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Google, Sergey and 23andMe: Why it all makes sense

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There is a good deal of buzz in the tech-news world about a $3.9 million investment that Google has made in a company called 23andMe, a startup in hiring mode with dreams of “helping consumers understand and browse their genome”.

$3.9 million? What’s the big deal about a company that Google is investing less than 1/750th the cash is put out to buy DoubleClick? As Eric Schmidt has pointed out, Google buys companies with “1-2-3 people and you never, never hear about them.”

The big deal is this: Anne Wojcicki, who is a co-founder of 23andMe and who is also a shareholder and member of the board of directors, is married to Sergey Brin, Google’s President, Technology and one of its founders. Sergey also holds approximately 35% of Google’s Class B common stock.”

Oh, and some of that $3.9 million is going to pay back a $2.6 million loan that Brin made to 23andMe. Also, another participant in the round of investment is Genentech, whose CEO Arthur Levinson also sits on Google’s board.

All of which has prompted some bloggers to proclaim this “an obvious conflict of interest“. After all, this is all coming to light mere days after Brin broke so many hearts by marrying Wojcicki.

Okay, but hold on. A case could be made that there is a good reason for Google to make this deal. And although I realize I may end up regretting it, I am going to make that case.

The conflict-of-interest theory holds that Google was not only willing to breach business ethics, but defiantly disclosed it in an SEC filing. And that Brin was so intent on getting this deal done that he managed to get Levinson and his company, not to mention two top VC firms (Mohr Davidow and New Enterprise Associates) to join him in his lapse of integrity.

That’s a lot of intelligence to vanish all at the same time, on the same deal. There is a lot of crazy thinking in Silicon Valley these days, but not that crazy.

Marital bliss aside, does the deal make sense? The first thing I thought of when I read about is was another deal: Microsoft’s purchase of health-care search engine Medstory in February. It was the latest of small, quiet buys Microsoft has made to get a footing in the market for consumer-oriented health-care information. Microsoft sees a big market there one day, and an investment in 23andMe lets Google chart yet another collision course with Microsoft’s ambitions.

It’s also interesting to see Google and Genentech collaborating on a deal. Both have been innovative leaders in their respective industries, and this investment could signal that they see a rekindling in bioinformatics years after the initial buzz surrounding genomics fizzled away.

Finally, I’ve been poking around only a little bit, but I haven’t yet found a company that gives Google a better entry into a genomics-for-consumers startup. There is Family Tree DNA but it’s focused more on genealogy than health. And 454 Life Sciences which is geared more toward companies than consumers, and SNPedia more of a resource than a service.

That’s far from an exhaustive list, and if anyone can find a more deserving vehicle in this niche for Google’s money, please leave your comments below.

Whatever conflicts there may appear in this deal, it’s a far cry from a $2 million birthday party for Mrs. Kozlowski. If Google wants to really organize the world information, it needs to consider DNA, the most personal of data. And what 23andMe is purporting to sell is the ultimate in navel gazing.

19 Responses to “Google, Sergey and 23andMe: Why it all makes sense”

  1. To Genie:

    If you have the competence to comment on the substance of my comparison between Terahertz-based direct sequencing (developed by Nanophotonics Biosciences) and the limited value of high-density-microarray based genotyping (offered at $1000 per customer by 23andme, DeCode Genetics, and Navigenics) please do so. Otherwise, please stop your slander.

  2. Please save us from the self-promotional “Nanophotonics Biosciences (Menlo Park, CA)” comments. We get that you are trying to link this company with some interesting personal genomics discussions, and have nice search engine rating, but c’mon…

    If you really want people to evaluate Nanophotonics Biosciences, get a website and put up some information about the technology.

  3. The current genome sequence variation reference point used by 23andme, DeCode Genetics, and Navigenics is inadequate to be of any practical use to the consumer. Also, $1000 is an impractical cost for the limited value of the result.

    However, direct whole-genome DNA sequencing for $1000 per customer will empower the individual to practice preventative medicine without becoming a patient in the dysfunctional and bankrupt health care system.

    Current medical practice is an ancient art that will soon become extinct due to direct whole-genome DNA sequencing. Companies such as Nanophotonics Biosciences (Menlo Park, CA) will likely be the first to complete the development of this technology because they can identify individual molecules with up to Terahertz speed per device, which translates into reading individual customer’s entire genome of more than 3 billion subunits in less than 1 millisecond.

    Welcome to knowing yourself and others without the present degree of ambiguity.

  4. No significant mention about where this might all lead and what Google’s suits ultimately envision after possibly accomplishing some sort of “organization of the world’s information.”

    The assumption in all of this is that they are capable and deserve such a world role and that there is only their way of organizing it all?

    Behemoth’s in the fortune 500 need to be put in their place. Domination is closer to enslavement then some kind of benevolent corporate wet dream but most people interested in these subjects seem to overlook and ignore these things.

  5. GeneticsIsNotAJoke

    I do not completely believe in the information about telling you how to live so that you can avoid certain diseases. The truth of the matter is that the exact science to predict such things DOES NOT exits and such speculations could cause a lot of panic among a person’s life. What I mean is that there is no model which exists today, and predicts that if a person has a certain variant in his genome, he/she will get the disease in the future. Even if we assume that such a thing exists, i.e. if someone, somehow is able to test and tell you if you will get a disease in the future, NOTHING much can be done about it. The reason is simple: Pharama companies are not make PRE-Symptomatic drugs, i.e. they are only making drugs for diseases when you show symptoms of those diseases and almost nothing exists for you to take a drug, when you do not have the disease but might get it in the future. I believe such services by 23andme etc are just to increase panic in the world. Having said all this, it is definately a good service to offer, not now, but 10 years or so down the line, when you know exactly how these diseases are caused in the lifetime and when what can be done about them. I hope people really understand what they are doing before opting for such a service. If you have to get a disease in the future, it is better to enjoy your days in life till you get that disease, provided it is a disease for which nothing much can be done about it at this stage.

  6. Viktor Stolc

    The best company to enable Google into the genomics-for-consumers market would be the fastest DNA sequencing startup. One such company is Nanophotonics Biosciences, Inc. (Menlo Park, CA). They have been working in secrecy on their nanophotonic reader that can directly read single molecules nearly instantaneously without any biochemical manipulation. Should Google acquire NPB, it would be the end of privacy: Welcome to knowing yourself and others without ambiguity.

  7. The best thing is:

    Apparently nobody knows what exactly 23andMe is doing, how they are going about it or how far into realising their goals they are… and despite this, they might become a household name in just a few weeks…

    This is what it means to be born in the spotlight.

    Magnificent coup!

  8. BruceB

    I agree with earlier comments – what exactly is 23andMe’s business model? It will be quite interesting to see this develop. (And I agree with Venture Itch – this is a toe in the water for Google into bioinformatics, genomics and consumers.) But there are potential, huge ethical issues for 23andMe (depending on their business model): How will individual’s personal DNA information be kept private and confidential? If a gene variation is found that indicates a strong likelihood of future illness (breast cancer, e.g.)or even a death sentence (Huntington’s disease), will genetic counseling be made available? by whom? do consumers REALLY want some of this info? Also, what confidence will consumers have that the DNA analysis is done to the highest standards? Besides the business questions, there are huge personal and ethically questions. Should be interesting to see how this rolls out.

  9. My personal belief is that this deal is more about Sergey’s keen business sense than about personal relationship. Genome search is well posed to become next big thing for decades, and affiliation with Google is a marriage made in heaven when it comes to search.

  10. I agree that support of Anne Wojcicki’s company by Google goes beyond “being wife of CEO” and is reasonable! In 4-8 years DNA scanners will be on the market that will be able to analyze your whole DNA code and download it to your PC or even to your Google Account. The only issue will be: software (bioinformatics!) that would be able to search SUPER QUICKLY through this whole DNA information which in total is not big (whole DNA code of human is less than 4GB) but difficult to search for gene sequences that would be meaningful.

    In other words Google is spot on again and feel free to see my doodle related to Anne Wojcicki here:
    … that also reveals my scoop about Google: “adsense for images” !

  11. the google investment is not as much as issue of money or whether it is a good investment, but the message that it is sending. i am sure that anne is very bright and talented, but why would sergey and google even create this distracting scenario?

    sergey can pick up the phone and get multiple vc’s to line up for anne without google’s involvement, or have a few dollars fall out of his pocket to fund her company, so its not money.

    google and sergey are on top of the technology world, and with that comes the idea that you are infallable and above reproach. that is the true danger of these type of decisions. you see these hollywood stars in the paper because they pull the “do you know who I am?” speech at the hot nightclub when they can’t get into the vip. then they expect all their drinks to be comp’d because they are “insert your favorite spoiled hollywood starlet here.”

    there should be a little outrage at this deal in order that sergey doesn’t go down this cliche path.

  12. Joey P

    This is very interesting indeed. This isn’t Google’s first foray into BioTech, specifically genomics as they’ve worked with, “Craig Venter and others on groundbreaking genetic and biological research,” in the past :

    Also it’s no coincidence that Arthur Levinson both sits on Google’s board as well as invested in this company. One of the main bottlenecks in decoding the human genome is the vast computing power needed to decipher DNA. But with Google building data centers all over the place, as well as boasting one of the world’s most powerful supercomputers, maybe part of the funding 23andMe got was to pay for computer time.

    What’s really interesting is 23andMe’s statement, “By connecting you to others, we can also help put your genome into the larger context of human commonality and diversity.”

    I have to agree with Artashes, Google can afford to be altruistic and if this thing works out, it could be a HUGE step to better understanding the essence of life. So long as they don’t patent the findings and keep them private. (As many other biotech companies are doing now)

  13. I just think you’re justifying the outcome, not giving it a reason. If I pitched a genetics company to Google, I’d be laughed out the door.

    In business, you just don’t put yourself at risk like this, and compromise your integrity. Did I miss the day he lost his last $10 billion? They pay a billion for YouTube, but have a business justification. They pay $3 million for his wife’s company, and it looks like an inside deal. This is just an interest free loan, not unlike the days of Enron and Worldcom.

    Maybe they’d like to invest in a truck parts company too.

  14. Artashes

    Hold your horses.

    First, Sergei and his current wife knew each other from 10 years ago, not 10 weeks ago. Knowing each other well by now, they know exactly what each of them has been occupied with in their professional careers. One is a technology geek, another is a biotech geek. So what other person would one expect Brin to rely and trust when it comes to biotech-related information??

    Second, Google’s ambition to collect and organize the world’s information, they cannot overlook the “the ultimate level of information” which is human genome system. As Om pointed out, Google and Genentech is what makes it an ideal marriage for collaboration environment.

    Third, anyone who thinks Sergei is greedy (there are a few comments on that blog Om linked to) is an idiot. Why would someone with $16 billion and great philanthropic initiatives risk his “no Evil” reputation for a couple of million? The guy isn’t hiding anything from the public, and is generally smarter than most people in the room. Big deal – so it happened that he married a successful and bright young woman who also happens to be an expert in the field – is that a crime? :)


  15. Given that Adam Bosworth routinely blogs about Google’s interest in personalized healthcare and the fact that biological information is the ultimate level of information, Google’s interest in 23andMe is not surprising (there are other companies, e.g. BioWisdom which would be good fits for Google too). The only thing that got this the attention that it did was that Google disclosed it, for obvious reasons.

    Incidentally, at least officially, Brin recused himself. Also, the co-founder of 23andMe is a biotech/bioinformatics industry veteran (ex-Affymetrix), so all in all, given the fact that this is chump change, no big deal.

    Now, if I could find out more about what 23andMe was up to :).

  16. Jonathan

    you missed an “a” in your link code =]

    I think that there’s certainly a potential for conflict of interest in the deal, but I also think that people who see one there are just looking for something to complain about google about. Not that there’s no conflict of interest potentially there, but that allowing that conflict, like you said, to overcome ethics is simply a really big argument to make without much basis.