BREAKING: Troubled poop-testing startup uBiome is laying off half its staff

Hollis Johnson / Business Insider

Microbiome-testing startup uBiome is laying off 114 employees on Wednesday, or about half its staff.
uBiome was founded in 2012 and raised $105 million from investors to explore the microbiome, a "forgotten organ."
The FBI raided uBiome’s headquarters in April, reportedly related to the company’s billing practices.
Two months later, all 3 top execs at uBiome left their posts, Business Insider reported. Three new executives from the consulting firm Goldin Associates were brought in to replace them.
Visit Business Insider’s homepage for more stories.

Microbiome-testing company uBiome on Wednesday is laying off half its staff as the troubled startup, once valued at $600 million, looks for a path forward.

The company is cutting 114 of the 229 people it current employs, according to a source familiar with the layoffs. 42 are employees based in the US, while 72 layoffs are occurring in Latin America, the person said. uBiome is planning to keep its labs open.

"As we work to implement a go-forward plan for uBiome, we are making changes to the Company’s organizational structure that impact certain teams and positions," Curtis Solsvig, the interim uBiome CEO and a director at Goldin Associates, said in a statement provided to Business Insider. "This was a difficult decision, but we are committed to positioning uBiome for sustainable growth."

uBiome accidentally informed some of its workers they were being let go on Monday in a payroll error, according to four current and former uBiome employees. After the accidental notification, Solsvig called an emergency meeting, the people said.

It has been a turbulent few months for uBiome, whose tests rely on samples of human poop. At the end of June, all three of the company’s top executives left their posts, Business Insider reported.

Cofounders and co-CEOs Zachary Apte and Jessica Richman resigned, after having been placed on administrative leave on the heels of an FBI raid in April. The raid was reportedly part of an investigation into uBiome’s billing practices.

John Rakow, uBiome’s general counsel and interim CEO as of May 1, also departed. In a message to Business Insider, Rakow said he left to spend more time with family.

To run the company, the board appointed three new executives from the consulting firm Goldin Associates, including Solsvig.

Employees are being informed of their fates in a pair of meetings on Wednesday, according to insiders at uBiome. On Monday, at least 40 workers were mistakenly sent two paystubs—the first would have been accurate if their last day was Monday. The second stub was hidden by the system. Both were immediately retracted, and Solsvig then called the emergency meeting.

Trouble at uBiome has been brewing for years, Business Insider previously reported.

The company stored poop samples in second-hand freezers that lacked temperature monitors, according to ex-employees, and didn’t get a government-certified lab space until almost three years later, government officials said. Staff regularly hid from a founder whom one ex-employee called "abusive," insiders said. And uBiome had an undisclosed partnership with birth control startup Nurx, the focus of a recent New York Times investigation.

From citizen science project to FBI raid

Founded in 2012 with support from the University of California, San Francisco and donations from a Kickstarter fundraiser, uBiome sold tests that provide information about the bacteria in your body, called the microbiome. Most of the tests worked by having customers use a swab to take a sample of their poop from used toilet paper.

For five years, uBiome only sold tests that people could buy directly, without the involvement of a doctor. Those tests were portrayed as casual, personal experiments. But starting in 2017, uBiome began selling two other tests. These tests, uBiome said, provided medical insight into people’s health. As such, they required a doctor’s approval and would be covered by insurance.

Around that time, uBiome began attracting attention from Silicon Valley investors. It raised $105 million from backers including OS Fund, 8VC, Andreessen Horowitz, and Y Combinator, and was valued at $600 million.

Then in April, the FBI raided uBiome’s offices, reportedly as part of an investigation into how the company was charging patients and insurers for the medical tests. The US Attorney’s Office for the Northern District of California and "several other US and California governmental agencies" were involved in the FBI search, Rakow said in a letter sent to investors on May 8.

On May 1, Apte and Richman were placed on leave from the company. uBiome’s board of directors launched an independent probe, with former federal prosecutor George Canellos, a partner at the law firm Milbank, leading it.

Five days later, uBiome suspended sales of both medical tests.

Customers reported problems for more than a year

For at least a year before the FBI raid, people who had taken one of uBiome’s two medical tests had been complaining of billing issues, according to a review of documents submitted to the Federal Trade Commission and obtained by Business Insider. The complaints detail instances of surprise bills as high as $3,000, and of bills sent to insurers for tests that weren’t delivered.

The complaints involve two tests — one called SmartGut which looks at bacteria in the gut, and another called SmartJane with looks at bacteria in the vagina.

Since launching those medical tests in 2017, uBiome overstated their medical value and prioritized growth over patient care, Business Insider reported earlier this month based on interviews with 11 former uBiome employees along with lawyers, outside experts, and government officials.

"Some of my uBiome results remind me of astrology," one former employee said.

Advisors and directors are dwindling

Following the FBI raid, uBiome’s board of directors narrowed significantly.

uBiome’s board had six members as recently as April. In May, two board members resigned, while in April, former Novartis CEO Joe Jimenez left the board as well.

With Richman and Apte’s departure from uBiome’s board, 8VC partner Kimmy Scotti was the sole remaining board member. In November 2016, 8VC led uBiome’s series B funding round of just under $16 million.

NOW WATCH: Elon Musk’s multibillion-dollar Starship rocket could one day take people to the moon and Mars

DON’T MISS: uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here’s the inside story.

Source: Business Insider – lramsey@businessinsider.com (Lydia Ramsey)