Implications of uBiome Bankruptcy

The recent filing of bankruptcy by uBiome should prove to be interesting as we look for possible repercussions in the Microbiome sector from the VC community who have previously supported companies in that sector.

Will they decide that the company is Theranos, Jr., or perhaps that the market is more limited than previously thought? Or simply that uBiome was too early in our understanding of the microbiome to create a sound business model? Either way the valuations and the ability to raise follow-on funding for other companies looking to build businesses in the broad area of the microbiome will likely be impacted. In particular some companies appear to be using microbiome “science” in areas where it’s unclear that the science supports the intended use. For example:
• Wineseq promises to tell wine grape growers the quality of their wine from a couple of samples of their vineyard soil microbiome. While there might be correlation between soil microbiome and grape quality, there is no scientific proof as to causality. We are skeptical they will find much success in the wine growing community beyond a few trials by early adopters; and
• Phylagen promises use of the microbiome as a way to validate product sourcing – again, a questionable scientific proposition. This comes as a pivot after failing to convince companies like Google to sequence their office staff microbiome with the intent to somehow increase worker productivity.

This early in our understanding of the microbiome; the science is still very much developing and our understanding of causality is very limited. At best, many microbiome companies over-promise on the underlying science. Prospective customers are attracted because they are intrigued by the potential of understanding the microbiome but ultimately fail to turn into buyers, much less repeat paying customers, once they find these offers provide little tangible value to them.

Exacerbating the challenge for many microbiome companies is that the sophisticated user communities and companies who need to understand the microbiome (e.g., food companies) are developing their own in-house expertise for these analyses, thereby shrinking the market of prospective customers.

Fido views this as a reminder about the need for these new initiatives to establish an attractive business model, grounded in defensible science, that provides meaningful and measurable value to customers, on a recurring basis. In our view uBiome will, unfortunately, not be the last microbiome company to struggle with their value proposition and hence their ability to attract ongoing customers.