Why a crypto nonprofit with $65m wants to buy the DNA data of 15 million people

The Sei Foundation, a crypto nonprofit, is making a long shot bid to acquire 23andMe, the bankrupt consumer DNA testing firm.

The unlikely buyer says it wants to give 23andMe’s customers’ control of their DNA data using blockchain technology, and eventually allow them to monetise it.

“We are talking to some partners who would syndicate on the deal,” Eleanor Davies, head of DeSci at the Sei Foundation, told DL News in an interview. “It’s not a publicity stunt.”

DeSci

Decentralised science, or DeSci, is a movement that aims to build public infrastructure for funding, creating, and reviewing scientific pursuits using blockchain technology.

On March 28, 23andMe received permission from a US Bankruptcy Court to sell the genetic data for 15 million customers to potential bidders, igniting fears over how the data might be used under new ownership.

California Attorney General Rob Bonta issued a consumer alert, citing the potential data privacy concerns surrounding 23andMe’s sale.

Insurance and health companies are reportedly among the potential buyers, Phil Mataras, founder of decentralised cloud network AR.IO, told DL News.

“With the health insurance situation in the US as punitive as it is, this could be disastrous for some 23andMe customers,” Mataras said.

Security measures

The company says its security measures surrounding the genetic data will remain in place after its sale. But its privacy policy says those measures can be changed at any time.

To be sure, users can request that 23andMe delete their genetic data. However, it’s likely that many customers, especially those who first used the firm’s services when it launched 17 years ago, aren’t aware their data is at risk.

The Sei Foundation is a nonprofit tasked with developing the Sei blockchain.

‘We aim to go above and beyond in terms of protecting users’ data privacy.’

Eleanor Davies, The SEI Foundation

It launched in August 2023, positioning itself as a faster, more performant alternative to top smart contract network Ethereum.

However, adoption has been slow. Users have so far deposited $410 million into apps on the blockchain, making it the 17th biggest blockchain project.

Profit motive

If the Sei Foundation manages to acquire 23andMe, it may have a difficult path.

The business failed under its current model because of the one-and-done nature of its flagship product — the DNA ancestry test. After taking the test once, there’s no reason for customers to take it again.

Davies herself doesn’t have a scientific background, but rather experience in advising on healthcare and biotechnology investments.

She said the Sei Foundation has assembled a large team of funders and advisers with experience in data management, healthcare, and the pharmaceuticals industry to aid the Sei Foundation’s decentralised science initiative.

The plan is to monetise 23andMe’s existing genetic database — with customer consent — while keeping the DNA testing part of the business running.

She described a system that could look like an exchange or marketplace with confidential transfers, where users could pick and choose who to let use their genetic information.

For example, customers could allow their genetic data to contribute to scientific research on only rare diseases.

Security concerns

How exactly the Sei blockchain fits into this plan isn’t clear.

Davies said she couldn’t share specifics but added that the genetic data itself would be stored offchain using enterprise level data storage.

“We aim to go above and beyond in terms of protecting users’ data privacy,” she said.

Security and privacy are big concerns for many of 23andMe’s customers. In October 2023, hackers stole 7 million customers’ data. The stolen information included people’s names, addresses and genetic data and was sold online.

In response, some impacted users filed a class action lawsuit against the company.

The Sei Foundation said it would use the Sei blockchain in how data is accessed, who accesses it, and the incentive mechanisms surrounding the monetisation of genetic data.

Doing so could return control of customers’ data back to them. But it might also create new problems.

Non-custodial crypto wallets are vulnerable. If a user loses the password-like codes that allow access to the wallet, the contents could be lost forever.

“[We] want to make it as frictionless as possible for users to be able to decide how their data is used,” Davies said. “It wouldn’t have a crypto front end.”

$65m war chest

When asked where the money for the purchase of 23andMe would come from, Davies pointed to the Sei Foundation’s $65 million DeSci venture fund called Sapien Capital.

Whether this on its own will be enough to put in a competitive bid for 23andMe isn’t clear.

The firm’s market capitalisation hovers around $13 million, but it has $277 million in assets and $214 million in liabilities, court documents show.

The number of interested parties could spark a bidding war.

Ryan Sitton, the CEO of data firm Pinnacle, another prospective buyer, has offered shareholders $100 million for the company.

Anne Wojcicki, a co-founder of 23andMe and its former CEO, has also expressed renewed interest in buying the company after failing twice before.

Davies declined to name which other investors the Sei Foundation is in talks with to syndicate on a potential deal.

Offers to purchase 23andMe are due on May 7, and a final hearing on the sale will be held in June.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.