Kian Sadeghi of Nucleus Genomics on replacing 23andMe with true whole-genome sequencing

stock. Let's just call it. So, let's bring him on down. " Keon, how you doing? There he is. What is up? Welcome to the show. Are you guys celebrating? I mean, it's kind of it's kind of uh depressing. It's kind of macob to celebrate on when your when your rivals go bankrupt. But what happened?

Listen, let's put this tweet up, John. We got a tweet up here. I put up late last night. I think it was around 2 a. m. Eastern or so. Maybe 1 2 a. m. Eastern. I saw the announcement. The first thing I have to say to 23 and me is thank you. Because the reality is, you stand the shoulders of giants here, right?

We stand the shoulders of giants. Old companies do. You know, you go from Blockbuster to Netflix. You go from, you know, Blackberry to the iPhone. You know, go from MySpace to Facebook. And now you're going from 23 and me to nucleus genomics, right? The industry is wide open.

Nucleus is years ahead and we're going to seize the moment. But before I talk about that, thank you to 23 and me. Did a great job building the foundation and now it's time for something new. That's the reality. So yeah, talk me through the key.

It seemed like your post was really focused on the on the technology and the price to sequence and the difference between shotgun sequencing and full sequencing. Uh talk to me about that. How different is the technology? And also, why can't 23 and me just use the same tech as you? Yeah, great question.

So, pull up, I have another tweet here, John, that actually I just put another tweet thread out here that I think I should pull up on the screen. Give some further context on what's going on and what 20 users should actually do. It's currently riding high on Twitter.

Uh, but no, difference between micro genome sequencing. I mean, it's massive. It's like a horse versus a car, right? You're talking about T technology missing millions and millions of genetic markers. effectively it's not actually useful for any really disease risk assessment.

So it's fundamentally different here and the same question is the classic innovators dilemma's problem right why can't this big company do this thing well because imagine you know 23 means a castle they have to pull out the foundation of their castle everything has to change technology product regulatory infrastructure every single part of 23 had to change to actually embrace whole genome sequencing this is capitalism at work we love capitalism around here 23 means dying because we couldn't adapt nucleus is sending because we are embracing the newest genetic technology but actually I think even goes beyond technology yeah go ahead John, you have something to say?

No, I I I I just want to push on that more because like if I'm like I I I like you.

I'm not going to compete with you, but if I was a potential buyer, I would buy 23 and me, rip out shotgun sequencing, drop in, you know, call up, I don't know, aluminina or something and figure out how to do whole genome and you would independently derive nucleus. That's the beauty. Yeah, exactly.

You have to change all the models. Yeah. Yeah. Yeah.

May maybe the denovo approach is is correct and and I mean that's why I'm bullish on you, but you know at the same time it just it I I'm still not really understanding like why is it such rocket science for them to just offer all hey we're on V2 now we we're we're like you still spit in the tube.

You still pay a hundred bucks. You mail it to us. We just put it in a different machine. It doesn't seem that complicated to me. No offense. Well, it's a massive informatics change. It's a massive regulatory change. It's extremely non-trivial. It's like kind of like being like, you know, horses both get us places.

Why can't they just make an engine? It's it's fundamentally different, you know. Uh but really the thing that 23 got wrong, it wasn't just technology. It was also actually the philosophy of the business.

They really viewed data gathering as a means to make drugs, but because it's such a small sliver of your DNA, you actually can't really make drugs off of it, which ended up making that such that the customer wasn't the customer. The customer is the pharma company.

And and I want to say here something really important which is a lot of people ask me right now what should I do with my 23 data? What should I do with my 23 data?

Well, first and foremost you should move it to a HIPACO compliant environment right like what one of the most shocking things about 23 means it's actually not HIPPA compliant right it doesn't follow the gold standard clinical regulations that ensure your data is safeguarded. So Nucleus for example we are HIPO compliant.

We are a physicianordered clinical grade test. We make sure no genetic or protected health information is shared with any third party. It's very similar to like going to your doctor's office.

Another thing to know and I hope you have the thread up here which is you know we outlined some of these things is we you know 23 and me the reality is that it's actually been illegal since 2008 for any insurance company any health insurance company as well any employer to use your genetic information that's been illegal for two decades it's very very important to say that so there are some safeguards in place even though not 23 is not HIPPA compliance but if you're a 23 user and you're listening to this you should do two things one is you download your genetic data secure your genetic data and then two which is micro data small snapshot of DNA, but two, you should probably put them in a hippo compliant environment.

You can actually DM me. I can help you doing that. Uh some customers are currently uploading their DNA to nucleus currently because they know that we're going to take very good care of their DNA because it is of course ultimately all about the patient. Talk about uh there's not total clarity right now.

23 and me is not HIPPA compliant. I'm trying to understand in a in you know 23 million in a bankruptcy environment is the value of them as an asset. It's pretty damaged. It's pretty damaged brand. There's not a lot of brand value necessarily.

Uh what are what are some of the risks of of the types of buyers for that business? And it seems very possible from our initial research that somebody could buy it and with the explicit intent of not even rebooting the business but just monetizing the underlying user data.

So is the value the data or just the revenue stream because I'm sure that they have marketing campaigns running. I'm sure they're bringing in customers and charging them 100 bucks a test or something. There's some there's some normal business going on there.

might not be profitable but like maybe you could cut costs and get to profitability or is this is this nightmare scenario of someone buys it just for the data is that at all credible? Yeah. So it's a good question.

I think one thing this nucleus actively is looking into right now considering whether it makes sense you know earlier I'm sure you remember you know we explored the possibility of acquiring 23me and we're looking into right now whether that would make sense to go and see what we can do and how we can help in this situation.

I think the thing to remember is that again this is microarray data. It's a small sliver of someone's DNA. A lot of the most critical genetic markers that you wouldn't want someone to know about simply do not exist in the data. And that cannot be overstated because it is microade data. It is a small sliver of your DNA.

It misses the most fundamental health risk that someone could have. So in some respects it's a little bit overblown when people are worried. But sometimes there's this funny narrative. People are like I did 23 me. I learned that you know my pee smells like asparagus. you know, that if that gets out, I mean, that's bad.

It should never have gone out, but like, you know, not that big of a deal. Yeah. Yeah. It can't be both. Yeah. Yeah. It can't be both doomsday. They're getting my DNA and also the product isn't that good and it's not that reliable. It can't be. Exactly. Exactly. I would encourage you think about this.

You can do there's there's two really extreme narratives about 23 minutes. Actually, start looking at it. It's like, oh, I learned nothing. It's like, why did you think you learned nothing? Because it's a small sl of your DNA. That's like one narrative. Then it's like, oh, it's the end of the world. My data shared.

It's like, well, actually, you know, the reality is that it's a smallest of your DNA. Obviously, no data should ever get breached. No, no one's saying that. Of course not. But, of course, it's it's micro data.

And so, what I recommend is download the data knowing that one, there's f better regulations that protect you and protect all people who do genetic testing and that there are actual regulations that exist in clinical genetics companies like Nucleus that can safeguard your data, right?

It's like going to your doctor's office. So, that's the thing I think that should be top of mind uh for consumers right now. You you mentioned that that they were potentially selling data to pharmaceutical companies.

Again, that's kind of this weird narrative where if the data is not that valuable, then who are they selling it to? But this is also this this is one of the again this is a great point. This is one of the reason why 20 me failed because originally the founder Ann, she said, "Okay, listen. We're going to use this data.

People are actually she has a quote on the record. People are going to donate data to 23 and me. " In other words, one of the reasons why 20 me failed is they never wanted to build a true consumer health application. He was never actually about, hey, can we provide you with life-saving or medical insights.

He was about, hey, because he was doing the genealology business for a long time. Hey, we're going to get ancestry on. We're going to get as many people as possible. We're going to take this data and then go to GSK. They worked with, you know, GSK, for example.

The problem with that is this is the thing they underestimate because it is a small slip of your DNA.

It's fundamentally not useful for drug discovery, which caught up with them because then if your business model is based off collecting a lot of data to then make drugs, but it's microwave data, it's kind of it doesn't work, right? the customer doesn't want what you're buying which is why eventually 23 collapsed.

So in some sense it's a technological problem which is again it's the smallest bit of your DNA but also I think it's a philosophical problem they didn't the customer wasn't the customer the farmer company was the customer right and so that's why people say I didn't learn anything about from 23 me 23 didn't really their goal was not to actually to really help you in your health and and that's another big shift from 23 to nucleus right we're hipaco compliant our techn is far more advanced we actually want to give you medical grade insight that helps you live longer helps you have healthy family as well and then also we want continue to build out that platform beyond just genetics, blood, wearables, urine analyses, full body MRIs and beyond into a true consumer health application.

Imagine 23 we shipped, right? They how far ahead that they be? They'd be 20 years ahead of everyone, right? Consumer health has just recently hit the zeitgeist. By 20 would have had a head start, but that wasn't the customer. And so, it's not just technological difference.

It's actually a very strong philosophical difference as well.

How uh how are they such a you know they they have the sort of one-time purchase problem uh that that could contribute to challenges from a business standpoint uh becomes much harder if you're sort of get this upfront you know payment and then you know I'm assuming the average 23 and me customer just like you know gets testing done you know maybe references back at some point but uh why why don't you think they were able to avoid bankruptcy given the scale that they were at, right?

This is a company that does hundreds of millions of topline revenue. You would think they would be able to figure out some e economic like they've been in trouble for a long time. You would have thought that they would have gone found, you know, Ann would have gone founder mode and and like figured out a way.

Well, it sounds like she tried and and is now bidding on the business to go founder mode. Maybe I I always say that there's no such thing as a genetics company. There's only such thing as a healthcare company. And the reason why people always say 23 is one time, 23 is one time, right?

There was actually no difficulty for 23me to add in other diagnostic tests and build a more consumer health application that was vertically integrated. But again, their customer was the pharma company. Yeah. They actually they didn't care that it was one time. They got your DNA and that is the fundamental difference.

23 could have solved that problem. I mean, you look at some companies today, you know, some blood testing companies are building on top of Quest Diagnostics. 23 could have snapped their fingers and launched that product in one minute. Right? But of course that wasn't the cost and that wasn't the business model.

That wasn't the strategy. So this is a great example where strategy meets technology which eventually results in failure. Right? You have the innovation problem. The genetics has really changed the 20 million has been around since 2006. 2006 the cost of being a genome was you know 10 million a sample.

Today nucleund it's one of the greatest technological ships ever right. And so all these pieces together you have you know 23 collapsing which is sad but I also think it's the sign it's time for something new. It's time for a true health consumer health application. Can you talk a little bit about ancestry. com?

They were acquired for by Blackstone for 4. 7 billion. It seems like that business is doing pretty well. Again, not a genetics company particularly. They have their little niche in ancestry. People really love that. They become experts there. But how does that business play with you? And great question 23 me.

You know, it's interesting because one time a very very wise investor of ours said he said retention isn't about the product, it's about the use case. Okay, it's a very sharp comment and I think ancestry is a good example of that because genealogy is a very super high touch point uh uh business. People love genealogy.

They love looking at who their ancestors are. People like literally spend their entire hobby actually around this, right? And ancestry capitalized on that. They realized that genetics was a mean to do better genealogy.

23 and me never realized are they a genealogy business are they a health business are they a drug discovery business they never got that right for nucleus we use genetics to help people live longer and have healthy families the value prop is very clear it's not about DNA DNA is a means to accomplish some end goal for the user which is namely better health and having a healthier family right that is a fundamental uh uh difference and to your point answers is a multi a multi-billion dollar business nera people say genetics business don't work nera a clinical genetics business.

It's about at 20 billion dollars. Okay. So, genetics is in its absolute infancy stage here. And I really do think in the next decade, you're going to see the rise of a consumer health behemoth. And that consumer health behemoth is going to have a whole genome, the entire someone's DNA at its foundation.

And it's going to impact not just someone's health, but again also their family. And nucleus is building that future.

So is it is it possible then that 23 andme had become this sort of toxic brand and even the pharmaceutical companies said you know we we like the data they have but we don't want to kind of like even mess around here because there's huge potential for blowback right I imagine you know there there's there's some risk there is that part of why they well the pharma companies worked at 23me but because the data is such a small sliver they realized that there was something to be found the The the most important thing for drug discovery in a genetics context is finding rare genetic markers because those actually elucidate mechanism to identify novel rare genetic markers.

You need a whole genome file, right? Because a micro again is such a small bit of your DNA. If your DNA is a thousand page book said one pages you one page, you can't actually get anything out of that. So it didn't work from a drug perspective business. It didn't work from a consumer health business. Hence its collapse.

U there's a great actually chart here. I don't know if you guys It's an old tweet Peter of mine. Maybe you guys pull it up later. It's from bedrock. Uh does does screen sharing work? Can I share my screen? I think you can actually. Oh, here we go. We're going to try. This is a technology first here.

Whatever you screen share is live. So, do not It's live. Ignore the tabs. There's a lot of tabs up there. It's actually small perfectly. Yeah, it looks great. Okay. So, here we have uh you know this great thing. Shout out to Bedrock, right? They have this narrative violations, right? Clean tech is dead. You have Tesla.

Day naps always fads. You have Tinder. Consumer is dead. You have Canva. And then of course the most recent artificial intelligence has been overhyped under for 10 years. You have open AI. I will tell you what is next in 2024. Popular narrative right now is consumer genetics is dead.

And then right now Nucleus is open AI. That is what's going on. Let's go pump the bags. Let's ring the size gong for on nucleus. Uh, do you have any idea how quickly do you have any sort of read on how quickly this is going to get resolved?

Well, you know, Nucleus might be the one resolving it if you know what I'm saying. Listen, I'm out of rubbing his hands. Some of our some of our big boy investors is in my, you know, they currently text me saying, "K, what can we do here?

" And, you know, you know, we we tried for a quarter of a billion dollars, you know, what's $50 million? Hey, you have to ask. Getting cheaper every day. getting cheaper every day. There we go. That's great. Well, good luck to you, Keon. I hope you can pull it off. I know you'll be successful regardless of what happens.

Thanks for jumping on. Love it. Great. I hope this gong is going to get hit for a very specific reason soon. Absolutely. Good luck to you. Thanks, guys. Talk to you soon. Thanks for coming on. Bye. Breaking news.

I love some breaking news and I love having founders hop on to help us break it down because we are going full golden retriever mode. I don't understand anything about that, but that's why we get the experts on. That's the way the show works. Experts. Trust the experts, folks.

Trust Trust the Seedstage founder pumping his bags. Don't even trust yourself. Don't even just the Exactly. Um, do you want to you want to finish out the timeline right now? What do you think? Yeah, we can do a little bit. Uh, I thought this one from Liz Wessle.

This has to be the frothiest VC market for seed and preede I've seen in my tech lifetime, 2012 to present. It's becoming truly absurd. Uh I ramp investor seed stage. Wow. She did the seed round. Crazy. Yep. Goed. Uh I haven't seen anything crazier personally. I mean then 2022.

I was going to say crypto stuff was really crazy. Like the last the last company that I committed to was like a $60 million post seed round, but the founder had sold his last company for hundreds of millions and I don't care.

But again, I'm not an institutional fund that's trying to, you know, cares about ownership targets or anything like that. This is good context from Jason Lumpkin. Uh he says, "I would be fine with it if public multiples were higher.

" And so, yeah, I mean, this is why, you know, we had Logan Bartlett on the show to kind of break down what's happening in the public markets because there should be some sort of tracking between these two.

Uh, and and it's when there's a really crazy disconnect that you think, hey, maybe the public markets are uh a leading indicator on what will happen to venture valuations. Um, but at the same time, there's a lot of companies that are getting to higher ARRs faster than ever, and it'll be interesting.

The weirdest outcome I think would be that, you know, seed and preede deals, they get overpaid for and they don't produce the same number of power law outcomes.

Like maybe there's not a a single trillion dollar company that comes out of this vintage, but all of those companies wind up producing like a hundred million of IBIDA and they're like good businesses and and then like the funds kind of perform anyway. Like that would be a very strange outcome.

would look nothing like venture has ever, but to see a to it would be very interesting to see a venture fund vintage 2025 produce a reasonable irr without a power law winner in the portfolio. Yeah, I have no idea if it's possible, but it' be interesting.

the the to steelman that there's potentially we've accumulated in the last 25ish years the knowh how to repeatedly build valuable software tech just technology businesses generally and in that scenario paying these expensive prices because you have this incredible team. Yep.

and maybe you only get a 3x on that one investment, but you get a bunch of other 3xs and collectively you get a 2x fund and that becomes venture. That'd be very interesting. And that there's nothing if if that happens and I don't I can argue against it easily. Yeah. as well.

But if that happens, it's not necessarily bad because ask any dude in private equity that has like, you know, uh has just been doing these sort of 2x funds for however many decades, they've done very well. So yeah, of course. Um and yeah, we want higher success rates for founders and teams, too.

Even if it's lower terminal sort of like exit values. It's also interesting that I mean Open AI is maybe positioned itself as like potentially the power law winner of AI. Like people are clearly underwriting that deal at a future valuation of like a trillion dollars.

They think it's going to be a big consumer tech company. And no one's really concretized how like what the source of monopoly power will be in that com in that company. Like there's not really a network effect yet. At least there's no the value is it becomes it's just an aggregation theory thing.

it becomes a verb and it's it's like Google competition is always a click away but you accumulate so much customer support that you just data and by nature of the usage the product gets so much better I would think so too and then you know so maybe we're bullish who knows um but I mean it's certainly not cornered resource because the LLMs are you know commoditized now it's not really scale because everyone can serve these all the hyperscalers can serve these it's really just that that attention uh anyway we should have Augustus on to talk about this next one soon.

Yeah. Uh from Lee Zin. I actually want to have him on to talk about his uh Oh yeah, the debate with Did you listen to Ronda Santis or or Yeah, his his he was debating Ron. Well, Ronda Santis has been trying to ban cloud seating. has been trying to ban cloud seating.

And RFK recently came out saying, "I support what Ronda Santis is doing. " Like part of the Maja movement is anti-cloud seating. And Augustus came out very strongly saying like, "No, RFK, like don't do that. " like like this there's more nuance to this argument and so we should unpack that.

We should unpack his uh testimony which was uh very interesting and we should also have him talk about this which is that China is erasing deserts from its map.

The first time I ever met Augustus at Josh Steinman's house having some cigars was he could just comes up to me and he's like oh yeah did you know that like the Gobi desert is going away and I was like what are you talking about dude? And he's like, "Yeah, China's erasing their deserts. " And I was like, "How?

" He was like, "Yeah, they're basically just planting tons and tons of trees. " And that's exactly what this video shows. Uh he says, "By far 65 million mu of desert has been greened. That's around the same area of Denmark.

" And you can watch this video and it's crazy because it's just like literally just sand dunes and then the most verdant lush greenery you've ever seen. And it just looks like wow. Like I would never want to live in the desert, but I would absolutely live on this beautiful lush farmland.

Like imagine plopping like a nice farm farmhouse on that. And that's just like the American dream. And we could do that with our deserts in America. And so yeah. Yeah.

And so we talked to Augustus about this earlier saying, you know, after you do cloud seeding, like is there a tree planting startup that needs to be built or will that be your company?

and he was kind of saying, "Maybe it'll be a different company, but uh but I want this to happen and I want to figure out what the economics of this business are. Is it just a handout from the uh from the Chinese government? If so, do we need to do that in America?

Uh if there is there a way that you can do this just with the free market, that would be amazing, you know. " Yeah. And this ties into the terraforming stuff with the uh what's that the salt and sea? Yep. If we can get water back into that bad boy, then everything around it. But uh we have some uh breaking news.

I wanted to pull it up. Uh it's not actually breaking, but well, it is breaking. It's the nucleus genomics team. Oh, yeah. Uh they were all posted up watching uh Keon uh come on the show. So, Ben Ben, pull it up if you can. Look at the team here locked in. All meetings were cancelled, but shout out to the team.

Uh thank you for keeping our thanks for watching genetic data safe. That's great. Uh it's great having uh Keon on the show. He's he's definitely built for television. We talked about this. We talked about this earlier with Lulu like what is his format? What's the format?

He's a good poster, but he's great in a just come on and rock and roll and and and rub the thinks about acquiring a a multi former multi-billion dollar company. Absolutely fantastic. Well, that's a great place to end the show. Thank you for watching. Go leave us a fivestar review.

Put an ad for your business or your fund on the show uh into that. If you're breaking news, if you're raising the big money, if you think we should raise the ring the size gong for you, give us a call. We'll have you on the show. And we have a number of founders this week coming on to break their fundraises.

Uh I can't wait. Yeah, it is a beautiful We're going to have to set the minimum threshold and then just raise it. It's like, oh, 50 million that's, you know, that's a Tuesday for us. Yeah. Call us when you're raising 80. Exactly.

But right now it's a golden opportunity for anyone who's it is making making waves in venture. It's a beautiful week to get to work in and around technology for sure. So many interesting stories. And if we keep up this pace, we will be doing a Dom episode probably next week. I can't wait. We're at 26K. I can't wait.

6K out. Let's go. Thank you for everyone who's