Despite the company’s early popularity, it failed to develop its strategy and product line beyond that single-transaction customer engagement. Attendees visit the 23andMe booth at the RootsTech annual genealogical event in Salt Lake City, Utah, on Feb. 28, 2019.GEORGE FREY/Reuters
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Business leaders, always eager to find cautionary tales about how not to run a business, will find a thick volume of scary stories in the spectacular flame-out of 23andMe.
The once high-flying genetic home-testing company that capitalized on an identity-obsessed cultural blip filed for bankruptcy protection this week and said it would look for a buyer. The move came as its CEO and co-founder, Anne Wojcicki, resigned.
How bad was the fall? The San Francisco-based company was valued at more than US$6-billion when it went public in 2021. But revenues declined and losses increased to more than US$170-million so far this fiscal year. This week, 23andMe’s value was pegged at around US$14-million.
Even co-founder Linda Avey, who left the company in 2009, took to social media to express her dismay that so many things had gone wrong at the company she helped to create three years earlier. “There are many cautionary tales buried in the 23andMe story,” Ms. Avey said in a post on X this week.
Among them: The company was a one-trick pony. Its core offering relied on customers to use a home-testing kit and send samples of saliva to the company for DNA analysis. The resulting genetic breakdown claimed to show the origin of customers’ ancestors and the relative percentages of various ethnicities.
The cultural focus on identity – and the emergence of diversity as a social and political marker – drove 23andMe’s popularity, further adorned by an endorsement by Oprah Winfrey, who called it “the ultimate selfie.” At its peak, the company had about 15 million customers.
The rise of the company’s profile and the use of its test results were not without controversy. Critics suggested many people used results to prove they had bloodlines of marginalized or underrepresented groups as a way to satisfy diversity, equity and inclusion recruiting mandates that had become commonplace in the corporate, academic and government worlds.
Even popular culture lampooned the practice. In an episode of the popular animated satirical series South Park, a user of a DNA-testing service shouted excitedly when seeing his results: “I’m 21 per cent victim!”
Despite the company’s early popularity, it failed to develop its strategy and product line beyond that single-transaction customer engagement. The sustainability of the business model stalled with its inability to generate recurring revenue with follow-ups, upsells, and diversified products and services, such as therapeutics and research.
And then there were privacy concerns about the integrity of the company’s capability to store sensitive personal information of customers. That data remains its most valuable asset and, as such, is a central issue in the bankruptcy filing and the uncertainty around a new owner.
Over the years, willing customers as well as non-customers wary of sending DNA samples to a corporate entity for testing and storage expressed concern about the security of their information.
Fears ranged from concerns about personal data being used by health care entities to influence insurance rates to the data being used for social shaming and hate crimes to the more extreme – the information falling into the hands of foreign governments and terrorist groups who could develop highly targeted biological weapons.
A major data breach at 23andMe in October of 2023 fuelled the anxiety. A cyberattack by hackers stole profile and ethnicity information about nearly seven million 23andMe customers, primarily Ashkenazi Jews and ethnically Chinese users.
News of the bankruptcy filing has customers scrambling to delete their data from the company’s files, and social media is abuzz with instructions on how to do it. California’s attorney-general has advised customers to do so as soon as possible.
According to Ms. Avey, there was a breakdown in 23andMe’s corporate-governance process that enabled Ms. Wojcicki to circumvent the board of directors, squeeze out Ms. Avey and assume control.
“Striking a balance between the desire for founder control and board oversight is essential; otherwise, why have a board at all?” Ms. Avey said in her post.
Sour grapes? Perhaps. But it is one cautionary tale that won’t die with the old entity.
Ms. Wojcicki, who had tried unsuccessfully to convince the board to take the company private, said she resigned from her post as CEO because she wanted to mount a bid to buy 23andMe out of bankruptcy protection.
While some continuity is usually a positive for any company in transition, in this case, it may not be in the best interest of stakeholders.
Ms. Wojcicki had her shot and made a mess of it. And now that the social and political winds have changed and the market for 23andMe’s offerings has softened, some new thinking is probably in order.