More Clarity from New Energous FOIA Documents

One of the pleasures of writing this blog is in the communications with engineers and scientists who are experts in their respective fields, and I get to learn from private email discussions, or have a great sounding board to bounce theories back and forth with. Following my recent posts on the Energous FOIA documents, one contributing reader let me know they had also directly requested those documents on Energous, and received a batch of redacted emails that had some new ones not in the collection that had been previously available, which led to some interesting exchanges - so thank you for that.

These documents cover an earlier time period from December 2014 to March 2017, with at least one of the email threads having a full year gap in the middle. Those of you who would like to see the new documents in full, email me and I'll send them, or you can contact the FCC yourself and say "I ask for the responsive records for FOIA 2018-000342", and start with the FCC FOIA page here.

There are no stunning technical revelations in here, but there are some key points from earlier that seem to be confirmed. For those who don't want to read the details, the main takeaways are that:

• Switch from 5.75 GHz to 915 MHz seems to have happened late summer 2016
• The "local" RF power issue to get Part 18 seems to be resolved in Oct/Nov 2016
• Reduction of power at receiver to well below 1 Watt seems to happen at end of 2016
• Explicit admission of single device charging occurs in early 2017

These four items combined are likely to have a significant impact on the practicality of the device - huge "pockets" of energy and poor steering, highly limited operating range, delivered power below useful levels for most devices, and only one device at any time. The entire system was on shaky ground to begin with, IMO, and these changes made what I would consider a terrible product far, far worse. In future posts I may compare the dates of these changes, that have quite an impact, with statements from Energous at the time. A publicly traded company must be very careful in what it tells the public.

"Throw it at the wall and see what sticks"

I guessed that Energous were just refiling applications again and again, each time making what minimal changes they thought might get them through, and relying on the FCC to guide them in changes, or perhaps simply to give up and so win through attrition. These documents seem to reinforce that with five face-to-face meetings between June 2016 and March 2017, and nine OET Submissions between August 2016 and March 2017. If we look at the times they submitted, there are some key changes at various dates. Unlike most situations where a company has a product that has to meet minimum specs to satisfy customer demand, it's obvious that there is no aspect of the design that will not be sacrificed in order to get Part 18 approval, no matter how pointless the resulting 'product' is. I list the physical meetings and OET submissions at the base of this article. Key changes are:

• 5.75 GHz to 915 MHz change occurred between June 23rd 2016 (experimental licence) and October 17th 2016 (Document 59)
• Part 18 "Unlimited Power" appears to have been resolved between October 17th 2016 (Doc 59) and November 8th 2016 (Doc 58), possibly at the October 26th face-to-face meeting. "Local" and "unconstrained" RF energy issues do not arise anymore. Note this does not resolve safety issues, such as SAR
• Two Receivers Down to One happens between August 23rd 2016 (Doc 61) and December 12th 2016 (Doc 56). No reason given, perhaps complex SAR measurements
• Drop Below 1 Watt Charging Claim happens between August 23rd 2016 (Doc 61) and (likely) December 12th 2016 (Doc 56) or (definitively) March 28th 2017 (Doc 5)
• Change from 10 Antenna to 12 happens between December 12th 2016 (Doc 56) and February 26th 2017 (Doc 1)
• Change from Sound Bar to Angled Sound Bar happens between December 12th 2016 (Doc 56) and February 26th 2017 (Doc 1). May just be a description change, but coincides with # of antenna change. Energous still demonstrating 'abandoned' straight bar as of January and June 2017.
• Change to Charging a Single Device is in February 26th 2017 (Doc 1), although it was obvious even in earlier submissions this was likely. May be a move to "time sharing" charging multiple devices, reducing already low charge rate to each

No significant changes seem to have occurred between March 2017 and approval in December 2017, which surprised me as the system and performance were so basic that I thought they had to have rushed it, but it seems they had most of a year.

Given the above, it doesn't appear that the change to 915 MHz, at least by itself, fixed the Part 18 issues as that change had occurred by October 17th 2016, while Part 18 questions were still being asked. It could be that the change occurred and it just took time to get that accepted as sufficient for Part 18, or it could also mean that they still had not satisfied SAR safety and did not start lowering the power output until December 2016/March 2017. This also means that Energous knew the mid-range transmitter would be incompatible with the higher frequency mini-WattUp, or have 1 Watt charging, while promoting licencing deals with the likes of Myant. I wonder if Myant knew?

The most important change that allowed for Part 18 approval seems confirmed now to be the requirement for "local" RF energy, and that such energy is never "uncontained". I've suggested this may restrict any such system from working in the far field (which for an array this size is around 1 meter at 915 MHz), but may also be restricting the system from working in the near field where there are multiple "pockets of energy". This would then be a second need for the safety cutoff system that prevents SAR limits being exceeded. If this is the case, even without SAR limits the system would be constrained to the 50 cm to 1 m range it currently is, and makes questionable the claims of Energous' CEO that power limits could be raised by extending this keep-out zone.

This gives a possible explanation as to why 5.75 GHz was not used (beyond the simple FCC statement of "no destroying WiFi"), as the far-field boundary moves much further out and the "pocket" of energy gets smaller in theory - that any close in operation that would be needed would be in the near field with many maxima and minima, with potential for further maxima beyond the charging location. Either that or such a system would require too many antenna and electronics too precise for Energous to want/be able to build. There's still not enough information to resolve this question, but more pieces are beginning to fall into place.

If that's the case, it doesn't bode too well for Ossia, who recently claimed a shift to 5.8 GHz. While they have a 2D array and can probably dynamically alter the transmit aperture, say to a 30x30 cm square for a 1 meter far field. There would be a pretty reasonable number of elements in that, assuming 1/3 wavelength pitch (around 17 by 17, or ~300). Quite how they overcome the SAR and safety issue and still get reasonable energy out, I'm not sure - I still only see this working for IoT devices at exceptionally low power. Searching on the FCC website though, I can't find grantee code for Ossia - it's as if they've never interacted with the FCC on product regulation at all. Does anyone know what their FCC grantee code is?

So the outcome of this is more clarity that Energous were simply doing whatever it takes to get Part 18 approval, even if it were a product that failed to meet their original claims, and some visibility into the methods they used to slowly reduce capability, or wear down the FCC, until it was finally allowed. The "local" RF energy question seems to have been answered by placing severe restrictions on the usable range, while safety was met by reducing power again and again, retesting until it finally passed. Little by little, we're learning more about how this process was playing out in the background. I'm looking forward to the next set of revelations to narrow down what's really going on.

Oh, and Energous earnings tomorrow - odds on this ~$400m market cap company earning more than $25,000 this quarter? (My mistake, earnings at the end of Wednesday, not Tuesday! And boy was it an interesting call.)

(Repeating the seemingly obligatory statement - I have no financial position, short or long, in Energous or any related company)

Below is a simply a summary of meetings and submissions to the FCC by Energous on their mid-range device. This is not intended, or likely, to be complete, just what is known at this time. I'll update with other information later.

Physical Meetings

• 8/9th June 2016 (experimental licence application)
• 27th July 2016 (Doc 61)
• 26th October 2016 (Doc 55)
• 6th December 2016 (Doc 54)
• 28th Feb 2017 (Doc 3)

Office Engineering and Technology (OET) Response Submissions

• 23rd August 2016 (Doc 61) - Still not clear that Part 18 is achievable, and claims a second receiver at 1 Watt. To get Part 18, repeatedly references "local" RF energy. Two receivers listed, one at 100 mW, one at 1 Watt - last mention of two receivers or 1 Watt. Power reported as "Number Receivers Supported: Rx-1: 100mW, Rx-2: 1W", No indication if these two receivers were on the same device, or could be separate, I expect a single device. Lists a sensor needed for SAR compliance.

• 17th October 2016 (Doc 59) - Earliest mention of the 913 MHz band in available documents. Ongoing discussion of viability of Part 18 with it clearly critical that energy be assured to be "local" and can never be "uncontained". Also see page 2

• 8th November 2016 (Doc 58) - All Part 18 discussion is dropped following Oct 26th meeting. It is never raised again in future documents. Part 18 "local" and "unconstrained" issues solved?
• 30th November 2016 (Doc 55, Page 4) refers to an OET Response on this date but not available
• 10th December 2016 (Doc 57) refers to meeting of Oct 26 and not Dec 6. Appears Energous want OET to develop new safety criteria for them. Jeff McNeil of Energous adds "Regulatory" to his SVP Ops title.
• 12th December 2016 (Doc 56) refers to Dec 6th meeting. FCC requests clarity on which of the many designs will be submitted. Table 1 lists 10 antenna and "Target Platforms: Sound bar for desktop usage". Power now reported as "Cumulative Receive Power at 30 cm and 1m: [Redacted]". Use case claims "charging multiple devices", but admits to one device at a time.

• 18th December 2016 (Doc 55) FCC request a different method of calculating SAR and measure individual antenna
• 26th February 2017 (Doc 1) Table 1 lists 12 antenna and "Target Platforms: Angled Sound Bar for desktop usage". If an actual change, a limit on phase array capability to focus? Number of antenna and description change. Use case now admits "charging single device"

• 28th March 2017 (Doc 5) - FCC still asking for single clear submission

Experimental Licence Application

• To demonstrate the technology to FCC, a 15 day experimental licence was applied for , starting June 8th 2016 for 15 days. Application is here. The details of this can be found at the FCC site here, and clearly show still operating at 5.8 GHz, with 20.4 Watts output (55.6 W ERP). Energous' next such application was for 6 days, between 6th and 12th January this year for  CES, which listed the 913 MHz band with 30 W ERP. 

Energous FCC FOIA Docs

I had a chance to go through the FCC/Energous FOIA documents mentioned in my last blog post. They span a period from around February to December 2017 when Energous were trying to get their mid-range transmitter approved under Part 18 (unlimited power) rules. Most of them have the really useful information redacted, and are Energous bugging the FCC to "please can we visit so we can move this on quickly" and the FCC engineers saying "errr, sorry out of town that day" like an ex-girlfriend trying to avoid an annoying and slightly psycho ex. One of them was super interesting with lots of info in it though, which reveals a lot of the history of the system.

The data shown seems to be for the system as they were trying to push through in early 2017, with 21 W out, but to ensure they hit the SAR safety limit by December had to dial it back to 10 Watts out. This ties with the December device power at 90 cm being 30 mW, while in March it was 60 mW at 1 meter. They pushed the size of the safety cutoff zone up to 50 cm from around 35 cm, possibly changing the focal point along the way (just eyeballing the structure it looks to have changed between March and December). 

The main FCC concerns seemed to be safety via the SAR limit, as well as ensuring that energy was in "pockets of concentration" (Doc 18). There's a significant discussion on corrective factors applied as safety margins, and basically they have to scale all measured results by ~1.5 and still be under the 1.6W/kg limit (Doc 30). This means, as I suspected, that Energous cannot raise the power output of their system from where they are today (0.966 W/kg) - what they have now is as powerful as it gets.

My read of this - Energous just kept resubmitting and resubmitting, each time with the FCC telling them to go away and what to do next, and eventually they dialed everything back to the point where they got it through under the SAR limit. An undercurrent in the notes is sloppy work by Energous, with the FCC constantly having to ask for clarifications, updates, or actually doing calculations for them! (Doc 30) 

I don't see any evidence of pressure on the staff to push the device through, more exasperation on their part with second rate engineers just throwing stuff at the wall hoping it would eventually stick.

The rest of this analysis is a little dry for those not interested in the details, just warning you.

There's a few things though that stand out as important, beyond what I listed earlier. First of all, they had moved to 915 MHz from 5.8 GHz by February 2017. Document 1 indicates that the February submission is a second clarification or change in response to a meeting they had with the FCC in October 2016. I could speculate that a 5 or 6 month response time indicates that some significant changes had been made, as new measurements or clarifications could be made quickly. This may be the timeframe in which the frequency switch was made. This IMO is a significant change with implications for performance of the system, yet was never mentioned in SEC calls or quarterly reports.

The work presented by Energous also appears to be sloppy, with the FCC multiple times noting how poor the data consistency and quality is (Doc 9 "trying to understand field distribution", Doc 41 requesting "proper and consistent information", Doc 48 "We understand that it was prepared quickly, but we suggest paying attention to some details.").  Their two tables don't match, for example the received power listed below when converted from dBm in Table 2 are 512 mW and 47 mW (27.1 and 16.7 dBm) for 30 cm and 1 meter respectively, but in Table 1 (previous post) are 190 mW and 60 mW (22.8 and 17.7 dBm).

Basically, the numbers don't add up. I expect the numbers here are for an earlier system that was very tightly focused to try and maximize power at a single point to get to ~500 mW to charge a phone, but ended up going way over SAR. There may be some other reason, one being estimated and one measured, but I'm tending to the "sloppy" for now.

Document 32 shows the "keep out" zone changed around November 2017, increasing it to 50 cm. This may also be when the physical structure of the power bar was changed, or may simply be that they were forced to update their SAR measurements and this was required.

Document 18 references the need not only to be concerned with safety and states that data "should also show that the energy distribution through field maps demonstrate that there are pockets of concentration". This indicates that the safety restriction was not only a single SAR number, but the physical distribution of the energy. 

Figure 11 above shows a typical on axis beam, with a peak at one point showing the transition from near to far field, and then a gradual but continuous reduction with distance. If we assume a "pocket" of energy implies a region where there is a lower value of energy both before and after the charge location, then that would restrict the use of the system to just beyond near field only. Even with a phased array, where that transition zone is, it's a function of frequency and physical size of the transmitter. For any practical size transmitter, (equations here) it's basically likely to never be viable beyond 1 meter. If this is the case, that's a huge limitation for any at-distance wireless power system unless they make the transmitter the size of a wall.

Also, that peak in Figure 11 is at 42cm, but they say a focus at 65cm. They might want to take a look at their work there...

The size of a region of constructive interference, a focus, is often defined by the half power, or -3dB points. Looking at Figures 11 and 13, it seems that region is about 60 cm in the x- and z-axes, but only 15cm or so in the y-axis. Some "pocket"!

The "safety system" that detects if anyone is in range of the device and shuts it off (supposedly) is ultrasonic, using TI PGA450 chips and my best guess would be Murata ultrasound transmitters (sound familiar?), used in car parking sensors. I'd be very interested to see how this is setup, because as someone who has worked with them before and ultrasound a lot, I think that system might be easy to fool if you don't design it very carefully.

So overall this data is interesting, nothing too amazing, but confirms what was suspected - that this system is at the limit of what it can transmit safely, that it doesn't have enough power to charge a phone in any realistic way, that efficiency is low, and that FCC staff weren't too impressed with Energous' consistency and quality of work. But it does prove that persistence pays off.

(Seemingly obligatory statement - I have no financial position, short or long, in Energous or any related company)

Energous: It's Worse Than We Thought

A contributor to SeekingAlpha has recently posted an article highlighting data from an FOIA request to the FCC regarding Energous' approval for their mid-range transmitter last December. They appear to show concern from the FCC officials as to how the system was performing, and understanding the system behavior. There's also discussion regarding the safety limits, which I think are one of the key issues and concerns surrounding this approval, and covered them in several posts. The author has provided the FOIA documents for download here.

For some background, I wrote several posts on the FCC approval in December last year, you can find them starting here.

Interestingly, earlier this year I did a FOIA request for all of FCC Chairman Ajit Pai's communications regarding Energous (along with several other keywords) and was told there was nothing. Given Ajit Pai's (IMO clearly illegal) use of the official FCC communications to promote a private company, I suspect there are documents there, just not available. I may revisit that.

One of the key images that has been redacted from the FCC report, but is floating around from another source, shows the actual specifications for their desktop system.

There are some key points in here:

• The system works for only 1 receiver at a time
• Output is from 12 antenna, each antenna is 1.8W (32.5 dBm) - 21.6 Watts total output
• Receive power at 30cm is 190 mW, at 1m is 60mW
• Max range 1 meter
• Receiver is 6.5 cm in diameter
• No mention of safety limit distance

There is no clear detail is that received power is actual RF power at target, or power to battery at target - I suspect the former. This is a higher output power than the system shown in FCC documents in the Part 18 Approval (21.6W vs 10W), and the receive power slightly lower - I was estimating 100 to 150 mW at 50 cm, some were estimating higher. That implies a "Wall to Battery" efficiency of 0.2% at 30cm and 0.06% at 1 meter, assuming 90 Watts in at the wall socket (thanks to a reader for pointing out my initial mistake here). That would mean a phone would take over a day to charge at 30 centimeters, and nearly 4 days at 1 meter - and that's assuming 100% efficiency on receive, and I also suspect those numbers are ideal and real world will be worse. You might say it's more appropriate for IoT or small item charging, however the receiver, at 6.5cm diameter, is wider than my phone. I expect it's multiple dipole antenna and they need it that size to get even that terrible efficiency. I can see why Myant didn't want this receiver in their underwear.

So charge times are obscenely long, it's incredibly inefficient, only one target receiver at a time, the receiver is larger than a phone, and it needs a safety cutoff if you get too close. Did I miss anything? 

Apple must be chomping at the bit to get hold of this technology...

I'll dig into the released documents in more detail later, but at first glance it doesn't quite match with prior statements from the Energous CEO as to system capabilities.

"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."

5.5 Watts vs an actual 0.19W - only a factor of around 29. Remember that when viewing the statements from at-distance wireless power companies as to their performance specs, compared to what they have to write in the legally required documents and spec sheets.

There's an update to this post, reading the releases in more detail, here.

(Since I always seem to need say this - I have no financial position, short or long, in Energous or any related company)

Delusional Investors: Theranos Edition Part II

A couple of days ago I posted some videos of well known VC and early Theranos investor Tim Draper defending Elizabeth Holmes and calling SEC involvement "government interference" and saying that journalists were responsible for the downfall of the company, not fraud. Apparently it's a route to vast riches for a journalist, and so they can't be trusted, unlike the purely altruistic VC.

It's amazing how when talking about fraud in large organizations it's always the person who has least to gain financially that has their motives questioned, usually by those with most to gain. In part it's to cast doubt onto the messenger, but also the accusers simply can't understand any motivation other than financial for revealing wrongdoing.

Draper's now doubled down on his doubling down and even after federal indictments drop, he's saying the same. Watch the video. I really don't know what to say.

Billionaire investor and early Theranos backer @TimDraper discusses supporting Elizabeth Holmes after her fraud charges, how more journalists will try to take down CEOs to get rich, and why he's not soured on investing in young, visionary startup founders. #CheddarLIVE pic.twitter.com/fxXGJEgFZU

— Cheddar (@cheddar) June 19, 2018

Embarrassed and Disgusted

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

Dr Seuss Cartoon from 1941

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? 

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.

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. 

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.

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.