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23andMe Has Collapsed 🧬

23andMe Has Collapsed 🧬

Hey there! 👋
The DNA testing company 23andMe has filed for bankruptcy protection, which marks a significant downfall for what once was a company with a $6 billion valuation.
Let’s dive into what’s happening and how law firms could be affected.
Don't have time for the full scoop? No worries, we've got you covered with a quick summary: click here
How did we get here? 🤔
2006-2007: 23andMe launches with $1,000 DNA tests, celebrity “spit parties” and lots of hype.
2013: FDA sent a warning letter regarding health risk information in test results, forcing products off the market temporarily.
2015: 23andMe launches an ambitious (and costly) drug discovery business despite warnings about the high expense and uncertain returns.
2021: The company goes public, briefly valued at $6 billion, but drops to $3 billion by year's end.
2023: A major data breach exposes the DNA of 6.9 million customers. This led to a class-action lawsuit that settled for $30 million.
Now: After failed attempts to take the company private (first valuing it at $75 million, then just $42 million), 23andMe enters bankruptcy.
Why is 23andMe struggling? 😟
Revenue Challenge: The company's direct-to-consumer testing model created a one-time purchase problem. Once customers bought a kit, there was little reason to return for additional purchases.
Subscription Struggles: Attempts to create recurring revenue through health risk subscriptions failed to gain sufficient traction to offset costs.
Diversification: The company pursued three distinct business models simultaneously:
Consumer DNA testing
Pharmaceutical drug development (extremely capital-intensive)
Telehealth services (through the Lemonaid acquisition)
Cash Burn: The drug discovery business in particular required massive investment with no guarantee of returns, draining resources from the core business.
Market Saturation: By 2023, most people interested in DNA testing had already purchased kits, leading to declining new customer acquisition.
Competition: Other companies like ancestry.com entered the market with competitive offerings, squeezing margins.
What happens to the customer data? 👨👩👧👦
When most companies go bankrupt, they sell buildings, equipment, or products. 23andMe's most valuable asset is different - it's genetic information on 15 million customers. This data shows health risks, family history, and unique genetic markers.
23andMe plans to auction its assets on May 14. Many customers are rushing to delete their data before this happens.
Who wants this data? 🤷♀️
Several types of companies might bid on 23andMe's assets:
Medical researchers who could use it to develop new treatments
Food companies interested in genetic taste preferences
Advertisers who want to target products based on genetic traits
Insurance companies looking to assess risk
How could this affect law firms? ⚖️
23andMe’s collapse highlights the increasing risks surrounding data privacy.
Customers might sue over how their genetic data is handled, especially if it is sold to third parties unlawfully.
It shows the potential legal and financial consequences of running a data-driven business without strong security measures.
Corporate lawyers may work on 23andMe’s restructuring, representing creditors, investors, and other stakeholders as the company’s assets are auctioned off.
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I hope you enjoyed this article. See you next week! 👋
Written by Chirag Morar