54gene

What did it do?

54gene was a genomics start-up based in Lagos and Washington that aimed to close the diversity gap in global drug research by collecting Africans' genomic data. It built a biobank and planned to offer data and research services to pharmaceutical companies. During the pandemic it became one of Nigeria's major Covid-19 testing providers.

Why did it shut down?

The company grew rapidly on Covid testing during the pandemic and hired large numbers of staff, but when demand for tests fell, revenue declined. In 2022 around 200 people were laid off in two waves, the founding CEO left and the valuation was reported to have dropped from $170 million to about $50 million. Three changes of CEO within a year, lawsuits and the high cost of genomics infrastructure put the company under strain. In July 2023 it began winding down its operations.

The story

Less than 3 per cent of the genetic material used in global drug research came from Africans. 54gene was founded in 2019 under the leadership of Dr Abasi Ene-Obong to fill that gap, and was accepted into Y Combinator the same year. With offices in Lagos and Washington, the company aimed to collect Africans' genomic data and make it available to pharmaceutical companies' research; building a biobank was also part of the plan. It soon came to be seen as the showcase company of Africa's budding biotech scene.

The pandemic opened an unexpected door. In 2020, through its clinical diagnostics unit, 54gene became one of Nigeria's largest Covid-19 testing providers and hired staff rapidly for the work; according to TechCabal's sources, testing brought in at least $20 million in revenue. On that momentum came a $15 million Series A in 2020 and, in 2021, a $25 million Series B joined by Adjuvant Capital, Cathay AfricInvest Innovation Fund, KdT Ventures and Endeavor Catalyst. According to people close to the matter, the Series B valued the company at $170 million; total investment reached $45 million.

When demand for testing waned, revenue fell. In August 2022, 95 people, most of them working in the testing unit, were laid off, followed in October by more than 100, equivalent to 55 per cent of the remaining workforce. Co-founder Ogochukwu Francis Osifo left in September, and Ene-Obong stepped down as CEO in October 2022. In a bridge round led by investors on the board, the valuation was reported to have fallen to about $50 million. The company went through three CEOs in a year; Teresia Bost, the former general counsel and interim CEO, sued the company and some executives, alleging discrimination and a hostile working environment.

In July 2023, in the words of then CEO Ron Chiarello, the company became financially unable to continue operating, and the wind-down began. By September its website was unreachable, buyers were being sought for its assets, including the biobank, and sources reported that some suppliers were still owed money.

54gene shows that companies growing on temporary revenue born of a crisis find out very quickly, once that revenue disappears, whether their core business can stand on its own.

Lessons for founders

• When you expand your headcount on temporary revenue that arrives during a crisis, plan in writing from the outset which team will stay once that revenue ends.
• In capital-intensive fields such as genomics, try to sign your first pharmaceutical contracts before making major infrastructure investments.
• A founder's departure and a string of CEO changes erode investor confidence quickly; hand over leadership with a written transition plan.

Sources

1. Exclusive: After raising $45m in two years, 54gene is shutting down (TechCabal, 2023-09-27)
2. 54gene valuation slashed by over $100M amid job cuts and CEO exit (TechCrunch, 2022-10-28)
3. African genomics startup, 54gene, lays off 100 employees following founder’s resignation (Techpoint Africa, 2022-10-31)

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