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A rare situation where everyone feels like they came out ahead. The us govt gets to say they clawed back 7bn in taxes. And rentec gets to keep the gains from having invested the 7bn for close to a decade at their absurdly high rate of return. Smart!
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Yeah if that is true then the business is inherently unprofitable and they are just playing accounting gimmicks to obscure this simple fact.
Does anyone understand what goes into Ubers sales and marketing expense? It appears they are spending roughly 500mm a quarter on this line item which is enough to eat up most of their entire gross profit. Are their high Sales and marketing costs a function of their high driver churn?
I'd be shocked if RH can eventually launch this product in any form. People on HN seem to think its a marketing issue, but it isn't. The problem with the product is much deeper.
The core issue is that there is no way right now to provide savers with a 3% risk free interest rate. 1 year treasuries for e.g are at a 2.7% yield and that assumes you lock up your money for a year. Basically, their "novel" idea was to supplement the rate they would theoretically be getting from investing your money in t-bills with interchange revenue. But the interchange revenue wouldn't be a sure thing. It depends on the behavior of the customer. This in turn means that they would have to just pay depositors out from their VC money until they attract that type of customer that could support their interchange revenue assumptions.
There is a good reason that ideas like this are strictly regulated. If I could just set up a company and promise main street investors a guaranteed return based on my rosy view of the world, a lot of people could end up hurt. I'd be shocked if the product, after they finally launch it, offers any of the features that attracted people to the offering in the first place.
At the minimum they'd have to change their name and probably do a huge down round if they need to raise more money.. Also, is the CEO really going to want to run a traditional lab that has little competitive advantage over their competitors? Doesn't really fit into her ideal of making the world a better place. Are any of the board members going to want to stay on and take responsibility for this train wreck? People like Kissinger, Schultz, etc have everything to lose and little to gain from being on the boards of controversial companies. They are mostly concerned about their brand and legacy above all else. I don't think it looks good for them
Good place to make sure you aren't asked any hard questions.
This seems to me to be the most premise summary of what likely happened. Startup raises a ton of money for a new model that isn't ready yet.. so they use existing machines to fake it till they figure out how to get the Edison machine to work. Not terribly dissimilar in some way from jet.com just buying goods you ordered off of other sites and paying for the difference, in hopes they can test the market, build a brand and eventually make their model work. Problem is that it isn't obvious that scale helps you reach the ultimate goal here (unless you reason that more money/longer runway = higher likelihood of success). Unfortunately for Theranos, actual lives are at stake here and there is a lot of regulation in the medical space for good reason.