Bill Maris: Here's why Google Ventures didn't invest in Theranos

Bill Maris, founder of Google Ventures, is happy that his firm decided not to invest in biotech company Theranos.

It's been a tense few weeks for the startup, which touts a new approach to blood testing. Theranos came under fire after an investigative story in The Wall Street Journal reported that it relies heavily on traditional technology versus its proprietary blood tests, which have had their very functionality called into question.

Theranos, which has raised about $400 million at a $9 million valuation, called the WSJ report "full of falsehoods," but is reportedly stopping most of its signature blood tests under pressure from federal regulators.

Maris tells Business Insider that his firm decided to pass on investing in biotech startup Theranos back in 2013, even though it invests in many health and life sciences companies like 23andMe and Flatiron Health, because it had questions about the company's technology.

"We looked at it a couple times but there was so much hand-waving - like, Look over here! - that we couldn't figure it out," Maris tells Business Insider. "So, we just had someone from our Life Science team go into Walgreens and take the test. And it wasn't that difficult for anyone to determine that things may not be what they seem here."

That employee found that when he went to get a test done, Theranos wanted more than just a drop of blood in one of its "nanotainers." He denied a full venous blood draw, and ended up getting called back a week later because they wanted him to give more blood.

That wasn't a good sign to Google Ventures, which now prefers to be called "GV" in the wake of Google's reorganization into a larger holding company called Alphabet. (GV works like any other VC firm, but instead of taking money from a variety of limited partners to invest in startups, it takes money from only one - Google.)

When GV is looking at life science companies, it wants to invest in startups that are very open about their technology and have a board with a lot of tech expertise. Theranos didn't pass that test - its board is heavy with political and military officials, versus medical experts.

"We make a series of investments, some will pan out and some won't," Maris says, citing a portfolio company that had to scrap its technology after a double-blind test proved that it didn't work as well as it thought it would. "But that's really different from a case where you can't really tell what's going on, and you just cross your fingers and say, 'It seems like this has great momentum.'"

However, Maris doesn't think that the thorny Theranos situation will slow down investing in the health sector overall.

"I feel like those of us that know what we're doing, know what we're doing," he says. "Those who get burned might be gun-shy about it now. But if you're a technology investor and you decide that you're also going to be a healthcare investor or a green-tech investor, that doesn't usually work out that well. There are reasons why people make their careers studying these things and becoming experts. My guess is, if Theranos completely blows up, those investors will think twice about the next blood diagnostic that comes along, but at the same time, they're in the business of taking chances."

He does think that it's a cautionary tale for the relationship between startups and the press, though. Theranos founder and CEO Elizabeth Holmes has appeared on the cover of several magazines over the last few years.

"I haven't been able to find a single reporter who has written about Theranos that has gone and had the test done," he says.

Elizabeth Holmes will be speaking at WSJDLive Wednesday morning - follow along with our coverage then.