- dismissive
- class-action lawsuit
- attribute
- she has a willful ignorance of constraints.
- pediatrics
- feisty
- heroine
- quirky traits
- after college bounced around
- pinching pennies on innovation
- honcho
- portmanteau
- deliberation
- cavalier approach
- she did a guest spot on "Shark Tank"
- bee pollen
- philanthropic gathering
- SPAC
- supervoting stock / supervoting privileges
- outpost
- lurking
- cocktail conversation
- erectile dysfunction
- impotence
23andMe’s Fall From $6 Billion to Nearly $0
From celebrity ‘spit parties’ to a drop in the bucket: The once-hot DNA-testing company is struggling to profit
Five years ago,
was one of the hottest startups in the world. Millions of people were spitting into its test tubes to learn about their ancestry. Oprah had named its kit one of her favorite things; Lizzo dressed up as one for Halloween; Eddie Murphy name-checked the company on “Saturday Night Live.” 23andMe went public in 2021 and its valuation briefly topped $6 billion. Forbes anointed Anne Wojcicki, 23andMe’s chief executive and a Silicon Valley celebrity, as the “newest self-made billionaire.”
Now Wojcicki’s self-made billions have vanished. 23andMe’s valuation has crashed 98% from its peak and Nasdaq has threatened to delist its sub-$1 stock. Wojcicki reduced staff by a quarter last year through three rounds of layoffs and a subsidiary sale. The company has never made a profit and is burning cash so quickly it could run out by 2025.
Silicon Valley’s fortunes were built on the lofty ambitions of entrepreneurs swinging for the fences—even if most of them strike out. Wojcicki, for her part, isn’t giving up. She’s sticking to her goal to transform 23andMe from a supplier of basic ancestry and health data into a comprehensive healthcare company that develops drugs, offers medical care and sells subscription health reports.
She still has to prove the business can sustain itself. She’s raised about $1.4 billion for 23andMe, and spent roughly 80% of it.
Known for her quirky charm and informal style—she typically wears workout gear to the office—Wojcicki, 50, has been searching for fresh capital. But with 23andMe’s stock trading at just 74 cents, the company likely can’t raise money by selling more shares. And the company’s early-stage drug programs are so expensive, she has sought investor partners for some of them, so far unsuccessfully, and given up stakes in others. She could also plug the hole with her own cash.
At the center of 23andMe’s DNA-testing business are two fundamental challenges. Customers only need to take the test once, and few test-takers get life-altering health results.
Wojcicki’s most ambitious bet is developing drugs using 23andMe’s stockpile of more than 10 million DNA samples that test-takers have agreed may be used for research. But getting new drugs to market is expensive and takes years.
In another blow to its brand, 23andMe had a data breach this fall that exposed nongenetic information of 6.9 million customers, highlighting the same privacy concerns that Wojcicki once blamed for slowing sales and exposing the company to a class-action lawsuit, which was filed last Friday.
Wojcicki (pronounced woh-JIS-key) attributes 23andMe’s low share price to a broad downturn for small drug company stocks. “It’s definitely been harder than we expected. But I don’t think that we’ve executed yet on what the vision actually is,” which is to use genetic information to give consumers more control over their healthcare, she said. “You know, the thing I found with people who are dismissive is like, you just have to prove them wrong,” she said.
Patrick Chung, a longtime board member, said Wojcicki is a great startup founder because she has stuck to her big vision despite tough obstacles. “Anne has a willful ignorance of constraints,” he said.
She’s also dedicated to her personal brand, those who know her say. Last March,
made Barbie dolls based on her and her two sisters, former YouTube CEO Susan Wojcicki and pediatrics professor Janet Wojcicki, in a promotion for International Women’s Day. Anne said she had to convince her more press-shy sisters to do it. Some 23andMe employees had found it odd that she spent time on it so soon after the year’s first round of layoffs. One asked about it at the company’s weekly all-hands meeting, known as “feisty Fridays,” where her chief of staff said it was good for the “Anne brand.”
Wojcicki said she jumped at the chance as a way to encourage science education for girls and connected it to 23andMe’s genetic tests for quirky traits such as asparagus odor detection in urine.
“I mean, honestly, there’s parts of this in my personality that come through in the product,” she said. “Like, if you make things fun, people engage more.”
This article is based on interviews with more than 50 current and former 23andMe executives, employees, contractors, board members and others familiar with the company and its CEO.
Early years
The daughter of the onetime chair of Stanford University’s physics department and a high-school journalism teacher, Wojcicki grew up at the center of Silicon Valley. She went to Yale, where she played ice hockey, and after college bounced around hedge funds and private-equity firms analyzing healthcare companies.
Two formative things happened during this period. She saw a crash in healthcare stocks, and how companies responded by pinching pennies on innovation. She said she decided she wanted to help consumers take more control over their healthcare.
She also met Sergey Brin. In 1998, he and Larry Page rented her sister Susan’s garage to be the first office for their new company, called Google. Susan would become an executive in its advertising business before running YouTube years later.
The idea for a direct-to-consumer DNA-testing business came from Wojcicki’s co-founder, Linda Avey, a genetics expert. Brin had expressed interest in Avey’s prior work, so in 2005 she shared her idea with him. That’s how Avey met Wojcicki, Brin’s then-girlfriend, who told Avey after sitting in on meetings that she wanted to join the company.
Wojcicki was smart and driven, Avey said—and Brin could be a powerful backer. “I saw the stars aligning. If we wanted to get Google’s support, Anne could help cement that support because of her relationship with Sergey. That was my thinking at the time,” said Avey.
Brin gave the company its first capital and vetted some early hires. Google put in money too, announcing its investment two weeks after Brin and Wojcicki married in 2007.
Overnight Wojcicki went from little-known former financial analyst to Silicon Valley star. She helped build 23andMe’s brand, organizing “spit parties” where guests gave DNA samples. They collected celebrity saliva at the World Economic Forum in Davos in 2008 and again at New York Fashion Week that year, where Barry Diller, Rupert Murdoch, Harvey Weinstein and Diane von Furstenberg headlined a 23andMe gathering after meeting Wojcicki at an Allen & Co. conference she had attended with Brin.
The parties got press but didn’t help the business much. 23andMe’s test cost $399 at the time—too expensive to appeal to consumers.
Another high-profile backer was Wendi Murdoch, a friend of Anne’s. Around 2008, while the two were trying on gowns at the upscale Barneys New York department store, Wojcicki complained 23andMe needed a better publicist. Murdoch summoned Steven Rubenstein, the PR honcho for her husband’s company
, who successfully made his pitch in the dressing room. (News Corp is the parent company of The Wall Street Journal.)
In the office, Wojcicki tried to keep the company culture fun. She bought a remote-controlled fart machine and her secretary planted it on Avey’s seat, setting it off when the two walked into their office.
Avey, who shared the office with her co-founder for more than three years, said Wojcicki loved the limelight and was competitive with Brin. “Early on she would joke that 23andMe is going to be way bigger than Google,” Avey said.
Wojcicki wanted to make her own name, and in the case of their children, she did, giving them the new last name Wojin, a portmanteau of Wojcicki and Brin.
By 2009, Wojcicki wanted to run 23andMe herself, according to people familiar with her wishes. She convinced the two independent board members to fire her co-founder, which they did in a surprise meeting. A person familiar with the board’s deliberations said they went with Wojcicki due to her money and connections via Brin, which they felt might be central to the company’s future.
Wojcicki said she was grateful for Brin’s support during the company’s early days. She declined to comment on the board’s decision to fire her co-founder.
Boom
In 2012, a new funding round from Russian-born billionaire Yuri Milner—one of Wojcicki’s and Brin’s neighbors in Los Altos Hills—enabled 23andMe to reduce the price of its DNA test to $99.
The company’s first national advertising campaign a few months later caught the eye of the Food and Drug Administration, which halted sales of the health test, citing a risk of false reports. 23andMe had taken a cavalier approach to regulation, typical of Silicon Valley, and hadn’t gotten FDA authorization to market its test.
Wojcicki said the company had actively engaged the FDA before the sales halt but hadn’t communicated effectively.
After two years and millions of dollars spent validating its health reports, 23andMe was cleared to sell them again.
Wojcicki’s friends recall her determination in dealing with the regulator, at a time when she was under immense stress. She had recently separated from Brin, who was having an affair with a junior Google employee.
“I would have been in a fetal position in the corner,” said Karen Levy, one of Wojcicki’s best friends since kindergarten. “She just picked herself up and persevered. It was incredible to see that.”
Wojcicki said she wasn’t surprised when, after 23andMe received FDA authorization, its test became a viral sensation. Stories spread of people discovering unexpected parents or siblings. It had taken nine years to get to one million customers, and just three more to get to eight million.
Around the office, employees spotted U2’s Bono and the Edge, supermodel Karlie Kloss and other celebrities dropping in for meetings. Wojcicki walked the Met Gala red carpet with a new boyfriend, baseball star Alex Rodriguez, carrying a clutch made from DNA test chips. She did a guest spot on “Shark Tank.”
In 2019, Wojcicki moved 23andMe into a new Silicon Valley office building with enough space to double its staff. Her plan was to sublet the rest, though the pandemic made that impossible. Free weightlifting, yoga and meditation classes were taught in the first-floor gym. At its new gourmet cafeteria, 23andEat, chefs fermented fresh pizza dough overnight and stocked the oatmeal bar with locally sourced bee pollen.
In 2021, the company went public during the SPAC boom, a time when hundreds of risky companies making bold projections sold high-priced shares to investors. The special-purpose acquisition company that worked with 23andMe was backed by Richard Branson, whom Wojcicki had first met more than a decade earlier, when Branson invited her and Brin to a philanthropic gathering.
Wojcicki was paid $33 million that year, nearly all in stock, far more than is typical for CEOs of large public companies though not unheard of for startup founders.
“I get minimum wage. I’ve never been paid in cash,” Wojcicki said when asked about the pay package. “So I’m sure that there’s a paper dollar amount of something that’s not reflective of reality.” The year before the offering Wojcicki received $20 million in stock. The year after, she received just her base salary of $62,480.
Wojcicki’s stock carries supervoting privileges, giving her effective control of the company. She said she has never sold a share.
Fall
With so many DNA samples banked, 23andMe dialed up drug development, splitting costs and future profits in a deal with pharmaceutical giant
for therapies discovered inside 23andMe’s database.Unlike most small biotechs, which focus on a few areas, 23andMe investigated treatments for dozens of diseases. The payoff could be big, but any one drug can cost hundreds of millions of dollars and take 10 years to get through clinical trials. 23andMe says it has found more than 50 “drug candidates.” So far two have made it to early-stage human trials. Later this year, data could be released that will show whether one of them works.
By 2022, the drug development effort grew to a 150-person outpost in South San Francisco, one that would carry forward research after GSK’s deal to share costs ended.
Wojcicki said that she assumed she would be able to raise additional capital to support her development effort. But when that time came this year, interest rates were high and small drug-company stocks were out of favor. Unable to raise money, Wojcicki cut half the development team last summer.
To create a recurring revenue stream from the tests, Wojcicki has pivoted to subscriptions. As media companies launched streaming “+” channels, Wojcicki rolled out 23andMe+, offering personalized health reports, lifestyle advice and unspecified “new reports and features as discoveries are made” for an initial $229, with annual renewals of $69.
When the company last disclosed the number of subscribers a year ago, it had 640,000—less than half the number it had projected it would have by then.
Asked about the projection, Wojcicki first denied having given one. Shown the investor presentation that included it, she studied the page and after a pause said, “There’s nothing else to say other than that we were wrong.”
The idea behind 23andMe’s health data is that there may be worrisome information locked inside your genetic code that you’re better off knowing about. A small percentage of customers have a rare genetic variant increasing their risk of breast cancer, for example, and 23andMe’s test is a reliable screen that can lead to lifesaving doctor follow-ups. But most people don’t have a life-changing disease lurking in their genetic code. It’s not clear 23andMe has a compelling product worth $69 annually for either group.
Bruno Bowden, a Silicon Valley technology investor, provided an early testimonial for 23andMe’s website but now feels the product wasn’t very useful since it showed he had little increased risk for any rare disease. “It was mildly interesting because of the ancestry information,” he said. “It powered a few cocktail conversations.”
Wojcicki said it’s fair to criticize her for misjudging the subscription business thus far, but she said she sees the value proposition for consumers and trusts her product team to make it work. “The only thing I can do is execute,” she said. A 23andMe spokeswoman said the service has improved since Bowden used it and that 90% of subscribers get a “clinically relevant” result.
In November, 23andMe launched an even more ambitious subscription product. This one includes a more comprehensive, clinical-grade genetic test, as well as standard blood tests and appointments with 23andMe’s doctors. It costs $1,188 a year, billed up front with no insurance coverage.
The product, Total Health, is the realization of Wojcicki’s dream to provide genetics-based medical care. The medical establishment hasn’t adopted such testing as a standard procedure. To usher in the vision, 23andMe paid $400 million for struggling telehealth company Lemonaid Health.
Today Lemonaid still mostly prescribes drugs for conditions such as erectile dysfunction and hair loss and has fallen behind rivals with bigger advertising budgets. Wojcicki won’t say how many 23andMe test-takers consult Lemonaid doctors, but acknowledges the number is very small, considering 23andMe hasn’t integrated the telehealth company into its service.
Roelof Botha, a 23andMe board member and partner at Sequoia Capital, said the company’s big-spending strategy made sense when money was cheap. Now that it isn’t, “we’ve had to trim and focus on a smaller number of projects.”
Sequoia, which invested $145 million in 23andMe, still holds all its shares, he said. Today they are worth $18 million.
Jim Oberman, Elisa Cho and Theo Francis contributed to this article.
Write to Rolfe Winkler at Rolfe.Winkler@wsj.com
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