23Magic Secures RMB 100 Million Series B+ Financing Led by Matrix Partners China to Expand Market Presence and R&D

VCBeat (WeChat ID: vcbeat) learned at the earliest opportunity that on March 6, 2018, a well-known domestic consumer genetic testing company23mofang Announces Completion of RMB 100 Million in Series B+ Financing. This round of financing was led byJingweiLed by China, previous investors Yahui Medical, Hanwang Technology, and Deshang Qidian continued to participate in the follow-on investment.As of now,23mofang has secured a cumulative total of RMB 172.5 million in financing.

It is reported that the funds raised in this round of financing will be primarily allocated to marketing and research and development (R&D) investment. Zhou Kun, Founder and CEO of 23mofang, told VCBeat: “The consumer genetic testing market in China is experiencing explosive growth, but there are still insufficient production capacity and market education. Therefore, our primary focus moving forward is to achieve breakthroughs in these two areas.”

As of 2017, a total of 12 million people in the United States had undergone genetic sequencing, with 7 million of these tests completed in 2017 alone. This indicates that, driven by both declining costs and increased market education, the U.S. consumer genetic testing market has experienced explosive growth.

In China, the number of people covered by genetic testing is also rising sharply. By 2016, only 100,000 people in China had completed gene sequencing; by the end of 2017, this number had risen to 300,000, with a population penetration rate of approximately 1.03%.

This figure is nearly identical to the U.S. consumer genomics penetration rate from five years ago. In 2012, the penetration rate in the United States was approximately 1.1%; by 2017, it had reached 3.75%. If China’s market penetration rate were to reach 3.5% in the future, this would translate to 50 million people undergoing genetic sequencing.

“However, China’s current production capacity for consumer genetic testing is insufficient,” said Zhou Kun. “Therefore, we will focus our future investments on two areas: expanding production capacity and reducing costs, as well as strengthening market education and awareness.”

On August 8, 2017, 23mofang reduced the price of its comprehensive genetic testing package (ancestry + genetic health) from RMB 999 to RMB 499. This price marked a historic low for ancestry testing products and tripled the sales volume of 23mofang’s products. When asked about the reason for the price reduction, Zhou Kun responded that it had been under consideration for a long time.

Initially, genetic and consumer-grade testing products in the United States were all priced at $999. Naturally, sales were dismal at such a high price point. Later, companies reduced the price to $199—a steep drop from the previous level—yet the market response remained muted. The market only began to mature comprehensively when prices fell to $99.

Zhou Kun believes that, compared with the U.S. market, the price of RMB 999 in the Chinese market is not high; however, given China’s consumption levels, this price still needs to be lowered.

“We had originally planned to lower the price to 699 yuan on August 1, but after considerable deliberation on the evening of July 30, we ultimately decided to reduce it to 499 yuan,” Zhou Kun revealed to VCBeat. However, as all prior preparations were based on the 699-yuan price point, the official price reduction was postponed to August 8. Now, nearly half a year after the price cut, its positive impact is clearly evident, further driving market adoption of the product.

“Although the price has dropped by half compared to before, the revenue generated for the company is no less than before due to the expanded sales scale. ‘At first, many people didn’t understand and even said we would destroy the industry. But in fact, this price still allows for a reasonable gross margin, and costs have been continuously decreasing,’ Zhou Kun revealed. ‘We are currently at the break-even point and will soon achieve profitability.’”

As the industry scales up, these midstream testing providers are even more likely to exert downward pressure on the prices of upstream products. Greater purchasing volume grants them stronger bargaining power—a fundamental logic that applies across every industry.

Similarly, this explains why 23mofang, a consumer genetic testing company, has invested heavily in building its own laboratory and even applying for qualifications as a medical inspection institute. After the initial construction of the laboratory is completed, they will be able to take the initiative in cost control and production capacity management.

To enhance market education and outreach, 23mofang registered a subsidiary named Yuanma Jishi. The subsidiary is primarily responsible for operating the 23mofang WeChat official account, delivering engaging and informative genetic science content.

Initially, the WeChat Official Account platform served as the primary sales channel. As brand reputation gradually took shape, word-of-mouth among users became the main mode of dissemination, and the Official Account evolved into a platform for user interaction and feedback.

In addition, sales through e-commerce channels on JD.com and Taobao are also growing rapidly, with 23mofang currently ranking first in sales volume on both platforms. “Sales revenue from these channels still accounts for a very small proportion of the total, but it is growing quickly,” revealed Zhou Kun. “On February 10, we officially obtained the registration certificate for our medical laboratory, and our Tmall store will soon commence operations.”

When asked whether there were plans to develop offline operations, Zhou Kun admitted that it was still too early. The United States previously had many offline testing services, such as those for food and health management, but none of these initiatives gained traction. The consumer genomics market has been driven by the rise of two companies, 23andMe and Ancestry, both of which started out online. “Therefore, 23mofang has remained committed to its online-only strategy.”

As the market matures, these two companies are also beginning to expand into offline channels, attempting to sell their products in supermarkets and convenience stores. However, this sales approach is still premature for China. It is difficult to clearly communicate the function of a diagnostic test kit to consumers, whereas products suitable for supermarket sales must be simple and easy to understand.

In terms of product design, 23mofang engages users in the process of self-management. Instead, it aims to foster correct understanding among users through test reports and daily educational campaigns. For instance, users learn what genes are and how significantly they impact daily life. Only when users have a proper understanding can they correctly interpret their test results; this helps prevent excessive panic or even extreme actions, such as those taken by Angelina Jolie, upon receiving unfavorable test outcomes.

“We aim to help users gain self-awareness; only with a clear understanding of life and disease will they proactively improve their quality of daily life,” emphasized Zhou Kun.

Zhou Kun refers to this process as “power yourself,” an emotion that 23mofang aims to convey to users through its products. At the same time, he emphasizes that this process must be closely aligned with daily life, being both interesting and useful.

In the public perception, consumer-grade genetic testing may place greater emphasis on product marketing. However, among 23mofang’s team of over 80 employees, only four are dedicated to marketing. The company believes that research and development (R&D) and product design are fundamental. Users demand products that are more affordable, more accurate, and more useful. Only by delivering high-quality products can effective market promotion follow.

“Since 2017, our data volume has grown substantially, enabling us to verify and assess the accuracy of literature. I believe we will be able to do even more in the future,” said Zhou Kun.

As of 2017, 23mofang had accumulated over 150,000 samples, with a growth rate exceeding 100% per quarter. Leveraging this data, 23mofang is well-positioned to conduct more extensive and in-depth research in genetics and anthropology. Over the past six months, 23mofang has launched several new features based on these data, including tests for favism, ABO blood type, and lactose intolerance, all provided to users as free updates.

It is reported that the company’s fourth-generation product may be launched in April.