Creative destruction in the personal genomics

Gene ExpressionBy Razib KhanMar 4, 2010 11:14 AM


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I'm hearing about rumblings at 23andMe, and not in a good way. The company made a big splash a few years ago, and came highly recommended by friends (e.g., "They know their science, and have a bottomless pool of money"). This story at BNET got my attention though, and confirmed what many have been hinting at, or just telling me straight-up. Let's start the from the beginning. Back in late 2008 23andMe seemed absolutely untouchable. Here's Andrew Yates of Think Gene from then:

People, 23andMe isn't going anywhere. They are the Bill & Melinda Gates Sergey & Anne Brin Foundation, Silicon Valley style. Anne Wojcicki is married to Sergey Brin, so 23andMe has access to all the talent, connections, and capital 23andMe would ever need to make 23andMe work. Thus, assuming 23andMe doesn't do anything egregious, they will exist for as long as Mrs. Anne Wojcicki Brin pleases it to be so. If 23andMe shuts down, it won't be for some mundane reason like the bills weren't paid, it will be because Anne felt like it....What, does that offend your meritocratic, democratic, American dream sensibilities? Too bad. Go get an Ivy+ degree and marry your own richest man in the world.

This seemed to be a reasonable assessment, and I know I shared it. Case closed. And the momentum kept going for a while. But since then something seems to have gone wrong in the narrative. Check out this this comment thread at Dr. Daniel MacArthur's. There's apparently some lack of clarity about why Linda Avery, the co-founder, left. Who would want to leave a company which had access to Sergey Brin's pocketbook? As a friend put it to me, what kind of co-founder leaves a successful startup mid-stream voluntarily? (excepting Jawed Karim) You can get some ideas why from the Glassdoor reviews:

Employee #1 (Feb. 3, 2010): All decisions came down to one person, and it was NOT the ceo. Senior managers made some grave mistakes and many employees suffered. Managers and co-workers inexperienced. Did not value customer satisfaction. Vague product definition with very little marketing support. Employee #2 (Nov. 17, 2009): Extremely poor management that completely ignores the customer as well as employee needs. Major legal threats to the very existence of the business. Poor pay and complete lack of communication. Lack of focus and direction in management decisions.

This one is extremely well informed and presages the second round of layoffs:

Employee #3 (Oct. 1, 2009): 23andMe's non-traditional approach is a strength in building new and interesting products and in attracting a very savvy group of customers. 23andMe has done a lot for genetics--making a complex topic accessible and fun, bringing genetics to a wide audience, and also influencing important discussions at very high levels. The non-traditional approach is also a weakness, because the company's lack of corporate biotech experience at nearly all levels of the company has created major blind spots. As a result, 23andMe has stumbled into barriers that a more experienced company would have been aware of and taken the necessary steps to mitigate--which can require major commitments in resources and incorporation into the long-term business plan. 23andMe also made an early choice to pursue several different, non-overlapping goals at once, and although it has achieved some success--excellent content, unique website, novel research platform, recognition in the space--continued growth will start to cause these functions to overlap less and less, potentially creating resource conflict and mission creep in the future. The lack of biotech and research experience in the executive management and BD teams also creates an attitude of taking research for granted. Biology is hard; finding discoveries that can provide a foundation for profitability is by no means guaranteed. Improving the chance of medically useful discoveries means thoroughly understanding a clinical question and conducting the best research possible--which may directly conflict with making the web service as customer-friendly as possible. But the lack of direct research knowledge and experience has led 23andMe to avoid focusing on specific areas, which means that specific expertise has never been brought on board and that research quality continually compromises with (and is compromised by) the needs of the web-based service. My advice is to build a company that focuses on doing one thing very well. If that thing is a web portal for genetics content, then set aside the research goal. If that thing is research, then set aside the web portal. If it is a genome-wide diagnostics company, then do whatever it takes to succeed in the increasingly difficult diagnostics world. In terms of both science and profitability, quality scientific research requires a much larger commitment of time, resources, and discipline than management has been able to show thus far. Hiring people with clinical knowledge and with experience at running a successful biotech or molecular diagnostics company will keep 23andMe from having to constantly reinvent the wheel.

Note these reviews were anonymous. But now we hear about the big pay out. When we heard about the lay offs last year (thanks to Dr. Daniel in my case), we didn't know that 23andMe also spent $4 million dollars in payments to an executive, as this SEC filing shows. The likelihood is that either Linda Avey got $4 million in severance to keep quiet, or Anne Wojcicki (wife of a billionaire) was taking $4 million from 23andMe's coffers while almost 30 people are fired. 23andMe's PR states that this was paying back a "loan" from Anne. OK. Let's keep it real, for the wife of Sergey Brin (net worth around $18 billion), $4 million is pocket change. The only thing I can think of is that Sergey Brin got tired of throwing good money after bad. A few years ago I blithely suggested to Dr. Daniel MacArthur that deCODE would always have access to Icelandic money because of national pride. Well, that didn't work out, did it? I also mentioned to Dr. Dan that Brin would always be willing to pump money into 23andMe, but now who knows? Word is that morale at the company is at an all-time low, with Patrick Chung's layoffs decimating 23andMe's invincible image. And the hits may just keep on coming. Linda Avey noted on her blog that Andrew Pollack from the New York Times is about to write one of his characteristic brutal hit pieces. If so, it'll be a big turnaround for a company which was initially showered by media praise, and assumed to be untouchable.

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