Arivale

What did it do?

Arivale was a Seattle-based health start-up that ran genetic, blood and microbiome tests on participants and offered personalised nutrition and wellness coaching based on the results. It aimed to turn the genomics pioneer Leroy Hood's idea of “scientific wellness” into a consumer programme. The programme launched in 2015 and reached around 5,000 people.

Why did it shut down?

The tests were expensive, and although the programme price was cut from USD 3,500 a year to USD 99 a month, revenue did not cover costs. According to the company's management, the cost of acquiring customers also remained high. In early 2019 an attempt to pivot towards research partnerships failed to pay off, and operating at a loss became unsustainable. In April 2019 Arivale abruptly halted the programme and laid off all its staff.

The story

By midday on 24 April 2019, all of Seattle-based Arivale's roughly 120 employees had lost their jobs. Customers, meanwhile, learned from a message received the same day that the health coaching programme they had signed up to was ending with immediate effect. The company's explanation came down to one sentence: the cost of providing the service was higher than what customers could pay.

Arivale was the commercial arm of an idea that the genomics pioneer Leroy Hood, who had led the Caltech team that developed the automated DNA sequencer, called “scientific wellness”. The company was founded in 2014 by a team that included Hood and Clayton Lewis, who came from the venture capital firm Maveron. The programme, launched in 2015, ran genetic, blood and microbiome tests on participants and provided personalised nutrition and lifestyle coaching based on the results. Arivale raised more than USD 50 million from investors including ARCH Venture Partners, Polaris and Maveron, and won GeekWire's Startup of the Year award in 2016.

The problem was price. The programme started at USD 3,500 a year; over time the price was cut, and at closure most customers were paying USD 99 a month for the main programme. Over its lifetime the company served around 5,000 people, and a paper describing improvements in the health markers of around 2,500 participants was accepted for publication in Scientific Reports. But the tests remained expensive; according to chief executive Lewis, the cost of acquiring customers was also a serious problem. According to MedCity News, an attempt in early 2019 to change direction through research partnerships was too little, too late.

In its closure message the company wrote that it believed the cost of the tests would one day fall to a level at which they could be offered to consumers at an affordable price, but that until then it could not keep operating at a loss. Some of Arivale's work continued at the Institute for Systems Biology, the non-profit Hood co-founded.

The Arivale case shows that a scientifically impressive product cannot survive by selling directly to consumers when it depends on tests whose cost curve has not yet come down. Customers loving the programme did not change the fact that every customer cost the company money.

Lessons for founders

• If your unit cost depends on a supplier's price (for example, laboratory tests), plan for when that price will fall on the basis of contracts, not assumptions.
• Before selling an expensive programme directly to consumers, test institutional payers such as employers, insurers or hospitals.
• Do not assume that high customer satisfaction will fix unit economics on its own; if every customer loses you money, growth magnifies the loss.

Sources

1. Scientific wellness startup Arivale closes abruptly in 'tragic' end to vision to transform personal health (GeekWire, 2019-04-24)
2. Personalized health coaching startup Arivale shuts down (MedCity News, 2019-04-28)
3. Closure of high-tech medical firm Arivale stuns patients: 'I feel as if one of my arms was cut off' (The Seattle Times, 2019-04-26)

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