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Arivale’s offices were empty this week after the company’s abrupt closure. (GeekWire Photo)

Founded in 2015, Seattle startup Arivale aspired to pioneer a new sector called scientific wellness, combining genetic testing with personal coaching to improve the health of its members. Arivale raised more than $50 million in funding, employed 120 people, and served about 5,000 members over the life of its program.

PREVIOUSLY: Scientific wellness startup Arivale closes abruptly in ‘tragic’ end to vision to transform personal health

So optimistic was the company about this field that it trademarked the term “scientific wellness.” Seattle’s tech community voted Arivale the 2016 GeekWire Startup of the Year. Its co-founder, genomics legend Leroy “Lee” Hood, said when Arivale launched that the company “really stands a chance of being the Google or Microsoft of this whole arena.”

It wasn’t to be. Four years later, Arivale abruptly closed its doors this week, surprising its customers and employees, many of whom were left wondering what happened.

Clayton Lewis, Arivale’s CEO, said in an interview that the company faced significant business headwinds, including the high costs of customer acquisition and genetic testing. But bigger picture, he said, the company also grappled with societal challenges, including the reluctance of Americans to invest in their health despite success stories among Arivale’s members.

“I do not believe at this point that there is a meaningful market in the United States for a program that’s going to help people do something in the future,” he said. “I think that Americans, related to their health, are so living in the moment that the idea of optimizing your health so you can live this vibrant, joyful life as you age” isn’t appealing to enough people.

But some former employees said Arivale also made things more difficult for itself. One former employee, who requested anonymity, told GeekWire that Arivale didn’t spend its marketing dollars effectively, focusing too much on events and parties rather than more effective digital campaigns; hired too many coaches and had many of them sitting idle for significant portions of the day; and had a culture where top executives seemed unwilling to take feedback from rank-and-file employees on ways that they and the company could improve.

Arivale launched at a cost of $3,500 per year for its flagship program but later shifted to a model where many of its members were paying a $99/month subscription for ongoing genetic testing and coaching. Lewis said, in hindsight, he would have changed the way the company rolled out and priced its service. The company believed that it would see more adoption when it lowered its pricing and expanded its service nationally after starting with a small number of states.

“The mistake I would tell you I made as a CEO is that I drank my own Kool-Aid,” Lewis said. “For the first few years, we were not trying to rapidly scale the business because we wanted to prove the efficacy of the program. … Instead of launching with lower-cost, simpler programs, we stayed laser-focused on our flagship offering and we clearly did that to our peril.”

Genomics pioneer Lee Hood, left, and Clayton Lewis, the CEO of Arivale. (GeekWire File Photo)

Earlier this month, Hood spoke bullishly about the future of Arivale. “In the future, we’ll be able to manage chronic diseases before they show up,” he said at an event hosted by Town Hall Seattle and the Institute for Systems Biology, which Hood co-founded. “We’re already doing this with Alzheimer’s, and early results look spectacular.”

But Hood also admitted that Arivale’s wellness approach was “pretty expensive” at more than a thousand dollars per year.

“In principle, most people spend a lot more money than that utter trivia. And if you could get healthy, I’d argue it’s a real bargain,” he said.

Of Hood, Lewis said that “I’ve never met a man who’s a more determined optimist.”

In the wake of the company’s closure, Lewis was blunter than Hood about the cost issues, calling the company’s research-based approach to wellness “wickedly expensive.” The startup’s resources were strained both by customer acquisition costs and the high price of novel testing services.

Lewis said, “We tried an extraordinary number of ways to get people to join Arivale and we could not find a path to actually make that work as a viable business. Getting people into the program, the customer acquisition cost, we couldn’t master that.”

Arivale CEO Clayton Lewis and co-founder Lee Hood accept the award for Startup of the Year at the 2016 GeekWire Awards.

The company also had problems bringing down the costs of its services, such as tests for a person’s genetic makeup, microbiome and more than 40 blood markers. Arivale had expected the cost of those tests to fall more rapidly than they did.

Paula Ladd, an entrepreneur who founded a genetic testing startup called SNPgenomics around the same time Arivale was getting started, said that the science isn’t advanced enough to provide broad-based wellness advice.

“What role does genetics plays in wellness? As a researcher, I don’t understand it well enough. How could the general public understand it?” Ladd said.

Lewis agreed that Arivale arrived on the scene before its time. “We were very audacious,” he said. “What I believe is we were probably a decade too early.”

Dr. Darren White, CEO of employee health and wellness startup Aduro, said a version of Arivale’s approach to personalized health coaching will inevitably reach consumers.

“Health systems are already putting genetic testing inside primary care. It will be part of your annual visit with your doctor,” he said. Aduro does not yet incorporate genetic testing but plans to do so once costs decline sufficiently.

Arivale’s closure led to the layoffs of more than 120 employees, who received the news without warning. “There’s no elegant way to make decisions like this. And so people were very shocked,” Lewis said.

Lewis said that, while no decisions had been made, the Institute for Systems Biology was considering hiring some former Arivale employees. White said that he thought the Arivale team “will be absorbed pretty quickly” by the industry.

Arivale competed in the wellness space with genetic testing companies like 23andMe, Orig3n and the Mayo Clinic’s GeneGuide. Startups that offered health advice based on microbiome tests include Viome, uBiome and Thryve. But Lewis said he considered Arivale unique in providing a comprehensive approach, with testing and coaching.

Assessing rival firms, Lewis said that he thought genetic testing companies like 23andMe have been successful due to their lower, one-time price point and simpler offering, but he said that approach offers “surprise and delight” and “genetic entertainment” rather than improving health. As for those that give health advice based on microbiome tests, he said that some startups have made “false” claims.

Last week, the wellness industry suffered a major blow after a large study looking at nearly 33,000 employees in workplace wellness programs found “no significant effects on clinical measures of health, health care spending and utilization, or employment outcomes after 18 months.”

Human Longevity, a genomics startup backed by Celgene and DNA-sequencing company Illumina, saw its valuation fall 80 percent late last year as investors lost faith in its ability to sell its services to wealthy individuals and pharmaceutical companies.

Yet many data-driven wellness startups continue to draw funding. Viome, a startup that makes nutritional recommendations based on microbiome testing, recently raised $25 million in a round that included backing from Salesforce CEO Marc Benioff.

Arivale attempted to win customers directly through a healthcare system to no avail. Working with Michigan-based Spectrum Health, Arivale launched a test program directly in a health clinic. “Despite the fact that, if you walked in, it basically was an Arivale commercial, we saw about a 10% conversion into the program,” Lewis said.

Ladd said she thought the general public does not yet crave this sort of service. “I don’t come home from work wishing I had tested my microbiome, but I do wonder whether I have influenza or not,” she said.

Despite the startup’s challenges, Lewis said it was able to bring around 20 percent of customers with prediabetic or heart disease indicators to within a normal range in six months. Lewis, who competes in Ironman triathlons, was able to overcome a prediabetic diagnosis by following Arivale’s program.

Lee Hood spoke at the 2019 Life Science Innovation Northwest conference on Wednesday, Apr. 24, shortly before the news of Arivale’s closure was made public.

In a statement this week, Hood acknowledged the company’s business challenges but said he’s still a believer in the larger vision.

“We started Arivale with the goal of helping people improve wellness and avoid disease through personalized data and actionable health coaching. This approach has positively changed many lives and has shown great scientific merit. While Arivale’s direct-to-consumer model isn’t yet sustainable because of the high cost of the assays, I am proud of and thankful to everyone at Arivale for their dedication and devotion to this mission. They gave real meaning to the term scientific (or quantitative) wellness, which will be a major component of 21st-century medicine.”

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