23andMe's Fatal Flaw | Guess Who’s Back | 3

0:06I'm David Brown and this is Business Wars.

0:3123andMe had hype, investment, and a vision. But its business fundamentals were built on shaky ground. Founder Ann Wuchitski created a model where customers purchased a kit just once, and by the time she started branching out trying to create a revenue stream based on new pharmaceuticals, it was too little, too late. Still, Wuchitski fought for the survival of 23andMe until the bitter end. after a major data breach in 2023 and a mass board resignation in 2024. It looked like it was game over for 23andMe. The company filed for Chapter 11 bankruptcy in March 2025 and quickly began looking for buyers, with Wuchitski resigning from the company to put herself in the running.

1:17In May, 23andMe made a deal with Regeneron Pharmaceuticals to sell for$256 million. And then, in early June, Wuchitski reopened the bidding war by offering to pay$305 million through her recently founded nonprofit. Lila McClellan is a senior writer at Fortune, where she's profiled Wuchitski in her efforts to buy back the company she founded. Lila joins us to peel back some of the layers of Wuchitski's leadership, how she made it to the top, and what factors led to the company's ultimate fall. Later on, we'll hear from Alexi Horowitz-Ghazi, co-host of NPR's Planet Money, who joins us to answer the multi-million dollar question, the one everyone who ever purchased a 23andMe kit wants to know the answer to.

2:04What happens to your data now that the parent company's been sold? Alexi's Aunt Vovie was a 23andMe customer, so he decided to investigate with a team from Planet Money. Stick around, because all that's coming up.

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4:33Lila McClellan, welcome to Business Wars. Thank you for having me. Tell us a little bit about how you got into covering leadership for Fortune. So I actually used to be a workplace reporter at Quartz, and I ended up moving over to Fortune to cover leadership, first covering boards and now just covering leadership more generally. So it was kind of like flipping my perspective from the employee's perspective to the management's perspective. What have you found to be most different about this beat? Geez, well, there's so many different personalities. And then there's all of these different sort of power structures, which I think is very relevant to this story.

5:11and I've always been able to understand like the employee's point of view of a story, but it's been new for me to sort of try to get inside a CEO's head and see someone who's like grappling with big issues, big decisions, trying to do the right thing, trying to keep people employed. It's just not as black and white as it might seem from the outside. Yeah. I'm sure that there are a lot of entrepreneurs listening and thinking, nodding their heads. You don't say, But that's just it, because a lot of people look at some of these big corporate entities. You talk about something like 23andMe, and it sort of has this faceless quality.

5:47But some of the characters of the people who are actually pulling the levers, that's where this becomes really, really fascinating. And there are few as fascinating a figure as someone like Ann Wuchitsky, right? I would 100 % agree. This feels like it has movie potential. Yeah, I'll say. Why do you say that, though? What is it about Ann Wachitski that sort of fascinates you? Well, I think this is the right person at the right time to kind of make this big company happen. And she's a woman working in Silicon Valley. She has a lot of charisma and she has a lot of sort of tailwinds, right? Things that are going to make 23andMe great, but something goes wrong.

6:32And so what goes wrong with this person who really was lauded as a kind of hero? I think that's what's so interesting and so human. Does she seem like, based on what you've been able to learn about her, the kind of person who would be a sort of Silicon Valley superstar? You know, you think about some of those big, you know, luminaries in Silicon Valley. Does she fit in or how does she fit in, if so? Well, she does fit in. I mean, she grew up on Stanford campus. Her father was a particle physicist. So she grew up from the beginning being surrounded by these brilliant minds, right? And people who are kind of used to debate and out there to kind of change the world and very, very focused on technology, especially by the time she's like in her 20s, let's say.

7:19And then she herself just has that it factor that's hard to explain, but she keeps audiences captivated and you want her to succeed. And she can really get people to buy into her vision, which I think is something that Silicon Valley leaders are very good at doing. Yeah, that sort of star power charisma kind of thing that you often see. But what about business savvy? How much business savvy? Well, I think that's a good question because she did not run a company before 23andMe. She had been an analyst and she had actually covered the health care industry and health companies. So she knew about that, but she was not an operator when 23andMe was launched.

8:01And yet, according to your profile, she was running small businesses from a very early age, wasn't she? Yeah, there is a famous story about her taking lemons from a neighbor's tree with her sister and selling lemonade and starting a business when she needed to go on a ski trip that she couldn't afford. So she had that streak from a young age. I'm fascinated by how we fit in the stealing the lemons from a neighbor's tree. I'm just sort of wondering how that all folds in. But more salient to the story of her rise in this field, how did she meet Sergey Brin? So Susan Wojcicki, Ann Wojcicki's sister, lived in Palo Alto, and she actually rented out her garage to Sergey Brin and Larry Page when they were just starting Google.

8:57So it's like that, you know, iconic place in tech history. And so Ann was hanging around the house, basically, visiting her sister and got to meet both Brin and Larry Page. So we've got the garage. We've got Silicon Valley. We've got Stanford. What about the role of Bryn? How big of a role did he play in her transition from healthcare analyst to founder of a company? So what I learned when I was reporting on this is that Bryn was initially approached by other founders, a woman named Linda Avey. And there was a third founder who had a more kind of business background, but not a science and tech background.

9:40And Linda Avey wanted to pitch this idea she had for what became 23andMe to Bryn. And he was the one who thought that Anne Wojcicki, at that time his wife, would be the right person to run 23andMe. He saw a good marriage between Avey and Wojcicki. And so Avey, she actually talked about this on a podcast fairly recently. She had a meeting with Brynn, and she said that Ann Wojcicki came like bee-bopping in, even though she really hadn't been invited. And for her, it was kind of unnerving because, you know, everyone on her side in the room would have had, you know, NDA signed. It came out of nowhere.

10:23It wasn't a normal occurrence. So how does Wojcicki's personality show up in this product? Because it does seem like, well, with her larger-than-life size zing factor, X factor, or whatever you want to call that, she becomes rather instrumental in the launch and the continuity of 23andMe. Well, the ethos of the product really becomes about the mission. She doesn't really see the company as just a retail product or just another tech company in Silicon Valley. She sees this as driving toward a mission where people are going to be able to use their genetic information when they're being treated, when they go to the doctor, when they make lifestyle decisions.

11:04So I think that becomes apparent in all of the kind of material and marketing around the company. But then her sort of celebrity side is also what drives a lot of press coverage. We have like celebrity spit parties with, you know, Hollywood names, other tech names. So it really helps to drive awareness about this company. And Oprah sort of embraces it too, doesn't she, at some point? That's right. Oprah puts it on one of her favorite things lists. And I understand that a lot of folks then thought, well, if Oprah thinks it's good, then this has got to be the it thing. You mentioned earlier Linda Avey, and I want to ask more about her.

11:47She was a genetics expert who first proposed this whole spit test idea. But Linda left the company pretty early to pursue Alzheimer's research, or at least that was the official tale. What actually happened from what you learned? What actually happened was that Ann Wojcicki in 2009 went to the board and said that she wanted to run the company alone, that she wanted A.V. out. A.V. has said that it wasn't something that she chose at all. And she also called it devastating. Like this was her brilliance aha moment. And it was completely taken away from her. To be fair, Wojcicki did tell me that there were other people at the company who also thought that Linda should leave.

12:30So I think there's probably more to that story still. It's only come out in the past year. Well, when A.V. left, how was the company doing? I mean, their other co-founder, Paul Kusenza, had already left a year earlier. Do you think Wojcicki was ready to take sole control? I think that all depends on how you measure it. At this point in the game, they are not so focused on turning a profit as much as they are focused on scaling and getting those customers, getting that data. And then, you know, it's all part of the plan to use that data later. So in that sense, she was prepared because the company was undeniably successful at attracting customers.

13:10I think, you know, down the road, the questions come in about business decisions and timing decisions and whether or not the person who started the company and created all of the hype and excitement around it is the right person to run it as a mature firm. Hey, it's time for a quick break. My guest is Lila McClellan. She's senior writer at Fortune, who's been covering this story. And when we come back, we'll unpack the decisions that led Wuchitski's board to resign en masse. Stay with us.

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16:25Hi, welcome back to Business Wars. Our guest is Lila McClellan, a senior writer at Fortune magazine, whose profile on 23andMe founder Ann Wuchitski late last year shared the inside scoop on how the company began to unravel. Lila, talk to us more about Wuchitski's leadership style and what you heard from employees. I know you talked to several of them. Seemed like she favored control? That's right. First of all, I should say it wasn't easy to get people to talk about this because Anne had a huge following and she is a popular person in Silicon Valley. For all of her wonderful traits, she was also controlling or too sort of micromanaging as a CEO and that she wanted to make decisions and that would slow everything down.

17:13And so senior leaders felt like they weren't empowered to run things the way that they saw fit. You know, one person said to me that the North Star at 23andMe was, is Anne happy? Oh, boy. Do you think that that actually had an effect on the company's progress or its success ultimately? Well, in the sense that you have to wonder what kind of conversations were happening around this major decision to go into drug development. Pharmaceuticals, yeah. Right. In 2015. At the time, it didn't seem like a smart decision. She has talked about people warning her against this just because it costs, you know, as you know, it costs so much money and there's just no guarantee that you're going to walk away with a product.

17:57It could take years. And so you have to wonder if there had been a more collaborative CEO, if some of that advice would have been like heated and if the company would have managed its spending differently. You know, and you can even extend that question to what would eventually happen with a company. I mean, going to 2022, the company's stock goes into freefall and never really recovers. And I suppose you have to ask, could part of that be tied back to that question that employees were always asking, is Ann happy, right? Do you think there's a link to Wachitsky's decision making? I think so, because, you know, I mean, you're not going to always get the best outcome if that's actually the way it was inside.

18:42The right decision for the business might not make Anne happy. So we don't know how many little decisions or big decisions were made to please her rather than move the company in the right direction. But from what I understand, you actually wanted to get some answers on this, you know, and you went to check out the Reddit forums where individual shareholders were talking about Wuchitski's leadership style, right? That's right. And, you know, on Reddit, people don't hold back, right? They're like, she is my way or the highway and that she was holding the company back was the sentiment at the time.

19:17And it gets worse from there. There was a real breaking point that came around 2024 when the board ultimately says, on behalf of the shareholders, essentially, we can't do this. And everyone on the board resigned. Could you say more about why that happened? What drove the board to that point? There's a lot of things happening in 2024. But in the spring of that year, I think that's when Anne Wichowski first started talking about taking the company private because it was clear that it was running out of money. And she makes an offer by the summer, but it's not detailed enough. There's no sense of how she would finance the deal.

19:53And the premium itself, it's not that attractive to the board. And so they don't sort of outright say no, but they do say, hey, we need a lot more from you. We need these details. And they give her a deadline for that. She does not deliver. Like, according to the board statement, they don't get what they need from her to say yes to the deal. And she's already said that she will not agree to selling the company to a third party. And given that she was a controlling shareholder, that makes it really hard for the board to do much of anything. They cannot, they don't have the voting power to fire her, which probably would have happened under most circumstances.

20:32What does this mean, though, for the company writ large and for Wuchitski? Well, at this point, you know, the company is running out of money. They shut down their drug development business. And investors, of course, are panicking. And it's this absolutely shocking moment when you see seven board members and all people who are very serious, Silicon Valley figures, walk away like that. That suggests quite a lot of friction and frustration to reach that point. It also suggests to, I think, a lot of outside observers, and correct me if I'm wrong here, but it would suggest, I think, to me that they had lost confidence now, that all of these movers and shakers for whom there was a considerable degree of respect, that's why they're on the board, right?

21:21That they have now lost confidence in this company. Right. And they actually say in their memo about this that they do believe in the mission and what the company could be, but they can't see a path forward, right? When you just hear employees talking about someone who's running in what some people call founder's mode, running a company in that mode and not really allowing senior leaders to make decisions, you can kind of see how that may have been what was happening on the board. I mean, clearly it was one person against seven. You have just used a magic phrase, founder mode. Okay, this is something that I think a lot of folks in Silicon Valley have talked about.

22:02Could you say more about what that is? What is founder mode? And I'm almost wondering, considering how many lions have been made of some of these, you know, men in Silicon Valley, if that founder mode thing might have a little bit of a double standard ring to it? I think for a while there, it was one of those terms that people like didn't want to hear anymore because it became it sort of took over. Everybody was talking about founder mode. And I agree that there is a double standard here. So founder mode just means sort of like not letting go of your baby. Right. As a CEO and getting into the weeds on every decision and not allowing people to run the company.

22:45For a lot of businesses, you think about Steve Jobs at Apple, right? He leaves and he comes back. And that's seen as the reason for Apple's return to prominence, that were it not for the founder, you know, landing once again. And yet, Wachitski seems to be taking a lot of heat personally after having been a co-founder of this company. Right. And so you do have to kind of wonder if there's some sexism here. And even as a reporter working on this story, it was something I wanted to check in with myself about because we lionize people who act this way, who have a large ego and do big things in this founder mode.

23:26And that's what she did. But when women behave that way, it's just not seen as acceptable. It's like it's coming on too strong. And there's a double standard around that. Recently, 23andMe filed for bankruptcy, and that's been in the news a lot in recent months. And I'm curious, what do you think of all of the things that we've talked about here was the straw that broke the camel's back, if you will? You know, we saw the sinking stock prices. We saw the board leave en masse. We saw the drug discovery wing not quite deliver on all that was promised. Indeed, a lot of investors would say a lot of what was promised was not delivered.

24:06And then, of course, there's the Wachitsky factor, the person, the leadership, maybe the leadership style. Was there any one thing? I don't know if you can put it on any one thing. I do think that you need to look at the leadership style because we celebrate CEOs who make things work. So when something collapses this way, yes, there were environmental factors. But ultimately, it is the leader who has to take responsibility. Well, once the company files for Chapter 11, something really interesting happens. Wuchitski, who's been hanging on to this company for dear life, it seems, decides to resign.

24:45What's the strategy there? We now know that she probably was never really planning to walk away fully. Because after the, you know, what happened was there was a bankruptcy, then Regeneron, a huge pharmaceutical company, purchased the company and it looked like a done deal. And then weeks later, Ann Wojcicki is back and she has a new research group that she's formed called TTAM. And she has issues with the way the bankruptcy proceedings went. And she convinces the court to reopen the whole process. And she makes a bid, comes in higher. $305 million, much higher than the offers that she had made to buy the company back.

25:30Even between the board resigning and the bankruptcy, she had made a couple of offers. So she returned. She does not want to let this go. I know there are other companies that have tried to be 23andMe. Ancestry got in the game a while back, right? And then you've got some new startups like Nucleus. What's the scene like these days and where does it seem to be going? There isn't a sort of dominant player the way 23andMe was. Nucleus would like to be that player. And it pitches itself as the Netflix to 23andMe's blockbuster. And also says that it has newer technology and more, you know, it's sequencing full genomes, whereas 23andMe is now using older technology.

26:13But there's a lot of sort of new companies that are early stage diagnostic companies. And it seems like we are on the precipice of something earth shaking. It seems that we're going to get there. But right now, there are so many questions about whether or not these kinds of tests are useful, if we're ready for the information and if the science is worth it, you know, in terms of investments. So I think we're at a really interesting stage. Lila McClellan is a senior writer at Fortune, where she covers leadership, CEOs and board shakeups. You can check out her reporting at Fortune.com. Lila, thanks so much for joining us on Business Wars.