23andMe’s Bankruptcy and Lessons for Healthcare Innovation

The downfall of 23andMe this week isn’t just another Silicon Valley flameout. It’s a cautionary tale for anyone innovating in healthcare. The once-celebrated genomics pioneer, valued at $6 billion in 2021, just filed for Chapter 11 bankruptcy with assets now worth under $50 million. CEO Anne Wojcicki has resigned, but in a plot twist fit for HBO’s Succession, she’s positioning herself as a potential buyer of the company’s assets.

What happened here isn’t just a story of bad luck. It’s about the structural problems that emerge when healthcare companies chase unicorn status rather than sustainable economics.

The Unicorn Trap

23andMe exemplifies what I call the “hypergrowth health paradox.” Instead of doubling down on its core value proposition – helping consumers understand their genetic makeup – the company pivoted toward pharmaceutical development and even acquired a telehealth company to justify its bloated valuation. These moves may have looked impressive on pitch decks, but they created a company with no clear identity or competitive advantages, and totally unsustainable unit economics.

What do I think was the fundamental problem? 23andMe simply raised and spent too much money. When a company takes on hundreds of millions in capital at multi-billion-dollar valuations and then spends it frivolously, it creates an obligation to pursue massive profits and/or unrealistic market opportunities.

At CareYaya Health Technologies, the health tech startup I lead that’s quickly become one of LinkedIn’s Top 50 Startups in America, we’ve taken the completely opposite approach. We operate an AI-driven marketplace connecting thousands of college students to care for older adults, many living with dementia. It’s deeply personal work that I set out upon after suddenly becoming a caregiver in my mid-30s, and realizing how broken our country’s in-home care system truly is. Our mission is to use AI and workforce innovation to expand access, reduce costs, and build the future of American healthcare.

As a result of our mission-driven approach, we’ve been extremely deliberate about our funding, prioritizing mission alignment with investors like American Heart Association’s Social Impact Funds, building for capital efficiency and sustainable growth over the “blitzscaling” that ultimately doomed 23andMe.

Healthcare tech isn’t just software. You can’t “move fast and break things” when the lives of millions of people are at stake. While tech VCs expect hockey-stick growth curves and 10x returns within 5-7 years, healthcare innovation often requires longer time horizons and more patient capital.

Data Ethics Matter

Perhaps the most troubling aspect of 23andMe’s bankruptcy is what happens to the genetic data of its 15 million customers. The company’s privacy policy may allow for customer data to be transferred during bankruptcy proceedings or acquisitions. As insurance companies and data brokers circle the carcass, customers who trusted the company with their most intimate biological information are right to be concerned.

The lesson? In healthcare, trust is your most valuable asset. Building sustainable business models that don’t rely on exploiting patient data isn’t only ethically sound, it’s simply good business. At CareYaya, we’ve made privacy-preserving technology central to our platform, recognizing that healthcare companies must be worthy stewards of sensitive information.

The Prescription for Health Tech Founders

If you’re building in healthcare, here’s my prescription:

  1. Raise appropriate capital: The next funding round isn’t just a milestone for you to hit. It’s a tool to enable thoughtful growth. Take only what you need to reach sustainability.
  2. Focus on unit economics early: Each customer interaction should create value for all stakeholders – patients, providers, and your business.
  3. Choose investors who understand healthcare: Not all money is created equal. Investors who expect consumer tech growth curves will push you toward bad decisions in healthcare.
  4. Build around evidence, not hype: Digital health funding cycles are notoriously fickle. Evidence-based solutions survive when hype fades.
  5. Privacy by design: In the age of AI and integrated health data, privacy breaches are beyond just PR problems. They’re absolutely existential threats.

The real tragedy of 23andMe isn’t just the billions in investor capital that evaporated. It’s the missed opportunity to build something genuinely transformative in healthcare. The company had the data, brand recognition, and consumer trust to create lasting impact, but instead chased growth at all costs.

The next generation of healthcare innovators should learn from these mistakes. Build companies focused on patient outcomes and sustainable business models. Choose the right capital partners. In healthcare innovation, the goal isn’t a quick exit. The real goal is to genuinely improve human health.

The truth is, we need more healthcare founders with the courage to say “we’re building this for the long run,” even when the Silicon Valley hype machine is constantly pushing for unicorn valuations. Healthcare isn’t just another market to disrupt, but an opportunity for innovation to help humanity in its most vulnerable moments. Patients everywhere are depending on us, and that deserves companies that are built to last. Let’s get to work!

 

Neal K. Shah is the CEO of CareYaya Health Technologies, one of LinkedIn’s Top 50 Startups in America in 2024, which runs an AI-powered technology platform that helps thousands of families with healthcare across America. He is also the Chairman of Counterforce Health, a leading AI platform for helping patients fight health insurance claim denials, by analyzing success patterns across similar cases and using evidence-based strategies. He has been a featured contributor for CNBC, Wall Street Journal, Barron’s and TechCrunch.