Then What? Lessons of the 23andMe Valuation Collapse

23andMe, once valued at $6B was by April 17, 2024 trading at a price that rendered the enterprise value less than zero. A key to this collapse seems to be the fact that customers really only need to take a DNA test once. The core business had no recurring revenue model and seemed to have no answer to the question: then what?

The company has attempted to create additional revenue streams for some time including an entry into the drug discovery market to leverage its massive database of DNA, purchase of a telehealth firm as anchor for entry into the healthcare market, and a failed effort in providing health tests to consumers. For a business heading to a dead end, these were attempts to answer the "then what" question. But none have borne fruit, perhaps because the question was asked too late. Now there may be an effort to take the company private to generate the capital and time needed for new and recurring revenue streams to develop.

It's a stark lesson about why venture investors tend to be adamant about seeing recurring revenue sources in business models and a key reason that SaaS businesses have garnered so much investment over the last couple decades.

Recurring revenue answers the essential question: THEN WHAT?

Bill Haines, Partner