We have another shoe dropping at Theranos Lab:

U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California, according to people familiar with the matter.

The problems were found during an inspection by the Centers for Medicare and Medicaid Services, the chief federal regulator of clinical labs, at the blood-testing company’s facility in Newark, Calif. Failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program.

The inspection results are expected to be publicly released soon, these people said. A spokesman for the agency said it “can’t confirm any survey conclusions or results at this time.”

………

Theranos already has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the proprietary vials called “nanotainers.” In October, the FDA said it had determined that the nanotainers were an “uncleared medical device.”

Since then, Theranos has been performing just one test—to detect herpes—using its proprietary Edison device, people familiar with the matter said. That test was approved by the FDA.

Theranos is using traditional machines for the rest of the more than 200 tests it offers to consumers, the people said.

Theranos has been a hawking a proprietary technology which allows for a wide range of blood tests to be conducted by a simple finger prick.

They have a valuation of over $1 billion, their technology does not work reliably. their conventional lab tests have been cited by the FDA, and most of their business they have to outsource at a loss.

I understand that this Might Be a promising technology, but how does this become a multibillion dollar valuation?

How is there difference between this and much of the rest of the froth in Silicon Valley?

There are no venture capitalists.  There are just con men looking for the next idiot.

^*In the world of business, a unicorn is a company, usually a start-up that does not have an established performance record, with a stock market valuation or estimated valuation of more than $1 billion.