Let’s nourish Nilgais – Indian and sturdy – among start-ups, not Unicorns

Known Unknowns

“A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel,” is a comical and nonsensical quote attributed by the New Yorker to the now disgraced Stanford dropout Elizabeth Holmes, the CEO of the shuttered Silicon Valley diagnostic company Theranos. In 2015, I spent some time studying the start-up ecosystem in the Valley. I had come away underwhelmed by the quality of the Valley start-ups, and even the much-touted Stanford academic ecosystem did not impress. What was to applaud was the entrepreneurship spirit and the flow of money in the Valley. The Indian start-up ecosystem draws inspiration from the Valley and its heroes. However, the focus on Unicorns and valuation rather than on revenues and profits is a ‘pandemic’ that the Indian start-up ecosystem should nip in the bud. Also, wearing the ‘dropout’ tag as a badge of honour is passe.

Holmes goes on trial this month, charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud. At the core of the charges is that Holmes misled investors, patients, and doctors about Theranos’ ability to conduct hundreds of blood tests with a single drop of blood. Holmes is a prolific inventor, with close to 200 granted patents in bodily fluid analytics through point-of-care and distributed services. She was able to convince investors, including Rupert Murdoch, the Walton family, and former secretary of education Betsy DeVos’ family, each of whom put in more than $100 million into Theranos. Holmes had a board of directors that included two former Secretaries of State, two former Senators, a former director of the Centres for Disease Control and Prevention, retired senior military personnel, and former CEOs of major corporations. Holmes is said have been doing the standard Valley routine of “fake it till you make it”.

Founded in 2003, the Theranos story came unravelling in October of 2015, but probably was being orchestrated from much before. From whistle-blower employees to keen journalists to awakened regulators, winter was upon the company that Holmes built. The company had sold a vision without an engineering backing. Inventions did not translate to market innovations. Most importantly, the company allegedly resorted to falsifying test results to keep the momentum building. At the end of the day, with $750 million of investment and a $10 billion valuation, Theranos had built nothing that worked.

The Indian start-up story is just unfolding. It would be opportune to take lessons from successes and failures from across the world. Unicorns are companies with a valuation of $1 billion or more. Many Unicorns’ valuation is simply the investment multiplied by 4, much like empty calories, with no basis in revenues and profits. In India, it would be great to focus our start-ups on reaching the first year of $50 million in profitable revenue (not valuation). These companies should be called the Nilgais – Indian and sturdy.

(The author, the former CTO of Tata Group and founder of AI company Myelin Foundry, is driven to peel off known facts to discover unknown layers. @Gkatragadda)