The Fall of 23andMe: No Recurring Revenue, No Trust, No Future

Once a high-flying unicorn in the health-tech space, 23andMe was heralded as a revolutionary force, promising consumers unprecedented access to genetic information via a direct-to-consumer model. Instead, on March 24th, 2025, 23andMe filed for Bankruptcy, and its founder/CEO resigned.

How did such a successful biotech startup collapse?

From an early Google investment of $3.9M to a $3.5B IPO, the company was a poster child for innovation and disruption. But beneath the hype was a brittle business model built around one-time kit sales with no recurring revenue stream to drive long-term stability.

23andMe has become a cautionary tale—a stark reminder that every startup must eventually pivot from growth to profitability.

A Simple Business Model

23andMe's service was simple – pay a fee and learn about your genetic makeup. In 2006, this revolutionary offering provided millions of customers an opportunity to take a proactive approach to health and wellness based on their biological blueprint.

However, underlying this revolutionary business was a structural flaw: the lack of recurring revenue. The company operated largely on a one-time-purchase model—consumers bought a kit, received their results, and had little reason to engage further. This made long-term sustainability difficult and left the company vulnerable to fluctuations in demand and mounting pressure to monetize user data in controversial ways.

Selling Consumer Data

As 23andMe’s direct-to-consumer DNA testing business began to plateau in the late 2010s, the company pivoted toward what it believed would be a lucrative second act: monetizing its trove of genetic data for drug discovery and development. The pitch was compelling—leverage a database of over 12 million genotyped customers to accelerate pharmaceutical R&D and create a new revenue stream through data licensing and IP generation.

The vision materialized in 2018 when a partnership with GlaxoSmithKline (GSK) included a $300 million upfront investment, giving GSK exclusive rights to use 23andMe’s anonymized genetic database to identify novel drug targets. The deal left many customers "surprised and angry, unaware of what they had already signed (and spat) away" (Wired) hurting their public image in an era increasingly concerned about privacy.

When 23andMe went public via SPAC in June 2021, part of its $3.5 billion valuation was long-term upside this partnership. But five years later, the returns simply weren’t there, and the data licensing dream was quietly dying.

23andMe is just one of many startups that placed grand dreams in "selling data." We often heard this in Venture Capital pitches – the hundreds of millions of dollars that would come from selling user data. However, nearly a quarter-century after the dot-combust, the only commercially viable data monetization seems to be advertising through Google and social media.

Failing to Adapt to IPO

While 23andMe publicly faced bad PR, behind the scenes, insiders point to a founder who couldn't—or wouldn't—shift gears. Anne Wojcicki, who remained CEO through the company's IPO and subsequent decline, was widely praised for her vision and boldness in the early years. However, that same single-mindedness became a liability as the company matured.

Instead of transitioning toward a profit-oriented strategy, 23andMe remained in perpetual “growth mode,” with no recurring revenue and a biotech pipeline still years away from commercialization—if it ever got there. From FY2022 to FY2024, 23andMe’s R&D expenses consistently exceeded $150 million annually, while net losses ballooned to over $300 million in FY2024 alone. The company's balance sheet became unsustainable with mounting cash burn and no clear monetization path.

In September 2024, all seven independent directors of 23andMe resigned, frustrated with Wojcicki's leadership and inability to chart a plan for solvency.

A public company must learn to operate like one, with discipline and accountability. But 23andMe was still operating like a startup long after the runway ran out. Startups don’t fail because they lack vision. They fail when they can’t translate that vision into a mature, sustainable business.

A Lesson for the Startup Ecosystem

The fall of 23andMe isn’t just about a tech failure or a security oversight. It’s about a foundational breach of trust and a flawed business model that couldn’t support long-term growth. This is the key takeaway for startups, especially in sensitive industries like health, fintech, or AI: innovation excites, but trust and recurring revenue sustains.