23andMe Files for Bankruptcy: What Lessons Can We Learn?

By Dan Martin

Like sands through the hourglass so are the days of our lives. That line from the popular daytime drama seems like a fitting starting point as we look at the 23andMe soap opera, what happened and what it means for the industry going forward.

There are a lot of layers to this onion and plenty of plot twists to keep the average person interested and confused, especially those 15 million people whose personal and genetic data is tied up in all of this.

Let’s first encapsulate the rise and fall of the human genetics and biotechnology company’s past few years.

• Founded in 2006 by Linda Avey, Paul Cusenza and Anne Wojcicki, 23andMe went public via SPAC merger in 2021.

• Its market capitalization peaked at $6 billion shortly after going public, with Wojcicki becoming a billionaire.

• In 2023, the company reported a major data breach. 23andMe was taken to court over the breach and agreed to settle the case by paying $30 million and providing three years of security monitoring for the impacted users. There were also layoffs and the company’s share price plummeted by as much as 99% as it failed to turn a profit.

• During this fall from grace, Wojcicki was trying to take the company private and buy it herself, while also making it clear to the board and shareholders she would oppose any deal to sell the business to another entity.

• In September 2024 seven board members resigned due to differences in opinion over the direction of the company. Also, as the company increasingly faced financial challenges it implemented a 1-for-20 reverse stock split on October 16, 2024 aiming to increase its share price and meet the minimum bid price requirement to avoid being delisted from Nasdaq.

  
  

Still with me? Fast forward to today. 23andMe filed Chapter 11 on March 23, 2024 and Wojcicki stepped down as the CEO the next day. Wojcicki has stated she still believes in the company’s mission and wants to buy back the company’s assets. But, according to a recent SeekingAlpha article, the bankruptcy court will allow the 23andMe database to be auctioned to the highest bidder. Remember, that’s 15 million people’s detailed medical records including identity, genotype, race, paternity, self-reported medical conditions and other personal information—in short, biological data that can be tied to individuals and their families for decades (or more) to come.

The key takeaways:

• Standardized consumer data privacy policies are a must. At the heart of this situation is a much-needed conversation about the need for regulations and industry best practices related to the protection of consumer health data. With a pending sale of 23andMe’s most valued asset, the data the company collected are not subject to the Health Insurance Portability and Accountability Act (HIPAA), the federal law outlining privacy and transfer protections for individuals’ health data. Rather, genetic data are typically covered by consumer privacy laws. Because 23andMe is based in San Francisco, the company is subject to California’s consumer data privacy law. However, consumer privacy laws are not enacted at a national/federal level and, as a result, are inconsistent from state to state. And, not all states have consumer data privacy laws—currently only 20 states have comprehensive data privacy laws in place. The topic of genetic data privacy and protection must remain top of mind for both state and U.S. policymakers and there needs to be standards put in place.

• The (IPO) market needs a reset. When 23andMe went public via SPAC in 2021 that was in the middle of a massive boon for digital health companies—during that time, according to Rock Health, there were 34 digital health IPOs and a total of more than $70B VC dollars invested in digital health companies. Times were good…and, maybe a little too loose when it came to evaluating sustainable, long-term businesses. 23andMe is a poster child for that. Consider that it had a valuation of $6B shortly after it IPO’d in 2021 and in late March 2025 was valued at $16M. The company had a reliance on one-time DNA tests as its main source of revenue. It had plans to use its data to support novel drug discovery programs through partnerships with large drugmakers but nothing ever materialized to the level needed for a substantial revenue model. Its valuation was based on hope and potential, not on tangible numbers. However, the market is witnessing an almost 180 degree swing when it comes to how digital health companies are assessed and funded. In a previous post I referred to a Business Insider articleoutlining the high stakes for digital health companies considering an IPO in 2025, “revenue in the several hundreds of millions, profitability and growth at a pace of 30% or more on top of the prior year’s revenue.” Real revenue, real customers, real market traction. That is the new norm. While it may create a more challenging environment for founders, CEOs and marketers, it will make for a more stable industry with better companies, better innovation and better patient outcomes.   

• Trust is paramount. Building brand trust is more than a “feel good” initiative. It’s a concrete way to drive loyalty, retention and profitability. Brands will have their missteps, and no brand can win positive public favor all the time. Those that maintain long-term trust with customers, partners, investors, the media, analysts and the market are more likely to beat out the competition and rise to the top. As a trailblazer in the consumer genetics market, 23andMe was in unchartered waters at the epicenter of a complex business model whose customers consisted of people seeking access to their personal genetic information and pharmaceutical companies wanting access to big datasets of genetic, phenotypic, lifestyle-related, and other self-reported information. The combination of consumers’ lack of awareness (and clarity) as to how their data was being used or could be used in the future, the 2023 data breach, financial struggles and board unrest quickly deteriorated the company’s brand trust. Companies need to be thoughtful from day one how they interact with customers and key audiences. Doing so will set a firm expectation that they can rely on when things go wrong and help dimmish long-term negative impact to the brand. Companies need to proactively own their story, be transparent, be authentic and promote their brand values (and stick to them).

  
  

While 23andMe’s bankruptcy signals the end of the initial era in consumer genetics, it doesn’t mean momentum in the space is ending. Diagnostics players are advancing genomic testing capabilities, EHR vendors are integrating genetic data into patient records and younger consumers are still actively interested in at-home testing for fertility and hormone health among other genetic applications. Yes, there were failures, but there were valuable lessons learned from 23andMe’s highly publicized and scrutinized journey which, we can hope, will inform the next wave of market players. Raising capital responsibly, creating a sustainable business model, building trust in your brand and adopting consumer health data privacy policies are critical for industry success.

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