23andMe's Financial Trouble
In a significant turn of events, 23andMe, the pioneering genetic testing company renowned for making DNA analysis accessible to the public, has filed for Chapter 11 bankruptcy protection. This development has sparked widespread concern among its 15 million customers regarding the fate of their sensitive genetic data.
The bankruptcy follows a series of challenges, including a substantial data breach in 2023 that compromised the information of nearly 7 million users. [1] As the company seeks a buyer to navigate its financial turmoil, questions arise about data privacy and the future of consumer genetic testing.
Background of 23andMe
Founded in 2006 by Anne Wojcicki, Linda Avey, and Paul Cusenza, 23andMe emerged as a trailblazer in direct-to-consumer genetic testing.
The company’s innovative approach garnered significant attention and investment. In 2007, Google invested $3.9 million in 23andMe, reflecting early confidence in its potential. [2] By 2008, Time magazine recognized its DNA testing kit as the “Invention of the Year“. [3]
Despite these achievements, 23andMe faced challenges, including regulatory scrutiny from the FDA in 2013, which temporarily halted its health-related genetic reports. The company navigated these obstacles and resumed offering health insights after obtaining the necessary approvals.
In 2021, 23andMe went public through a merger with VG Acquisition Corp, a special-purpose acquisition company founded by Sir Richard Branson, achieving a valuation of $3.5 billion. [5] However, the subsequent years brought financial and operational challenges, leading to the company’s bankruptcy filing in March 2025.
23andMe's Bankruptcy Filing
On March 23, 2025, 23andMe filed for Chapter 11 bankruptcy protection in Delaware. This voluntary move will allow the company to restructure its debts while continuing operations under court supervision. Chapter 11 is often chosen by businesses aiming to reorganize and emerge financially stable.
As part of this process, CEO Anne Wojcicki resigned, and CFO Joe Selsavage is stepping in as interim CEO.
The company intends to sell its assets, including a vast repository of genetic data from approximately 15 million customers. This raises significant privacy concerns about the handling of sensitive genetic information during and after the sale.
Customers are advised to review their data privacy settings and consider deleting their genetic information if they have concerns about its future use.
Factors Leading to 23andMe's Bankruptcy
The bankruptcy of 23andMe, a once-prominent player in the genetic testing industry, can be attributed to several interrelated factors:
1. Decline in Demand for DNA Testing Kits
After an initial surge in consumer interest, the market for direct-to-consumer DNA testing kits experienced a significant downturn. Many individuals who were curious about their genetic information had already purchased kits, leading to market saturation. Additionally, growing skepticism about the utility and accuracy of these tests contributed to decreased demand.
2. Financial Challenges and Operational Missteps
Despite a peak valuation of $6 billion after going public in 2021, 23andMe faced mounting financial difficulties. The company struggled to generate recurring revenue and reportedly burned through cash reserves. British investor Richard Magides, a significant shareholder, criticized the company’s management and financial practices, expressing the need for better governance and strategic direction.
3. Impact of the 2023 Data Breach
In 2023, 23andMe suffered a substantial data breach that compromised the genetic information of millions of users. This incident severely damaged the company’s reputation, eroding customer trust and leading to legal challenges.
4. Leadership Changes and Strategic Decisions
Co-founder Anne Wojcicki’s resignation as CEO amid bankruptcy proceedings marked a pivotal leadership change. Co-founder Linda Avey expressed disappointment in the company’s trajectory, stating that 23andMe had “lost its way” under previous leadership. These leadership upheavals, coupled with strategic missteps, contributed to the company’s instability and eventual financial collapse.
Implications For 23andMe's Customers
The bankruptcy of 23andMe has raised concerns among its 15 million customers regarding the security and privacy of their sensitive genetic data. As the company undergoes restructuring, understanding the potential impact on personal information is necessary.
Data Privacy Concerns
Customers are apprehensive about how their genetic information will be handled during and after the bankruptcy proceedings. While 23andMe’s current privacy policy states that the company won’t sell customers’ identifiable genetic data and shares data with researchers only if customers opt in, the bankruptcy introduces uncertainties. A new owner could potentially alter these policies, leading to different uses of the data.
Recommendations From Authorities
In light of these concerns, authorities have provided guidance to customers. The California and many other State Attorney Generals have advised users to consider deleting their data from 23andMe to protect their privacy. [6] They emphasize that, despite existing privacy policies, changes in company ownership could lead to different data handling practices.
Company's Position
23andMe has attempted to reassure customers by stating that any buyer will be required to comply with applicable laws regarding the treatment of customer data. The company emphasizes its commitment to securing a partner who shares its dedication to customer data privacy.
Steps 23andMe's Customers Can Take to Protect Their Data
In light of 23andMe’s bankruptcy filing, safeguarding genetic information is paramount. Here are actionable steps to help you protect your data:
1. Download and Securely Store Your Genetic Data
Before deleting your account, consider downloading your genetic data for personal records:
- Access Account Settings: Log into your 23andMe account and navigate to the “Settings” section.
- Initiate Data Download: Scroll to the “23andMe Data” section and click “View.” Here, you can request downloads for various data types, including:
- An overview of your health and ancestry reports.
- Detailed ancestry information.
- Your uninterpreted genetic data.
2. Opt-Out of Research Studies and Data Sharing
If you’ve previously consented to participate in research studies or data sharing, you can withdraw your consent:
- Navigate to Preferences: Within your account settings, locate the “Preferences” section.
- Manage Consents: Review and adjust your participation in research and data-sharing programs.
3. Request Deletion of Your Genetic Data and Biological Samples
To ensure your genetic information and physical samples are removed from 23andMe’s databases:
- Initiate Data Deletion:
- Log into your account and go to “Settings.
- Scroll to “23andMe Data” and click “View.”
- Select “Permanently Delete Data” and follow the prompts.
The bankruptcy of 23andMe marks a pivotal moment for the direct-to-consumer genetic testing industry, underscoring the challenges companies face in balancing financial sustainability with ethical data stewardship.
As the company navigates its Chapter 11 proceedings, the fate of its extensive genetic database remains uncertain, raising significant privacy concerns for its 15 million customers. This situation highlights the urgent need for stronger regulatory frameworks to protect sensitive genetic information, especially during corporate transitions.
Bankruptcy can affect any business, large or small. If you are considering bankruptcy, contact Frego & Associates’ bankruptcy lawyers today for a free consultation.
Sources:
[1] Reporter, G. S. (2024, February 26). Hackers got nearly 7 million people’s data from 23andMe. The firm blamed users in ‘very dumb’ move. The Guardian. https://www.theguardian.com/technology/2024/feb/15/23andme-hack-data-genetic-data-selling-response
[2] Kawamoto, D. (2007, May 29). Google invests $3.9 million in biotech start-up. CNET. https://www.cnet.com/tech/tech-industry/google-invests-3-9-million-in-biotech-start-up/
[3] Reuters. (2025, March 24). 23andMe’s journey from DNA testing pioneer to bankruptcy. US News & World Report. https://money.usnews.com/investing/news/articles/2025-03-24/23andmes-journey-from-dna-testing-pioneer-to-bankruptcy
[4] Zhang, S. (2013). 23andMe ordered to halt sales of DNA tests. Nature. https://doi.org/10.1038/nature.2013.14236
[5] Reuters. (2021, February 4). DNA-testing firm 23andMe to go public through Branson-backed SPAC in a $3.5 billion deal. CNBC. https://www.cnbc.com/2021/02/04/dna-testing-firm-23andme-to-go-public-through-branson-backed-spac.html
[6] Attorney General Bonta urgently issues consumer alert for 23andMe. (2025, March 24). State of California – Department of Justice – Office of the Attorney General. https://oag.ca.gov/news/press-releases/attorney-general-bonta-urgently-issues-consumer-alert-23andme-customers
