[23andMe Valuation] – 23andMe Business Model & How it makes Money

23andMe Valuation, 23andMe Business Model & How 23andMe makes Money

23andMe Business Model
23andMe Business Model

I have been lately too much involved in HealthCare startups, because I have a feeling that health is gonna be at the top of the priority list for every one, and this is one thing that people spend on without blinking an eye!  Thus wanted to explore some unconventional business models and here it is – 23andMe Business Model!

About 23andMe, Founders, Funders & Facts

At one side of the equation is Con StartUps like Theranos who duped investors of their money for something that did not exist and at the other side are some tech startups that call themselves as HealthCare startups but are Vanilla Software startups like Practo – 23andMe is actually between both!  The reason I say that is because they started with Genetic Code Mapping (Ancestry Testing) for Individual customers like you and me but when they realized this is just a one time fun thing for many and they may not be able to pull off another Con story like Theranos they pivoted into a full blow research and services company along with drug discovery pipeline focusing on developing health tests (like Theranos!)

23andMe Founders:  Well this is not a startup per se, it’s already a decade plus old.  It was founded in 2006.  23andMe Founders are Anne Wojcicki (She is the Ex-wife of Google Co-Founder Sergey Brin), Linda Avey (Left and Started Up), Paul Cusenza (Left and Joined Work Force Back).

23andMe Funders: Google Ventures, NEA, Sergey Brin & GenenTech.

23andMe Valuation: Valuation as of June 2017, appx $2 Billion.

23andMe Business Model

How 23andMe Makes Money
How 23andMe Makes Money

23andMe business strategy is to collect genetic information from a large pool of diverse people across various age groups. They then mine this big data for research related to medical drug discovery or other pharmaceutical applications.

Their primary revenue lines include the following:

  • Direct To Consumer (D2C) Genetic Code Mapping Kit Sale
  • Research Services : The business vertical they built using the large pool of data they have gathered over the years, this is available as a subscription based intelligence data
  • Drug Discovery : Since they have this large data pool, they know what people eat and react to, they use that data to improve their  drug discovery pipeline

23andMe Business Model

The earliest 23andMe Business Model was to sell OTC test kits (similar to Pregnancy Test Kits) and let people play around with their spit sample and hair sample etc. to figure out their actual origins (Only they know how accurate it is) and then just forget about it!  Duh!

That’s it!

But these OTC kits were not really OTC, you had to send back the sample to them so that they can test it out and send you back the reports, this is how they collected data.  Though they had plans of using this data later on, but they just recently started the research based practice.

Basically, the business model of 23andMe gave the common man access to DNA testing – In simple words they gave birth to a full blown tech backed PERSONAL GENOMICS industry (huge potential here, contact me for more details if you are in this space).   They today boast of having more than 2 million customers across gender, race and age (the largest on the planet).

The kit that you send back to them reveals many things about you, I’ve listed down only few below:

  • Carrier Status Report: Your saliva sample can tell many things besides what you ate this morning 🙂 !  It shows if the subject is carrying a specific mutation or disease that it could potentially pass down to their children.
  • Wellness Report: Here they map you genetic code to existing database and try to identify if you are showing or may show some disease development so that you can start precautionary measures against it.
  • Genetic Ancestry Report: Ancestry report provides insights on the buyers ancestral origins and lineage. Like if you really don’t know which origins are your great grand parents and so on, 23andMe can do so. They also provide online tools like inheritance tracing and find your real parents etc. tool.
  • Health Traits Report: Your general health and routine analytics.

What I think of their D2C business model is that it is a complete waste of investor money in the short run (for the next 5 years or more, give or take 2 years) and then they will just blast off creating immense value for the investors in the long run by actually making sense to a large technology company like Google or Tesla, either of which will eventually integrate this large pool of personal genetic code of billions of people into a chat bot which would then replace basic medicine practitioners.

23andMe Business Model from Research Services

23andMe business model pivot happened after FDA issued them warnings about their test kits.  It is then that they realized that they can not depend on this fun thing to run their business and need to diversify into other revenue lines.

Since they already had this large pool of qualified and verified data, they started offering this to drug discovery and pharma R&D units.  This is when they struck GOLD.

The Direct To Consumer (DTC) genomics business is the just the show, the magic act.  The real act is going on at the back-end where they are collecting a large pool of CURRENT health stats. 23andMe have built disease specific communities for internal research purpose and most of the buyers have consented to share their data for research purpose. The most important thing coming out of this information is a large pool of infected patients that the new drug can be tested out on.

23andMe quickly enrolls patients for clinical trials due to access of their entire history has become the go to source for pharma companies. Last year it announced a partnership with biotech company Genentech (its’ largest outside shareholder) to develop new treatment for Parkinson’s Disease.

How does 23andMe Make Money from Drug Discovery

23andMe makes money from direct to consumer genome mapping kits and need ased paid subscription of their database to pharma majors and research companies. It recently started with drug discovery business as well, where they have onboarded 2 of their investor GenenTech’s leading drug researchers to work on their database internally and come up with a huge drug trial pipeline.

This may not be a good news for other drug companies because then they will not have access to 23andMe’s large database.  I don’t see this happening in the near future because drug discovery and approval is a long long long long process.

Apart from these revenue lines I feel there is something going on behind the curtain which is not visible to the naked eye.  I feel they may be subcontracted by large pharma companies on a RESULT BASED RESEARCH assignment where if the research done by them yields results they get paid or else they get to keep the data.

23andMe Valuation

23andMe Valuation
23andMe Valuation

23andMe Valuation is not public but what I could gather from their regulatory filings is that they must have raised last round at roughly 1.5 Billion USD+ valuation. Post that there have been no fund raise so considering their drug discovery venture is doing well with the parkinsons disease group, I can estimate that this must have surpassed $2 Billion in pre money valuation.

Disclaimer: All views about 23andMe Business Model, 23andMe Valuation, 23andMe Review and How 23andMe makes Money are personal and of the authors’.  You are indemnifying the author and the website from any liability arising out of using this data.

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