I'm getting a bit sick of the high priests of corporate governance getting bent out of shape about every little violation of their puritanical standards. The latest episode is the kerfuffle over Google, Inc.'s (NASDAQ: GOOG) co-founder Sergei Brin's wife who started a company -- 23andMe that's developing ways "to help you make sense of your own genetic information" -- in which Google invested $3.9 million.
The media's offering some gossip to make the medicine go down more easily. According to the New York Times [registration required], Brin's wife, Anne Wojcicki -- the Times said it's pronounced Wo-JIT-skee -- is a likable overachiever who received a biology degree from Yale! Security was so tight at her wedding to Brin on a private Bahamas isle that those departing on Brin's custom jet didn't know where they were heading!! Brin doesn't flaunt his wealth in the real estate market -- he lives in "a quiet residential neighborhood in Palo Alto!!!" And Fortune posts that 23andMe's test discovered that Warren and Jimmy Buffett are NOT related!!!!
These articles miss the key question: "Will Google investors get a return on their $3.9 million?"
Any corporate venture investment -- such as 23andMe -- should pass these three tests:
- Is its industry attractive? There is no answer to this question because the industry does not yet exist. 23andMe will provide "individualized genetic maps" costing $1,000 compared to billions with earlier technologies. As medicine advances, those who have had their genes mapped could be notified of developments concerning their own genes, including news of relevant drug discoveries. These maps could also help people join social networks of people who share the most genetic traits.
- Can Google help it compete? It's possible to imagine, although quite 1984-ish, that Google's technology could be used to search these genetic maps. For example, someone looking for a match for a bone marrow transplant could enter his or her genetic map, Google would search its database and up would pop the closest fits. I can only imagine the political firestorm over such applications. But it could also be a valuable life-saving tool. And I guess it's not hard to imagine pharmaceutical companies bidding for keyword search placement either -- making it a great addition to Google's advertising business.
- Is the price right? The amount of money Google invested is trivial from a shareholder perspective. If the entire investment is lost, it won't matter. I don't know the pre-money valuation used; whether it was comparable to that of similar investments, if they exist, or what percentage of 23andMe Google got for its $3.9 million. But if 23andMe succeeds, Google's share could be of meaningful value to public shareholders.
If a deal passes these three tests, it shouldn't matter whether the deal comes from Brin's brother, sister, mother, father, aunt, or uncle. If 23andMe's equity was purchased at a reasonable price and gains a significant market share in a big industry, then Google shareholders will ultimately benefit.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Google.
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Reader Comments (Page 1 of 1)
5-29-2007 @ 11:23AM
John said...
I think it is brilliant just like everything that Google does. Apparently Warren Buffet and Jimmy Buffet [ the singer who is also and investor in Berkshire Hathaway] used it and found a common ancestor 10,000 years ago. That is space age science.
5-29-2007 @ 12:09PM
ERVIN H0FFART said...
DNAPrint (DNAG) has similar aims and objectives as 23andMe. It is a penny stock company, and trades OTC.
Companies in this BioTech field are on the cutting edge and most likely will be heard from in a big way very soon.