Controversy Puts Silicon Valley's Unicorns Under Further Scrutiny
Theranos was supposed to change the way healthcare worked. Instead, controversy at the firm has changed the way some investors are looking at the company and others of its ilk—the so-called "unicorns."
In the case of Theranos, the company was supposed to change the way people received medical tests, making them cheaper, faster and better. The process uses drops, "finger pricks," of blood rather than vials drawn by needle to support an array of more than 240 tests. An investigative report on the company last week called the viability of the tests into question, though Theranos leaders stand by their claims.
"Unicorns" are those companies venture capitalists value at more than $1B. Once rare, there are now about 142 in existence. Theranos is actually nine times a unicorn, valued at $9B. Some of these startups have been successes, such as Uber. Others have failed to live up to expectations or simply failed.
All this adds up to create a risk bubble for Silicon Valley companies that have high hopes but are operating at a loss. The good news? If this bubble bursts, some say it will likely be venture capital that takes a hit rather than the average investor, since these companies are still privately held rather than publicly traded. That might buffer the economy a bit. [Guardian, WSJ]
