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Theranos CEO Elizabeth Holmes Finally Faces Criminal Charges

It's been some time coming, but the CEO of Theranos is finally facing criminal charges for fraud, as the WSJ's Carreyrou repor...

Sunday, June 17, 2018

Embarrassed and Disgusted

Don't like politics? Or swearing? Don't read this, the usual Theranos/tech stuff is here.


Being both British and American, I've joked for the last two years that I am embarrassed by my government on both sides of the Atlantic, but it's not really a joke. I'm truly embarrassed, and disgusted by them both. I thought Britain was out in front with the self-harm of Brexit, and then shot into the lead with the Windrush scandal. For the Americans here who don't know, that's when the "hostile environment" policies of the Home Office, primarily to appeal to the racism of a segment of the British electorate, resulted in British citizens being deported to countries they had either never been to, or not been in for most of a century, because they couldn't find ridiculous amounts of paperwork for every year of their life from 1973 on (the same Home Office had destroyed the relevant govt records a few years prior, so sad). But this week the US takes the lead with a deliberate policy to separate children from parents at the border, even when claiming asylum. The administration seems torn on whether to gleefully claim it such as with Miller, "God says to do it" from AG Sessions, or pretend and deny that it's even happening like Sec Nielsen. Whatever, it's clearly part of a policy to appear tough, traumatize kids, "trigger the libs", rile up the base with xenophobia, use children as bargaining chips to get a pointless wall paid for, and keep America from becoming less white.

Democrats can apparently end this if they just will bow to Trump's demands. We're literally at the "I didn't want to hit the kids. But you made me hit the kids because you didn't do as I said." stage of this administration.

Oh but wait a minute, Obama did something like it too, didn't he? That significant change in policy was years ago, not last month? Ah, well in that case it's all OK, isn't it? No it's not, and if you want to defend this type of policy with what-aboutism then fuck you. Trump seems determined to destroy anything Obama did, from the PPACA, through the Iran deal, to the Paris Climate Accords, but apparently on this there is just nothing to be done.

It doesn't matter if anyone did it before, it's happening now. It's not a requirement of law, but a choice of the administration to enforce in this manner. It could be ended immediately, but it isn't going to be, because this brutality is the goal, the purpose of this action. We're separating families and then brutalizing the kids, and sometimes deporting the parents without the kids. Kids upset and want to hug their sibling? No, not allowed. Tell kids their parents are dead? Tell parents their kids are lost? And conditions so bad there are reports of suicide? It's disgusting.

I've been lectured multiple times by Republicans these last two years that people have a "values matrix" and I don't understand that they value things differently (and the clear subtext always is "better"). First of all, is that a talking point somewhere because I've had a ton of folk hit me with that? Second, so your values are destruction of families, degradation of the national discourse, removal of healthcare benefits for most, support for dictatorial regimes, alienation of allies, destruction of the western alliance, and child marriage, or are they all worth it for a tax cut for the rich and a few judges? You know you can call yourself a Republican and not support Trump or this type of policy, right?

Democrats like me are just sore losers, don't understand what real Americans are. Except I'm not a Democrat, there seems to be a thinking in the US you can only me a member of one of two tribes. And I am an American, same as any whether it's from a big coastal city, or slap bang in the middle. Every American is a real American.

Don't like what I'm saying? Report me to ICE. They're the new force to intimidate if you don't like what someone is saying. Want to travel on a bus? Better be a US citizen (and white, let's be honest that will help a lot there). And it seems they're up for deporting green card holders who've been in the country for 50 years, and are now coming to take citizenship from naturalized US citizens who have filled their forms out incorrectly. What, they won't ever abuse that type of power and I'm overreacting? I'll point you to the above Windrush issue where that's what happened, and people born in the UK who had never left the country were getting deportation letters (even when they are white!). Trust a bureaucracy to deal with that correctly? On a zero tolerance, potentially life-or-death process? Have any of you ever been to a DMV? 

And why does the news just keep showing boys in these detention centers? Where are the girls and the babies? You know, the 'valuable' ones. If I start hearing that some lovely white Christian families are selflessly adopting the cutest of these kids to 'help', and sadly the parents get deported without them, then that's truly some Handmaid's Tale shit right there.

And for the selfish among you who still don't care, you do realize that eventually they'll come for you too? That to protect yourself, protect the weakest among us. Those without voices, those easily targeted, those that the powerful would demonize. If a society looks after the weakest, everyone is protected.

When I became a US Citizen, I was aware of the darker side of our past, but still believed in the ideals of the nation. To become a more perfect union. This is not the country I became a citizen of.

Everyone proud of their country today? 

Saturday, June 16, 2018

Theranos CEO Elizabeth Holmes Finally Faces Criminal Charges


It's been some time coming, but the CEO of Theranos is finally facing criminal charges for fraud, as the WSJ's Carreyrou reports here. The indictment is a well-written history of the company and distills down to a few pages the scheme to defraud investors, doctors, and patients. The charges focus on Wire Fraud occurring between late 2013 and mid 2015, and of the 11 counts of Wire Fraud, one is for the defrauding of investors, one for defrauding of patients and doctors, six are for monetary transfers from investors, one for payment to advertisers for their products, and two are for wiring of patient blood test results. The pair face up to 20 years in prison, $250,000 in fines, restitution to the defrauded, per count. Holmes, and co-defendant COO Balwani, have both plead not-guilty to all charges.

Holmes settled civil charges with the SEC for "massive fraud" a few months ago, and some were upset that she was allowed to settle for a seemingly small fine ($500,000) and a  10 year ban from being a company director. With the latest charges, Holmes has stepped down as CEO, but somehow remains the board chair at Theranos. I've felt for some time that Holmes was going to jail for what she'd done, and that while the wheels of justice turn slow they grind exceedingly fine. I have the feeling up to 220 years in jail is a pretty smooth paste...

Wire Fraud is a common charge in such cases as it is relatively straightforward to demonstrate as interstate (for federal jurisdiction) and has been upheld by the Supreme Court as quite broad in covering "everything designed to defraud by representations as to the past or present, or suggestions and promises as to the future." Other courts have expanded this to "puts its imprimatur on the accepted moral standards and condemns conduct which fails to match the 'reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society'".

Reading that wording, it's surprising and refreshing to see that 'caveat emptor' does not necessarily apply and that there is the expectation of fair dealing and honesty, even about the future. When discussing cases of fraud by startups, I often hear push-back that "everyone exaggerates", "they must have really believed so it was OK to exaggerate", or "well it's within the wording of the law even if they knew it was wrong". While startup and VC mentality may still accept that "fake it 'til you make it" is the norm, as with the SEC charges earlier this year, the law is making it clear that this is not legal, and that exaggeration as well as outright falsehoods are illegal

“The Theranos story is an important lesson for Silicon Valley,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.  “Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”

The federal charges against Holmes and Balwani make this even clearer, with wording like "obtaining money... from investors... by means of materially false and fraudulent pretenses... and material omissions with a duty to disclose". If you know it won't work, and fail to disclose, that's going to come back on you too - it's not just what you say, it's what you don't say. Energous, in my opinion, are another example of this type of fraud, where they deliberately create confusion to sell people the hope of at-distance wireless charging, when they know the promised future will never come.

Next standout statement in the indictment, at least to me, was "represented to investors that Theranos did not need the Food and Drug Administration ("FDA") to approve its proprietary analyzer and tests". Given that so many startup companies rely on regulatory arbitrage, that is bypassing existing regulation "because it's tech", and operate in some very grey areas (see Uber's history), companies who have claimed to investors that no regulatory approval would be needed might want to rethink that kind of statement unless they are very, very sure.

One of the last aspects of the "scheme to defraud" that the indictment raises is "represented to members of the media for publication of the false and misleading statements described above, and shared the resulting articles with potential investors both directly and via the Theranos website, knowing their statements to members of the media were false and misleading." So exaggerating/lying to the press then using those articles as part of your fundraising is part of a fraud case? I've repeatedly argued that this behaviour is fraudulent and told that it is not, I'm glad to see the US Attorney agrees. Some startups may want to review their media strategy.

I don't think Silicon Valley have really internalized this yet, and will find ways to make Theranos an exception. How many more Theranos style cases do we need until there's no more denying that they are not the exception? While Holmes' behavior was particularly egregious, to me it was an inevitable outcome of a system that through funding bias regularly selects for the most morally-flexible personalities in their founders. If by funding choices you prefer your CEOs to be liars, don't be surprised when they lie.

I hope that this might be the start of at least some people realizing that if they heavily exaggerate, or try to fake it 'til they make it, regarding investors and customers, that it's not "being an entrepreneur", it's fraud. That being said, until those providing the funding alter their metrics to favor the honest, I don't expect to see any major changes.

For those wanting to read more on Theranos, I can highly recommend John Carreyrou's book "Bad Blood", my review is here.

Friday, June 15, 2018

Theranos: Holmes Fundraising for New Company, and Sociopathic Founders?

There was other Theranos news this week that was overshadowed by the indictment, coming in the form of a Vanity Fair article by Nick Bilton. In it he reveals that disgraced CEO Holmes is currently doing the rounds of VCs in Silicon Valley pitching her next startup, even before her existing company goes under. Yes, you heard that right. Despite everything, she's still actually getting meetings with investors willing to listen to someone with her reputation. Now, I have to admit that if I were an investor, and I got a pitch from Elizabeth Holmes I'd be tempted to meet her in person to see what she was like, even if I had no intention of funding anything - however when there are VCs like Tim Draper who still are convinced that Theranos would have succeeded if it hadn't been for those pesky journalists, you know at least some of them are genuinely interested. Beyond that, imagine the thinking of someone who just settled with the SEC for fraud, with an imminent fraud indictment, who can go out there and straight faced ask for investment.

Bilton hits on a couple of key points that I've been trying to raise in this blog - first that the way tech media, investors, and startups interact is broken and encourages dishonesty and malinvestment. While Theranos is presented as a particularly egregious example of a Silicon Valley startup misdeeds, anyone who has been involved in the scene for more than a few years can recognize many other companies in what happened. It is not an outlier, it is an inevitable consequence of the system of financial rewards that benefits the least scrupulous. To quote from the article:

"You would think that seeing Holmes’s duplicity wrapped up in a neat bow in Carreyrou’s book, and in the S.E.C. settlement—which, incidentally, mentions the term “fraud” seven times—would force Silicon Valley to perform its own due diligence, and question whether the way C.E.O.s, investors, and the media interact should be re-evaluated. But alas, the tech world doesn’t see Theranos as a tech company, but rather a biotech outlier. In Silicon Valley, you can be sure that the company that should have changed everything about the way business is run will actually change very little. The majority of the tech press won’t ask tougher questions of Zuckerberg or Musk; they’ll simply continue to fawn over the idols of the business world. Whatever they say must be true."

Traditional VCs are saying that they didn't invest in Theranos, and they are right in that, much came from wealthy family foundations, but the entire "myth of the founder" and ecosystem that each is partially responsible for birthed this monster. The tech press, who put her on the cover of magazines and called her "The Next Steve Jobs" simply didn't do any due diligence of their own, and blindly accepted her word without even bothering to call their local university biotech prof for a comment. You are starting to see, though, an increased skepticism in at least some of the press, with the better journalists and publishers questioning that bit more, after all who wouldn't want to be the next Carreyrou? 



The second point Bilton raises regards the character of those founders who receive the most funding and coverage - the go-getters who sell incredible visions and struggling against reality to deliver the future, or the snake-oil salesmen peddling dangerous cures for their own financial benefit - depending on individual case and your viewpoint. In the case of Holmes and others accused of fraud, what does it take to do this over multiple years?

In his book "Bad Blood", Carreyrou says of Holmes "A sociopath is often described as someone with little to no conscience. I'll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there's no question that her moral compass was badly askew". While he goes on to say he believed she started the company with good intentions, it soon became evident there was to be no compromise in the vision, even to reality. "Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it." I'm not sure how else you can say that there is no conscience and guilt over the consequences of a person's actions. In his interview with Bilton, Carreyrou is a little more blunt: "She absolutely has sociopathic tendencies".

I think those of us who are "normal" simply want to dismiss that anyone could act that way, and there has to be a logical explanation for why they acted like that. Someone may set out with good intentions, but they are not made into a sociopath by the events in their life, their reaction to those events and their ongoing actions reveals their sociopathy. It's what they always were, it's just they're now in a situation that makes it obvious, compared to simpler times when the natural urge to think well of people lets us pretend they are a decent person.

Given how quickly Holmes showed a consciousness of guilt, it's clear to me these personality traits were already there. In "Bad Blood", the prologue relates that in 2006, less than three years after the company founding, CFO Mosley bluntly stated to Holmes "We've been fooling investors. We can't keep doing that." and for doing his job she immediately fired him. There are countless other examples where it's clear she knows she's doing wrong. Perhaps she believes that in the end she'll be proved right and that the end justifies the means, but that still doesn't absolve her of her wrongdoing. Regardless, she was this way at least 12 years ago, it is not a recent change.

While we've been talking sociopathy, I'm going to lay out an alternative lay-person diagnosis. Take it as my opinion, my Ph.D. is in engineering, not psychology. Bilton's article has a key quote:

“One person in particular, who left the company recently, says that she has a deeply engrained sense of martyrdom. She sees herself as sort of a Joan of Arc who is being persecuted,”

Now this may be a mask she wears to fool others, but I think this is a narrative that she has developed to explain her actions and justify them to herself. Everyone is the hero in their own story, and needs that narrative to define their life and why they are not the villain. From when the first stories broke on Holmes in 2015 the response was "misogyny", and even today her backers such as Draper claim persecution. A sociopath, typically suffering from a lack of empathy, simply wouldn't care. They might use such stories to provide cover for their actions, but not actually believe them. A person with other psychological issues, but not sociopathy, would build an elaborate tale of persecution to validate themselves rather than admit their wrongdoing. If any such issues are to be looked at, in my opinion it's the various parts of Personality Disorder Cluster B. According to the American Psychiatric Association, it is possible to meet the criteria for multiple disorders. Highlighting the four cluster components:

  • Antisocial: a pervasive disregard for the law and the rights of others.
  • Borderline: extreme "black and white" thinking, chronic feelings of emptiness, instability in relationships, self-image, identity and behavior often leading to self-harm and impulsivity.
  • Histrionic: pervasive attention-seeking behavior including inappropriately seductive behavior and shallow or exaggerated emotions.
  • Narcissistic: a pervasive pattern of grandiosity, need for admiration, and a lack of empathy.

Someone who has a disregard for law and others, sees in extremes, attention seeking, grandiosity, and a need for admiration. Does that sound familiar? Now you can still make a case for either, but for an attention seeking, billion dollar startup founder, the narcissistic trait in particular is too good a fit, and one that seems to be pretty useful in raising money.

Delusional Investors: Theranos Edition

If you want to see Tim Draper, early Theranos investor, defend Theranos against all reality, just watch this interview. It's about 11 minutes long, and he comes out with multiple statements that are flat out wrong. To capture just three of them:
  • The SEC charges were based on innuendo: False, the SEC charges were detailed and Holmes settled them. She was accused of "massive fraud" and the SEC were very clear about that.
  • The SEC has no authority to regulate non-public companies: False, the SEC absolutely have authority to enforce fraud laws on non-public companies. To quote “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”
  • Carreyrou's book Bad Blood is nothing but lies: False, read the book and his articles, they are meticulously researched with detailed interviews and documentation. Had they been malicious lies, Theranos and Holmes would have had an exceptionally strong case to sue for libel.
  • Theranos had a viable product, it was just 'beta': False, not even close. They never had anything even close to working at a level acceptable for medical diagnosis.

This is the guy who is campaigning to split California into three states, which makes as much sense as Theranos being a viable company. I'm not sure if he still genuinely believes in Holmes, or just so unwilling to admit he was a mark in a con that he's doubling down.

There's another similarly crazy interview here

Sunday, June 3, 2018

Wireless Power Consortium: Aristides Capital on Energous - Still Not Looking Good

Earlier today Christopher Brown of Aristides Capital gave a presentation on "The Six Billion Dollar Watt: Promise and Problems of Wireless Charging 2.0" at the Wireless Power Consortium meeting in Quebec. He continues to focus on Energous and his opinion of them has not improved since last time. You can find the WPC page here with direct download here and a simple PDF of it here. It's similar to, but updated from, a talk he gave a few weeks ago at a short selling conference that can be seen here. Here's one of my favorite slides from it, highlighting the "Time to Carrot" where Energous have been pushing out product delivery to around 18 months away for four years.


I'm hoping that the Wireless Power industry is finally getting its act together and realizing that if one large well publicized company generates bad press, it's terrible for them all. If the overall industry speaks together to denounce what Brown straight out calls "fraud", then the mainstream media and large investors may finally take notice and give Energous and the like the coverage and treatment they deserve.

Tuesday, May 29, 2018

Bad Blood: The Story of Theranos


As long time readers of this blog know, Theranos is a company I've been covering since my very first post over two years ago. I'd been somewhat familiar with them since around 2013/14 - living in Silicon Valley and knowing many people in the biotech business there had always been rumors floating around as to exaggerated results and occasionally even faked demos. They were such an extreme example of what I've seen in startups over the last ~20 years they were a perfect vehicle for my blog to help highlight what was going on. 

The Wall Street Journal's John Carreyrou had reported 'questionable practices' at the company at the end of 2015, and despite heavy handed legal threats and constant denials by Theranos, things quickly started to unravel for the company and it's expected that the company will be bankrupt this summer, with possible criminal charges for the CEO, Elizabeth Holmes, to follow. Carreyrou has now written a book about Theranos called "Bad Blood", and covers the company's founding through to the present day. It was originally scheduled to be released later this year, but brought forward several months due to the impending bankruptcy of the company.

While I have followed Theranos closely, and know the facts of what's been happening better than most not directly involved, this is still a fantastic book that I both enjoyed and learned a few new things from. Despite it being a complex story of technology and finance, Carreyrou breaks it down in a straightforward way that anyone can follow, regardless of background. No need to understand tech or funding mechanisms - as long as you know what cheating, lying, and bullying are then you'll follow along without a problem. It's also Silicon Valley in a nutshell, and on almost every page there was something that reminded me of my own personal experience in startups, or those of close friends. I'd highly recommend it to anyone with even a passing interest in the story.

What I came away with was not what I was expecting though. I had thought that Holmes, and to a lesser extent, her boyfriend and company President/COO Sunny Balwani, would be the villains of the book, and the central characters it was built around. In the end, the memorable characters for me were the many employees who tried, over a period of nearly ten years, to draw attention to the fraud and dangerous actions of Theranos, even in the face of significant costs, both personal and financial. Many of them have suffered tremendous stress, such as through huge legal bills in the case of Tyler Schultz, or the death of a spouse through suicide in the case of Rochelle Gibbons. Despite threats of a lawsuit and being followed by private investigators, Erika Cheung wrote a complaint to the federal government that initiated lab inspections, shutdowns, and reports that sped the demise of the company. They didn't do it for profit, or because it was fun, or that they had an axe to grind, but because they knew what was going on was wrong, and someone needed to do something. Were it not for them, we'd be finding out about Theranos years later when people were dying through misdiagnosis and either lack of treatment, or incorrect treatment.

Even more frustrating was reading that those with the power to have done something failed to do so despite more than adequate evidence to do so. In 2008 the Theranos Board of Directors was warned of what was going on by both the head of marketing and the general counsel, yet something that would otherwise have had the CEO removed resulted in the removal of the whistleblowers instead. Many Board members of startups fail to take their jobs seriously, thinking it a once-a-quarter paid trip to California, and an important sounding line on their resume. Ultimately, they do have a fiduciary responsibility to the shareholders of the company, and I hope some of them see legal consequences for their actions - though I'm not holding my breath. Until that happens, I don't see the lack of oversight changing soon.

Senior management of both Safeway and Walgreens should also be ashamed of themselves - even when warned by their own due diligence consultant that something was very wrong with Theranos, Walgreens listened to Holmes and essentially had him removed. In any other deal I've ever been part of, should the person performing the due diligence be denied basic information and access then that would have been the end of the deal. Safeway spent $350 million doing up their stores with fancy "wellness centers" that were supposed to have been for Theranos - notice those nice wooden offices next to the pharmacies in your Safeway? That's what they were built for. They ignored the suspicions of their own chief medical officer and went on with the deal anyway.

Tech and business journalists also share some of the blame - like in too many cases, they simply accept the word of the company as to the state of their product and business, and fail to ask even basic questions. I've pointed out repeatedly on this blog how tech journalists are used in a 'whitewashing' of company PR, even when many experts are available to quickly debunk the most ridiculous of claims. It wasn't until Carreyrou came along that the serious questions were asked. Journalism like that doesn't come cheap though, and is a reason I subscribe to the WSJ, and I'd encourage you to do so as well.

Time and again the warning signs were there, and were raised by 'coal face employees' at all these organizations, only to be ignored by those at the top. Everyone looked at the glowing endorsements by the big names like Henry Kissinger or James Mattis, while ignoring the stream of people who knew what was going on and leaving their jobs in droves. Something I've always felt is that if you really want to know what's going on at a company, don't speak to the executive team or board, speak to the senior employees who actually make everything run - and if you can't speak to them because they keep quitting, then that's a huge red flag right there.

My first post on Theranos concluded with the quote below, and time has only strengthened my opinion:

"To be blunt - technology has gone beyond the capacity for most people to be able to comprehend, even some otherwise very intelligent and educated ones. That deluge of information 'overloads' most people and they fall back on the simplest of solutions - they look for authority figures who have already made decisions for them, or rely on the 'wisdom of crowds' and simply go along with the majority. Actual reasoning shuts down, and following that the idea that someone as smart and educated as you could have got it wrong just can't be entertained (or in the case of existing investors, ever acknowledged).

Something needs to change in how billions of dollars of funding, much originating from retirement funds, is distributed. The system is setup to reward certain behaviours, and good stewardship of this money, and the efficient application of efforts of thousands of workers to benefit our society, in my opinion are not among them. 

Theranos, and others like it, were simply inevitable and the symptom of a much deeper problem."

Theranos is all the flaws of Silicon Valley VC and startup culture bundled together and then cranked up to 11. Lives were ruined and even lost, over a billion dollars spent, and has it even changed anything? Even when federal agencies were admonishing the company for its practices ("massive fraud"), a VC complained publicly that was just the business model of every startup they'd been involved in. How many people have to die before some realize that funding a dating app is not the same as medical devices, and that lives are on the line? We'll see what criminal charges are forthcoming, but in the end the story of Theranos is just that of many Silicon Valley startups, "fake it 'til you make it", they just pushed it too far and got caught.

Monday, May 28, 2018

Powercast and Ossia

This blog spends a lot of time covering Energous, the RF based at-distance wireless power company, as in my opinion it's such a good example of how to manipulate the press, public, and markets with not much more than great PR and a willingness to be 'flexible with the truth'. In their own little world there's some competition from other companies essentially doing the same thing, in a technical sense. The most prominent of these are Ossia and Powercast.

I've been asked a few times about these companies and why I don't really cover them, and the basic reasons are these - they've not been blatantly lying about technical capabilities (to date, read on for some concerns), deliberately creating multiple product lines to confuse media and consumers, or funneling money from the general public straight into the pockets of the executives. There have been enough questions though that I wanted to clarify who these companies are, what they offer, and the (minor) technical differences between them and Energous.

Powercast



Powercast have been in operation since 2003, and have had an at-distance RF based wireless power system available and FCC approved since 2010. Like Energous they operate in the ~913MHz band, and the physics involved is essentially identical. They have a number of patents in the area. You can actually buy development kits to test them out, their website has detailed technical datasheets on all products, a simple but realistic spreadsheet for calculating actual power that can be delivered. The datasheets make it clear that they should be useful for wireless sensors and low power electronics, and never mention phones, tablets, TVs, cars, or any of the other ridiculous items other wireless power companies talk about. They don't spout techno-babble about "energy pockets" that they can't deliver on (like Energous' demonstrated inability to accurately focus in their FCC Part 18 filing).

The two product lines for receivers state up to 100 mW for the short range (over 2 days to charge a phone), and 10 mW for the long range (nearly 3 weeks for a phone), and that's maximum. More realistic is 1/10th of that, and that's reflected in the Powercast descriptions of 'microWatt to low milliWatt' levels. Powercast products are FCC Part 15 approved, which is the same rules under which your WiFi router operates - yes, it's that kind of power level we're talking about here. Could they get FCC Part 18 'unlimited power' certification? Yes, I think they could, and they might up their power output by a factor of 2 before all sorts of other safety limitations kick in. In practical terms Part 18 would buy them limited benefits with a number of restrictions, though clearly from the Energous buzz around their Part 18 approval it's worth a lot marketing wise.

So what does Energous have that Powercast doesn't? In my opinion basically nothing, except a marketing department willing to push the boundaries of truth, and an FCC Chairman willing to use his public position to promote a private company. Powercast appear to me to be a genuine engineering company, following all the rules and regulations, that has a product that you can buy, and are completely upfront and clear as to the technical capabilities and limitations. 

They may not have a desperately useful consumer-level product, but that's not to say it does not have its application. With regards to phones, if someone like Apple had wanted to, they could easily have made an offer that Powercast couldn't turn down and incorporate this tech into their equipment. But they didn't, and is a firm and clear datapoint that RF wireless charging isn't really viable in the consumer space. Powercast's website lists a number of design wins that may well have specific demands that make the technology appropriate for that case. I can see it being used in industrial settings, charging large numbers of extremely low power sensors in awkward to reach locations. They mention RFID on their site, and it seems like a good fit for those conditions. Use of this technology may also grow as the number of "Internet of Things" devices increase.

In my opinion, Powercast should be commended for sticking to an honest approach to their business in the face of what must be incredibly frustrating marketing and publicity from Energous. Like many engineering led companies that focus on delivering a product and not on marketing hype, their approach probably gives them a good business but fails to deliver them the riches that the less scrupulous get. The price of a conscience?

Ossia

Ossia have been going since about 2008 and are still privately held, having raised at least $25 million from industry and Venture Capital groups including Intel. Their technology, which they brand 'Cota', is also RF based, but this time at 2.4 GHz, same as some WiFi routers. Their founder/CTO writes blog posts and technical white papers available from their website, but they are exceptionally light and free from any real information with which to analyze their products in detail. There are no products, datasheets, or evaluation kits of Ossia technology that I am aware of.

Their choice of 2.4 GHz results in a smaller wavelength than the 900 MHz band (around 12.5 cm vs 33 cm), so in theory can lead to greater control over small focal zones and beamforming. At best the focus will be at least a phone sized sphere in any practical situation, but it's better than the beachball sized 'pocket' Energous have. By creating a large phased array of many small transmitters, and sending the right signal to each, a beam could be steered with reasonable precision - their 'ceiling tile' size array (pictured above, from here) could have 10 by 10 emitters each spaced at half a wavelength, and according to this article is closer to 16 by 16, so 1/3 wavelength spacing.

Larger arrays mean greater control, I covered some of the maths behind this here. Ossia claim this allows them to be much more precise in targeting the receiver, and 'bounce' signals around the room so that direct line of sight isn't needed. The image below from Ossia shows this in operation, with the receiver sending out a location signal about 100 times a second. This is a pretty well known engineering technique, sometimes called time-reversal, so under the right conditions it will work. It does not, however, reduce the size of the smallest possible focal zone, remove safety limits, or increase the amount of power legally transmittable.

Under Part 15 rules, Ossia can still only transmit as much power as Powercast, which means the entire system is just a more precise way of delivering microWatts to low milliWatts and leaves phone charging as an impossibility. Much of Ossia marketing material in the last few years has made it clear they're looking at similar low power situations as Powercast. Their statements are sometimes questionable, for example that 2.4 GHz is 'safer' than 5.8 GHz, can allow more precise targetting, and won't interfere with WiFi. I wonder if they'd say the same now that Energous have moved from 5.8 GHz to 913 MHz?

What about Part 18 and 'unlimited power'? There's no reason that Ossia can't do this, and once again will be limited not by transmit power, but the various safety restrictions, which like Powercast means perhaps a factor of two increase in power delivered. Why haven't Ossia done this, as it's not a complex set of tests to go through? While the FCC have not made specific statements on this, it seems they are unwilling to give Part 18 certification on wireless power devices in the 2.4 and 5.8 GHz ranges. Energous started at 5.8 GHz, but rapidly moved to 913 MHz when they repeatedly failed to get FCC approval in 2017, skipping 2.4 GHz entirely (there are limited frequency bands that are available in Part 18). 

One school of thought is that the FCC isn't allowing Part 18 at 2.4/5.8 as they are the main WiFi bands, and that communications will suffer interference, so the options left are 913 MHz and ~25 GHz. Another is that the FCC isn't allowing 'unbounded' energy above a certain level - that you need control of that region of power, a peak with clearly defined edges. This would mean charging would have to happen within the near field, or at best at the near/far field boundary. No matter what your technology, that is set by the laws of physics - basically your frequency and size of transmitter are all that matter. Bigger transmitters are less practical but will allow you to push that boundary out further. Higher frequencies lead to more precise control over the beam, but the boundary is now closer in. If this is the case, Ossia can only send energy around 40% (913/2400) of the distance of Energous under Part 18 for the same sized transmitter - and Energous can't even make it to 1 meter...

While Ossia have been playing by the rules and not putting out highly misleading marketing, I've been disturbed by some of their recent press. This article looked at both Ossia and Energous, and reached the usual level of in-depth analysis by a tech journalist that I'm used to (i.e. none). At first, Ossia demonstrate a transmitter with 10 Watts of output power - that's clearly well beyond Part 15 limits, and matches the 10 Watts of the Energous Part 18 transmitter.

"The maximum range is somewhere around 30 feet, but at that distance you can only receive a very small amount of power. Within 6 feet of the transmitter, you’ll get somewhere around 1 watt from the 10 watts being transmitted. At longer distances, you might expect 100 or perhaps 200 milliwatts, which isn’t enough to charge up a smartphone, though it can slow down the discharge."

Since they don't have Part 18 approval, that device needed to have a clear notice that it was not FCC approved and is not available for sale. I wonder if they had it and the journalist simply failed to notice? I also find their numbers disturbingly high - remember Energous transmits 10 Watts to get 30 mW at 90 centimeters, are Ossia really getting 33 times the power at twice the distance? That implies some massive directionality and antenna gain, and regions of space between transmitter and receiver going well over safety limits like SAR and MPE.

They then go on to talk about safety:

“We have established that this technology achieves the same level of safety as Wi-Fi and Bluetooth, so there is no issue with exposing people.”

This is bordering on deliberately misleading, having talked about the power levels with a non-approved device, (which seem to be vastly beyond anything realistic even under Part 18), to then go on to talk about safety numbers from WiFi type equipment of Part 15. Poor journalism may be to blame here, but I don't see Ossia rushing to correct it. I've refrained from talking about Ossia too much as they had not been making outrageous claims, or deliberately confusing the press and consumers by talking about two very different products in subsequent sentences, and allowing the listener/reader to assume they are the same. If they keep this up, in all fairness to Energous, I'll need to start covering them in the same way. Ossia, please don't make me do that, I've little enough time as it is to write...

Summary
There are at least two other RF based wireless power companies out there besides Energous. One of them has had an approved device on the market for years, but has minimal traction in the consumer market. The other seems to be trying a more technically sophisticated version of the same thing, but are now watching Energous getting away with very misleading marketing. Both are limited by the laws of physics, and safety rules, that mean powering phones or any other sizeable devices is out of reach. Despite that, tech journalists will continue to publish puff pieces on how wireless power for phone charging is just around the corner.

I can't blame companies who follow the law from trying to get favourable coverage. The tech press, however, need to wake up to the fact that they are now reporting on products and markets that directly affect our health and safety. Despite high profile cases like Theranos, it seems to be business as usual. The usual cursory coverage and regurgitation of company PR doesn't cut it in these situations, this isn't the latest iPhone or a dating app, and they need to step it up before something hurts more than investors wallets.

Saturday, May 12, 2018

More Energous Updates - Now trickle charging, 10Q shows a 9 month runway, FCC Chair promotion

A few brief Energous updates. There was a new article from Rhodri Marsden covering the technology area, and it was reasonably skeptical. The most interesting part for me was this quote from the Energous CEO:

Steve Rizzone, chief executive of Energous, responds by alluding to the lifestyle change mentioned by Bladen of Chargifi. “Mobile distance charging will not, for the foreseeable future, have charging power comparable to a wall socket,” he says. “But if you are continually topping off your mobile devices, you do not need to enable the same amount of power because charging happens continuously.”

So main points from here are 1) an admission they will not hit the multi-Watt charging rates and 2) that they are moving their public position to the "trickle charge" model where you don't charge the phone up, just try to halt or slow down the rate of battery decline. That's a pretty significant admission from a $500m market cap company - that everything they built the company on won't be happening "for the foreseeable future". A rational market would have seen a major price decline for their shares but for WATT, nothing. It's another indication this company's value is irrational - though that's not to say there won't be a lot of ups and downs, and money to be made and lost, before it finally hits zero.

Taking a look at the trickle charging claim - the FCC Part 18 data shows that maximum charge rate for a phone is around 100 mW at 50 cm from the transmitter, down to 30 mW at 90 cm. Ignoring RF to DC conversion loss, if you held your phone at exactly 50 cm away, square on to the transmitter, and didn't move it, you would extend the battery life from about 10 hours to 12 hours. At 90 centimeters you may add around 30 minutes if you are lucky. Don't hold it with your hand at the back of the phone though, or at an angle, you'll lose charging. This is me being nice to them with the numbers, realistically it makes no noticeable difference at all. Alternatively you could plug it in or place on a Qi charge pad and get back to 100% in an hour or so.

10Q
On the finances front, the 10Q was out for Energous, and it's not looking pretty for them. They had about $45m in the bank as of the end of March this year, with about $13.5m in per-quarter run rate. If that holds, they're out of cash in January, and by their own admission there are no significant products or revenue in that timeframe. Let's see how they either cut their expenses or persuade people to buy a few more tens of millions of dollars "worth" of stock.

Ajit Pai - Again
Once again the Chairman of the FCC, Ajit Pai, promoted Energous using the official FCC account. A reminder to everyone, this is a disgusting abuse of a public position for the private gain of his personal friends, and that's what we know about.
I took a little time to browse through Ajit Pai's Twitter feed and didn't see any other companies that got the benefit of his promotion.Did I miss any? I wonder what makes them so special to warrant this attention?

Tuesday, May 8, 2018

Webinar on Ultrasound in Public Places

For those who may be interested, the Acoustical Society of America will host a webinar on "Ultrasound and High Frequency Sound in Air in Public and Work Places: Applications‚ Devices and Effects" tomorrow, Wed May 9th 2018, 11:25 to 11:45am Pacific Time. If interested, the link to register is:


I have no participation in this, just listing as a PSA.

Monday, May 7, 2018

Theranos Updates - Loan defaults, layoffs, bankruptcy, and mega-rich families burning half a billion dollars.

Last month Theranos were back in the news, barely a few weeks after being admonished by the SEC for using lies and exaggeration to raise over $700 million from investors, this time for the CEO to announce that they were running out of cash and would likely have to close by the end of July. Approximately 100 employees will be let go in early June, leaving less than 25 who will most likely oversee a winding down of the company.

Theranos received a funding round last December, with a $100 million loan from Fortress Investment Group, which had many had been shocked to hear given the widespread knowledge of the company's difficulties. In my December article I pointed out things likely weren't as they seemed at first, and this was simply a predatory loan made in the knowledge that Theranos would in fact default, and that the lender would then take ownership of the company assets at firesale prices.

"So Fortress have arranged a deal where they don't have to put the full amount in up-front, but are still ahead of any other investor, get to own the only valuable part of the company if it goes wrong (the IP), and get discounted stock in the company if it, through some miracle, succeeds. With the right milestones and triggers, this could be a deal where Fortress win no matter what happens, and may actually come out better should Theranos fail. I wonder if Fortress have essentially arranged a deal to make sure that all the good parts are gone by the time everyone else reaches the bankruptcy auction.

Why would Theranos take such a deal? Well, because they have to choice - it's this or bankruptcy."

Well I'm feeling pretty smug right now, as that's exactly what looks to have happened. According to a letter Holmes wrote to shareholders (included at the bottom of this post, from Buzzfeed), despite having received $65 million from Fortress in December, they're about to miss a deadline for FDA approval on a device which will result in them not receiving the next tranche of $10 million. Most significantly though, should Theranos' bank balance drop below $3 million, they are in default of the terms of the Fortress loan, and the company predicts that will happen in July. According to Holmes:

Fortress would be entitled to control a foreclosure sale and/or monetization of the assets and to realize up to a three-times return on its investment (including, in addition to the amounts loaned by Fortress, the costs associated with Fortress’ monetization of the company’s assets). 

So Fortress get three times what they loaned, including whatever legal costs they have in extracting this money. A factor of three on the loan plus costs means they won't just get most of the company, they'll get all of it.

That $65 million gets Fortress around 1,175 patents (granted and applications) in the biotech space. They can sell them, licence them out, or use them to sue other successful biotech companies for payment. Given some large patent infringement payouts can result in 9 figure cheques, a single win like that will result in a great payday for Fortress.

It may not have even cost Fortress $65 million. I do wonder if they invested saying something like "This money cannot be used for legal expenses. It must be kept separate from all other cash and used only for salaries, facilities, and equipment." Knowing that Theranos had legal troubles they may have wanted to ensure the cash was not spent on that, and then set a stipulation that if the "other cash" account dropped below $3 million, the company essentially became theirs - regardless of how much of the investment was left. $65 million gone in basically 6 months, for a company of 125 people, is a monster burn rate. Even at a fully burdened cost of $400,000 per employee that's 'only' $25 million spent in 6 months. Facilities etc can be expensive, but not $40 million worth. In that case, Fortress would be owed $195 million (3*$65m), take the ~$40 million out the bank account that remains, then start picking the best $155 million of assets left (pretty much everything else) - making the cost of the whole company $25 million. Or maybe I'm just thinking too hard and Fortress didn't care, and just let them burn through it all with legal fees, thinking $65m was still a bargain.

Regardless, barring a miracle, Theranos are headed for default on their loan, and will end up being fully owned by Fortress. TheCEO amusingly asks for further investment to stave this off, but with the SEC judgement, and a skeleton staff, it's not going to happen. It will be interesting to see how Elizabeth Holmes does without the company to pay bills for her, such as for bodyguards, and with a likely criminal lawsuit coming. 

An Idiot and Their Money are Soon Parted
So who are the investors that Fortress jumped ahead of in their deal? Who put in the $700 million that got the company to this point? The Wall Street Journal recently published a list of major investors in Theranos, and it's now clear that the company was funded mostly by individual family investment vehicles, not traditional VC. Key investors were:
  • Walton Family $150 million
  • Rupert Murdoch $125 million
  • DeVos Family $100 million
  • Cox Family $100 million

So nearly half-a-billion dollars from four family investment groups, and they will probably see nothing back. (Murdoch already got out for a grand total of $4 million, a 97% loss). Pretty stunning, that. Now I'm going to bet on how much due diligence these companies did before investing, and I'm going with a number near zero. It was widely reported in March that when Theranos claimed revenues of over $100 million to investors, no audited accounts were provided, and investors failed to call a single supposed customer - and the actual revenue was $100,000. That's pretty basic due diligence that even the technically illiterate can understand. Think about the scrutiny you get when you go to the bank for a loan, and then realize that for $475 million no-one even picked up a phone and asked for a reference or a bank statement.

As for technical due diligence, they could have found a few well qualified scientists and executives in this area, and paid them a few thousand dollars each for technical and business evaluations. Total cost, less than 1% of the investment, but nope they couldn't do that either.

I've got no sympathy for them, they deserved to lose that money through their own carelessness - it's just frustrating that there are so many genuinely great companies out there that could work wonders on just a few million. That ~$500 million could have funded >100 hardware startups to a prototype/proof point, and made some genuinely useful advances - but the people that run those types of companies don't lie like Holmes, or exaggerate their technology, just to get a cheque signed (or, as in Holmes case, have well connected parents).

One bright side for Silicon Valley VCs, they can now say "See, wasn't us!", they really weren't the ones funding most of this decade's biggest fraud.

We'll definitely be hearing more about Theranos in the coming months, with the June layoffs, the July default, the inevitable bankruptcy and the possible criminal charges, but next up is John Carreyrou's book "Bad Blood". He's the WSJ journalist who broke the Theranos story, and his book is a history of the company, and will be out in two weeks (May 21st). My copy is on order, and looking forward to it. I fully expect a tale of insanity, greed, selfishness, and stupidity, and I'll review it as soon as I read it.







Holmes' Letter to Theranos Shareholders

April 10, 2018

Dear Theranos Stockholders,

We last wrote on December 22, 2017, shortly after closing a secured debt financing transaction with Fortress Investment Group. We said that the transaction provided us runway to continue work on the miniLab and to position the company for additional financing events—but acknowledged the narrow path forward.

Unfortunately, we are behind schedule on our first product milestone under the Fortress loan, and as a result will soon face a cash shortage. Below we detail our situation, apprise you of our options, and ask for your help as we continue to work to realize value for your investments. As we describe below, we are evaluating parallel paths, including potential investment terms that would provide a large stake in the company at what we believe to be a favorable price.
*****
The Fortress financing, which closed on December 11, 2017, provided Theranos with up to $100 million of liquidity, subject to product and operational milestones. The first funding tranche of $65 million gross was released at closing. The release of a second tranche of $10 million gross was contingent upon FDA approval or CE marking of the Zika assay for use on the miniLab. Achieving that milestone within the first half of 2018 was crucial to our business plan.

Development of the Zika assay has taken longer than anticipated. While the miniLab hardware and software have progressed steadily since we last wrote, we continue to face issues with the reliability of the Zika assay chemistry itself. As a result, timing for finalization of our FDA submission remains uncertain. We have raised with Fortress the possibility of releasing the second tranche of funding despite the lack of regulatory approval, but its willingness to do so is not assured and we understand that in any event it will likely depend on our securing additional commitments from our existing investors.

These developments leave the company in a difficult situation. Taking into account the substantial cost-cutting measures we are implementing today, including the reduction in force described below, our best current projections indicate that—absent further funding—our cash reserves will by the end of July fall below the $3 million minimum liquidity threshold required by the Fortress loan. Under the terms of our credit agreement with Fortress, our failure to maintain this minimum liquidity would constitute an event of default. Such an event of default, or other events of default that may accompany the company’s decreased liquidity, could precipitate an exercise of remedies by Fortress, including Fortress’ taking full control of our assets to satisfy the company’s obligations to Fortress. We expect that path would negatively impact the amounts, if any, available for distribution to our stockholders.

To avoid or delay a default under our credit agreement, we intend to take every step we can to preserve our remaining capital. Accordingly, today we provided notice, consistent with the WARN Act and other applicable law, to all but a small group of employees that their jobs will terminate in 60 days, on June 11, 2018. Difficult though that action is, we estimate that the associated cost savings will help conserve capital sufficient to fund our operations through approximately the end of July, without default under our credit agreement. After June 11, our remaining staff will consist primarily of financial, legal and administrative personnel alongside a core technical team, who will dedicate their efforts toward generating the maximum near-term return achievable for our stakeholders, likely through a sale of the company or its assets.

The most viable option that we have identified to forestall a near-term sale or a potential default under our credit agreement is further investment by one or more of you. In light of where we are, this is no easy ask. However, given your support of the company over the years, we wanted to provide this opportunity before we proceed too far down the current path.

Of course, even with new capital, the future of the company would remain highly uncertain. Nevertheless, additional investment may come with some meaningful benefits. A further investment could help protect your current one by providing the company time to continue developing the miniLab and/or to monetize its patent portfolio (subject to the terms and conditions of the Fortress loan). Further investment could also help us to avoid a sale for an uncertain amount—including a foreclosure sale following a liquidity-based default under the Fortress loan. Any such sale could significantly diminish the net realizable value of our assets. Moreover, in certain scenarios, Fortress would be entitled to control a foreclosure sale and/or monetization of the assets and to realize up to a three-times return on its investment (including, in addition to the amounts loaned by Fortress, the costs associated with Fortress’ monetization of the company’s assets). As a result, those scenarios would significantly reduce or eliminate any prospect of distributions to the company’s shareholders.

Our patent portfolio—which provided substantial support for the Fortress financing—contains more than 1,175 granted or pending patents worldwide. We believe our patents cover broad and important technologies, including: (i) the core technologies in the miniLab; (ii) technologies underlying point-of-care devices currently on the market and generating sizable revenue; and (iii) still-emerging technologies, such as an ingestible digital sensor that recently received regulatory approval for use in monitoring medication compliance. We also believe these patents have the potential not only to eventually protect the miniLab, should it receive FDA regulatory approvals, on the market, but also to support a licensing campaign that could generate significant additional revenues.

We have real progress to build on. Having rebuilt our quality system and implemented process-oriented safeguards for development and manufacturing, late last year we were granted a California Manufacturer’s License following an audit of our manufacturing facilities. Last month, representatives of a third-party notified body conducted an audit of our Quality System; we understand that the auditors will recommend issuance of the ISO 13485:2016 and MDSAP (Medical Device Single Audit Program) certification for the Theranos Quality System. We have also engaged a financial auditor, which expects to complete work on an audit of our 2017 financials by the end of June.

We recognize that the vision of distributed laboratory testing is what inspired many of you to invest, and we strongly believe that continuing our work toward that end could increase the near-term value of the company, and could provide the basis for building significant long-term value.

Although not yet set, the investment terms we are considering would provide a large stake in the company at a favorable price, in light of what we estimate is the intrinsic value of the company’s assets. We expect that new investment would take the form of a senior class of preferred stock, which would also feature substantial governance rights, allowing participating investors a significant role in steering the company forward.

Please note that if we offer new equity securities at a price per share less than the applicable conversion price of our existing series of preferred stock, the resulting anti-dilution adjustments could cause significant dilution to our existing stockholders. Such an offering would likely require the consent of the holders of a majority of our existing Series C-1B and Series C-2A Preferred Stock. The interests of these stockholders, who are senior to all other classes and series of stock with respect to payment upon a liquidation or deemed liquidation of the company, may differ from holders of other classes or series of our stock. Holders of Series C-1B and Series C-2A Preferred Stock should also be aware that their failure to participate in a financing having a purchase price of less than $5 per share would result in mandatory conversion of their shares into nonvoting Series C-1B* or Series C-2A* Preferred Stock.

Subject to our compliance with the preemptive rights of certain investors, we will offer this opportunity to all stockholders who are accredited investors within the meaning of Rule 501(a) under the Exchange Act of 1933, as amended. For any accredited investor who is interested in exploring it, we can provide a term sheet and are available to meet at any time. Irrespective of your future investment intent, we value your engagement as stockholders and welcome your questions and comments.
*****
This letter and its contents are confidential. We request that you not share or discuss this letter with others, except your attorneys, accountants and other advisors bound by confidentiality obligations. The unauthorized disclosure of this letter could violate the terms of agreements between you and the company, and could additionally depress the amount realizable upon a sale of our assets. This letter shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of our securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction or a valid exemption therefrom. Any offering that we conduct will be made only to accredited investors and only pursuant to definitive offering documents, including a disclosure package.

Thank you again for your support.

THERANOS, INC.
Elizabeth Holmes
Chairman and CEO

Saturday, May 5, 2018

Energous Updates

A few updates on Energous happenings from the last week or so. First up, Chris Brown of Aristides Capital gave a presentation at a conference, "Kase Learning: The Art, Pain and Opportunity of Short Selling".


It is the best presentation covering everything that is wrong about Energous I have seen, and neatly summarizes a bunch of what I have been saying in this blog, in a way a lay person can understand. According to their SeekingAlpha page, Aristides Capital manage about $83 million in investments. Here are the "Take Home Messages" from this 34 page work of art:

"The people who do publicity and media relations for Energous have done an utterly brilliant job selling vaporware. Congratulations, Ajit Pai and others.

The “advance” upon which Energous was founded, “the pocket of RF energy,” is a fabrication, a “dazzle them with BS” way of saying “constructive interference,” and doesn’t solve any issues. The reasons we don’t transmit large amounts of RF through the air for power—safety limitations, equipment cost and size, and poor efficiency—are the same as they have been for decades.

Energous is a fraud, one which is burning a lot of cash and will run out of money. The company has no chance of making a commercially successful product. We expect the stock will go to $0."

A link to the full presentation is here.

I added the bold above as I'm glad to see more people covering the what I said in my second post on this blog, over two years ago: "In theory, it can be done in limited cases, but in practice cost and efficiency issues will likely render it impractical." 

So many of the individual pages of this presentation cover topics I have often spent hundreds of words to try to get across in posts, so it's a lesson for me in how to be succinct and effective in this area. I won't repeat them all but a few memorable quotes:

Energous Corporation: a worthless equity hyped to $500 million

CEO who lies bigly and often

#FAKENEWS – false & unskeptical media coverage

If you tell the same big lie often enough, many people will believe it

and my personal favorite as an engineer:

Very small numbers add together to make other very small numbers

CNBC covered this and asked the company for a response:

"Energous did not immediately respond to a request for comment."

Download the presentation and read it for yourself, I'm not doing it justice here.

Speaking of "Unskeptical Media Coverage"
There was also a new wireless power article "When will your phone charge wirelessly in your pocket? We asked an expert" on Digital Trends. It focused on Energous and Ossia, with a brief mention of Powercast, so was aimed squarely at the RF at-distance wireless charging market. I was interested to see the analysis from independent experts and a balanced and reasonable piece on the practical issues surrounding this tech. You're going to be amazed by who the experts are:
  • Hatam Zeine - Founder and CTO of Ossia
  • Gordon Bell - VP Marketing of Energous
  • Mark Hopgood - Snr Director Marketing/Strategy at Dialog Semiconductor (Energous Partner/Investor)
aaaaaand that's it. Every single person interviewed has a financial incentive to promote this technology, they are completely biased. Not even a token attempt here to speak to a university professor of electrical engineering, or get a counter viewpoint. Spend a few minutes Googling Energous and you'll find plenty of stories out there on the less savory side of at least Energous. Of course I'm pretty biased since I'm one of those drawing attention to that. Is this a puff piece that's essentially PR for the companies, or is it actually an attempt to inform the reader? If the former, it achieved that goal splendidly, if it's the latter then it's a major fail.

Now I've been harsh on tech journalists covering this topic in the past, and while it's not the ass-kiss fest that David Pogue exemplifies, or the embarrassingly weak coverage from Tom's Guide where they got the wool pulled over their eyes on what they were showing,  this is still another company PR piece masquerading as tech journalism. I'm not sure the author even realizes he's being used by these companies to whitewash their PR and give it a veneer of authenticity.

I was about to take apart the rest of the article, but in the end realized it's just more of the same of what I've written on other journalists. Instead I'll just make this one point - whenever I talk to journalists about Energous, I'm either asked if I have a financial interest or conflict of interest. When I post online I always get someone replying that I'm just a short-seller looking to make money, or am upset I'm losing money shorting the stock despite my repeated statements that I have no position on the company - I even had someone who owns a wireless power company demand that I declare my financial interests because I was, unlike him, clearly biased. Why do I get more scrutiny about my motivations than someone who is doing it for the money? Only answer I can think of - when someone isn't doing something for money, it confuses people. The idea that you're doing it simply "because it's the right thing to do" is utterly alien and therefore suspicious.

Energous' Financials
It was also time for Energous' quarterly financial results, and once again there were no surprises here - it's still a ~$500m company with $25,000 in quarterly services revenue and no sales. With cash in the bank and the current burn rate, they have 9, at best 12, months of operation left before further fundraising is needed. All talk of product delivery and profitability was once again pushed out into the future, as seems to happen every time. By their own admission, they can't get to revenue before they run out of money, let alone to enough sales to break even. No mention of Myant dropping WattUp from their Skiin product, you'd think given the big deal they made of that product announcement a few months ago that it would be important for investors to be told about that. A transcript of the earnings call can be found here. Oh, and they're also awarding themselves millions of dollars in equity because they're doing such a fantastic job.

Monday, April 9, 2018

Energous FCC Approval Shows Weakness of WattUp Technology

More Energous news today with the announcement of another FCC approval, this time the "unlimited power" Part 18 approval for their Near-Field, contact only, system. You may remember this from May last year when it was approved under Part 18 at 5.8 GHz for 1 Watt transmitted output, but this time approved at 900 MHz at a staggering new 1 Watt transmitted output. Accounting for conversion efficiencies, that might be enough to charge your phone in 10 to 20 hours! Apparently this is momentous news and so WATT shares leapt 25% in after hours trading, because... well for no reason other than this is a volatile stock that trades on hope and greed, not an actual product or profits.

Why was this approval needed? Well, Energous had been advertising the WattUp family, that what charges with the Near-Field device will also work with their upcoming Mid- and Far-Field systems. Unfortunately, they learned in summer 2017 that the FCC would not allow the Mid-Field system to pass Part 18 at 5.8 GHz, and so they scrambled to change it and go with ~900 MHz, the only other frequency band realistically open to them. It got them the approval, for a pitiful amount of power (30 to 100 mW) at a small distance (0.5 to 0.9 meters) and a safety cutoff below 0.5 meters, but broke the promised compatibility with the contact version - the frequencies were just different. 

Now, this new approval allows them to market the compatibility, and it will be quite a campaign, I can just imagine it: 

"Charge your phone on a pad in around a day, and then charge at a distance in ten times as long! (Warning, charging only valid at 0.5 to 0.9 meters, safety cutoff closer than 0.5 meters)".


If you want to look at the data for yourself, look here, then search for Energous under the Applicant Name, and look up the product 2ADNG-NF230 at 918 MHz. You can see that transmitted power is limited to 29 dBm (basically, just under 1 Watt), and they likely have some antenna gain to pretend it's closer to 3 Watts. While there are two antenna to try and ensure the device charges at any angle, only one is active at any time.


Like the Mid-Field system approved at Christmas, the Specific Absorption Rate (SAR, a safety limit) seems to be what stops them, and is around 0.864 W/kg. While the limit is 1.6 W/kg, with safety margins it is hard to go much higher. Basically, this is as much power as they are ever going to put out. Further, unlike the Mid-Field, the CEO cannot pretend that the charge rate can be increased by altering the safety zone - there is none. This is as good as it gets. (Yes, Unlimited Power Part 18 does mean "around 1 Watt max").

For comparison, the Qi standard is around 5 Watts, with a high power version at 15 Watts - Qi is the resonant inductive method you're most likely to have seen, and that Apple has essentially chosen for AirPower. USB cables charge at anywhere from around 5 Watts to 100 Watts (though practically most today are around 10 Watts).

So at less than 1 Watt it's easy to see why Myant dropped Energous from their product. It would likely be ~10x slower than the cheaper, simpler cable they look to be providing instead. As a partner of Energous, Myant would have known this was coming, but still dropped it from the lineup. If "waiting for compatibility with long range charging" was the excuse, then that's gone, as both Near and Mid versions are at ~900 MHz now. Myant could put in the 900 MHz contact charging into their product now, and switch to the at-distance chargers later. If a key partner isn't taking advantage of this feature, IMO that's a major warning flag that something is rotten in the WattUp portfolio.

As with the Mid-Field FCC approval documents, this data shows how impractical the WattUp charging technology is, and how it can't be scaled up from here. This won't stop the Energous fans from claiming another victory, that the stock price boost is a sign of impending greatness, however it's just another well timed news dump of practical insignificance that will goose the stock for a few days. Just one of the occasional bounces you can expect to see on the way down and enabling some to make a profit from the volatility, not the value. I continue to admire Energous for their ability to boost the stock price and keep the game going longer. I wonder when we'll be seeing the next set of insider stock sales...

So is this overnight addition of $100 million to the market cap indicative of great things to come? I'll leave you with this, another reminder of what the Energous CEO said almost 2.5 years ago in the Q3 2015 earnings call:

"Here is a brief summary of the results of the amount of actual power delivered to a device at varying distances with a single WattUp transmitter. Power received at zero to five feet measured 5.55 watts compared to our targeted performance of 4 watts. Power received at five to 10 feet measured 3.74 watts compared to our targeted performance of 2 watts and power received at 10 to 15 feet measured 1.06 watts compared to our targeted performance of 1 watt."

They can barely do 1 Watt when in contact in Q2 2018. Still believing they'll deliver an actual product?

(My regular reminder, I have no financial position in Energous, long or short, or any other wireless power company)