Earlier this month, the FBI raided the offices of uBiome, a healthcare startup based in San Francisco. The company, which has raised more than $100 million and is valued at roughly $300 million, is accused of what amounts to billing malpractice. According to a deeply reported piece by Chrissy Farr of CNBC, their modus operandi appears to have involved aggressively billing patients multiple times and repeatedly pressuring doctors to be lenient in their interpretation of the need for tests. Farr’s story reveals how misguided growth strategies led to many rules broken, boundaries pushed, and lines crossed.
As someone who is emotionally and professionally invested in the Silicon Valley way, this has been particularly unsettling because of what it means for the overall health of our ecosystem. As Farr succinctly put it in a recent analysis, “There’s a lot that has to change.”
To be clear, this is not a Theranos-style incident. In that case, a delusional founder hoodwinked a group of investors and a board of directors who were famous, but not necessarily savvy. Silicon Valley investors rejected Theranos, which should have been a sign. That’s why uBiome is actually worse — it has shrewd venture backers and a board of directors who should know better. In other words, it is your classic Silicon Valley startup, advertising on Facebook and Instagram and chasing growth in its effort to become bigger and bigger.
Unfortunately, the uBiome situation — though perhaps more virulent than previous cases — is not the first of its kind. It wasn’t that long ago (just a few years) that Zenefits was embroiled in a scandal that blurred ethical and moral boundaries. It wouldn’t astonish me if there are more time bombs. In fact, I’d be more surprised if there weren’t any. The ecosystem is expanding, and the stakes are getting higher. The faster you grow your business, more your startup is valued and the more money it can raise in later stages.
Meanwhile, another thing that is growing is a general (and largely justified) distrust of Big Tech. If that suspicion spreads to startups, it will start to undermine the whole ecosystem. Whether it is medical diagnostic technologies or on-demand services that change cityscapes, trust has to be paramount.
I would love to know what you think — and to hear your ideas about what can be done to increase trust in this environment.
This first appeared on my May 5, 2019, weekly newsletter. If you like to get this delivered to your inbox, just sign-up here, and I will take care of the rest.
Update: uBiome sent an email to its customers and said that it is suspending the sale of its products, pending investigation.
We will also be temporarily suspending clinical operations. At this time and until further notice, uBiome will not be offering SmartGut or SmartJane. We will continue to offer and process our Explorer product.