YC. If you don’t get in, you should try again and wait”
• They don’t want you to go to any other incubator, even if they have taken people from other incubators
• It messes up the cap table for them, 7% has already been taken by other incubators (Jason’s or McClure’s for example) and they don’t want to come second, they want it all
• You don’t need to go to YC to be successful: total public value of YC companies is 0
• It just gives you a bit more of exposure, but the rest is on you

Jason’s reason for being a successful investor

• He’s not smart
• He’s just a good networker and people knows him thanks to the podcast
• He’s the #1 angel investor in world and when he’s at Demo Day people get in line to talk to him
• He’s doing YC combinator a favor by showing up, not the other way around

YC front-running the market

• He knows YC let some investors invest in the best companies before Demo Day
• He wants to get the same treatment and not like everybody else and fight for the left-overs at Demo Day when the top 10 companies have already been funded
• If you are a YC founder and want to get coffee with Jason to discuss options, just email him at jason@launch.co

Linkedin

• It has lost 40% of its market share value in a day (10 billion dollar of cap lost)
• The market is so spooked that a crash is imminent that any sign of weakness is a trigger to sell
• The product is annoying (Molly)
• If you using it to hire people and are power user, you can’t get to the customer support if you have a problem and when you do, they can’t solve it
• The customer service is bad
• Linkedin stories from influencers are good
• They are improving the UX of the product, the smartphone app is better
• The reason why it dropped so much: no growth is a sign of weakness in today’s climate
• Investors are used to phenomenal growth, they don’t want hold stock for value but for growth

Amazon customer support

• It seems you can now call them and the customer support is great (Molly)
• They have an american call center, a nice lady fixed a change of address for her product delivery

Twitter

• They have money and influence, but no growth
• There has been talks for Twitter to be taken private (same with Yahoo)
• Facebook has money and growth, but no influence — journalist and celebrities don’t want to be on that platform
• If you are a power user on Twitter, you get a different experience from the common user

Yahoo

• It keeps losing market value
• New strategy: invest, maintain, kill
• Former male employees filed a lawsuit against Marissa Mayer for being fired and discriminated against women, the CEO was too preferential to female leadership (even if men and female leadership have left Yahoo)
• She’s failing at Yahoo, even if she started good and the morale was high
• People say she should have been more focused on entertainment and media but they forget that she was brought on to step away from that
• The focus she should have had from the get-go was on the products and become a product company (email, mobile apps)
• She was good at it for a while, then liked to be on the media and kept the media alive, without focusing well neither on media and the products
• Now she’s finally killing the media
• It’s easy to criticize but it’s hard to change the DNA of a company

The city of San Francisco

• It spent 5 million dollars of taxpayers funds on Super Bowl activity to make the homeless disappear
• Ed Lee’s staff, San Francisco mayor’s staff, is said to have been taken bribes and involved with a convicted gangster in China Town, Shrimp Boy
• The corruption in SF has always been epic, ever since the gold rush
• The tech industry must be taking part in the corruption
• The city isn’t doing fine: the infrastructures are decaying, the streets are a mess, public transportation system is bad, no way to move people around
• Second or first most equal city in America
• Still better than it was years ago in some areas
• Cops aren’t allowed to put people in prison for petty crimes or misdemeanor crimes anymore, they just give them a ticket and they are out, getting away with stealing
• They could build more high rise buildings for condos to increase the supply of housing but big landlords have duped the social activists into believing that luxury condos will gentrify it

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