23andMe: A $1 Billion DNA Ancestry Testing Company
A few years ago we first wrote about 23andMe, the genetic testing company co-founded by Anne Wojcicki, the wife of Google co-founder Sergey Brin. Backed by names such as Genentech, Google Ventures, and Johnson and Johnson, 23andMe has raised a total of $191 million which includes a $79 million funding round which they just closed last week. In our first article, we noted that 23andMe’s genetic test offering included a health report. Since then, the U.S. Food and Drug Administration ordered the Company to discontinue marketing their health-related genetic tests because they lacked regulatory approval. Now 23andMe has changed their offering to a DNA ancestry test and has become the largest DNA Ancestry service in the world. (Update: As of 2015, 23andMe resumed sales of FDA approved health tests). The Company has managed to achieve a valuation of just over 1 unicorn so they must still be on the right track with their business model.
If you’re interested in learning about your ancestors, or potentially want to increase the number of your known relatives, then the $199 ancestry DNA test from 23andMe is right up your alley. The process is a very simple one. You sign up for the test and they send you a container in which you place a small sample of your saliva. You then send the container back to 23andMe and they perform a DNA profiling test on your saliva sample using chip equipment from Illumina. Afterwards you can log in to their website and see exactly where you came from in a report similar to the one seen below.
In addition to the above information, you can also find out how much Neanderthal you have in you with results we’ve seen varying from 2% to 2.9%. However, that seems as about as informative as if they told me I was related to Adam and Eve. Another available option is to see if you’re related to any of the over 1,000,000 genotyped 23andMe “members” that have already taken the same test. While it may sound like a good idea to see who you might be related to, this choice brings about some complexities that might not be so obvious. Take the below from the FAQ section of the 23andMe website:
In rare cases, participation in DNA Relatives may reveal that you are related to someone whom you didn’t expect, or that you are not related to someone in the way that you expected. This happens most frequently in the case of paternity. Consider this before you opt in to this feature.
Even with some potential land mines out there that the Company acknowledges, 23andMe’s marketing team decided to package this test… as a Father’s Day gift. Many people will not want to open up that can of worms and won’t take the test simply because they don’t want to risk finding out any surprises that could cause some serious awkwardness at the next family reunion. In a similar way, some people will have privacy concerns about their DNA being added to a massive central database. 23andMe assures clients that they take privacy very seriously. If you’re still concerned, what about submitting your DNA anonymously? 23andMe states that you have to use your real name, but do you really?
The test sounds interesting, but is there really that much growth to be had here? Sure, there are the many stories of people finding lost relatives but once you’ve shelled out $199 to find out you’re 11% British, are you likely to use the service again? Some media outlets even state that the ancestry reports are just not that informative and accuse the company of being involved in something equivalent to “genetic astrology”. Regardless of the naysayers, 23andMe has shown that some of the world’s most sophisticated investors believe in the potential of their business model based on their recent successful funding round.
One thing 23andMe may look to do is offer to follow on information products once they’ve secured your DNA. Should they receive FDA approval for their health reports, these could then be made available to those who already participated in the ancestry test for an additional fee. (Update: In 2015, 23andMe received FDA approval for their genetic health tests and offered these to existing clients for free!). The Company continues to sell their health reports in other countries where regulation is more lax. 23andMe is also doing research work with all the genetic information they are amassing and often ask people with a particular disease to participate in a study in exchange for free DNA profiling and some small compensation.