Jan 2017

Forbes Interviews Tim Sullivan, President and CEO of Ancestry

Forbes

During Black Friday and Cyber Monday, bargain-hunting Americans went online to stock up on millions of Xboxes and televisions, Barbies and Lego sets, iPhones and countless other holiday goodies. They also bought a record-setting 560,000 DNA kits from Ancestry.com.

"That blew us away," CEO Tim Sullivan told FORBES in an interview.

The sharp 4-day spike helped Ancestry sell more than 1.4 million AncestryDNA kits, which typically cost $99, in the fourth quarter. Ancestry said it now has more than 3 million members in its DNA database. Six months earlier, the company announced it had 2 million members. (Sales of AncestryDNA kits are higher than the size of its database, as many customers don't use the kits right after they purchase them. Overall, the company has sold more than 3.5 million kits.)

"We think we'll have 10 million people connected within two years," Sullivan, said. "Our goal is to win." Ancestry's best-known rival, 23andme, said last year that it had more than 1 million members.

The rise in sales of DNA kits helped Ancestry, which also offers subscriptions to amateur and professional genealogists for access to its trove of research documents and family trees, to grow revenue to $850 million, up 25% form a year earlier. The company said it had about $300 million in EBITDA, or income, before interest, taxes, depreciation and amortization. Sullivan, who shared the financials exclusively with FORBES, is expected to announce them publicly at JP Morgan's annual Healthcare Conference in San Francisco on Tuesday.

Sullivan said that the success of AncestryDNA kits has helped the company's genealogy research subscription business. "As the DNA business has exploded, it has re-accelerated the growth in the core business, bringing costs of new subscriber acquisition down," he said. The company said about 15% of DNA kit buyers become Ancestry subscribers. The company has more than 2.5 million subscribers, who pay an average of $20 a month for access to Ancestry's research data and tools.

Sullivan said that while AncestryDNA launched with an eye toward making inroads into personalized health, the vast majority of customers who buy the kits are interested in finding more about their origins. "Health hasn't taken off as a consumer category, partly because of regulatory issues," he said. Ancestry continues to explore applications in health -- it has an ongoing partnership with Alphabet's Calico -- but plans to remain focused on genealogy for the time being. "Our focus now is building a massive network of people who are interested in how they are related to teach other and where they come from," Sullivan said.

As part of that effort, later this year, Ancestry will introduce a "community detection" product that will help customers find out not only their genetic makeup, but also where they came from. The product is based on algorithms that combine Ancestry's genealogical records with its DNA database. For example, a user might find out not only that she is an Ashkenazy Jew, but also that she is likely to have come from a specific region in Belarus.

Founded in Utah in 1983 as Ancestry Publishing, which created magazines for genealogy buffs, the company has had a remarkable journey from sleepy genealogy service to tech unicorn. Ancestry went public in 2009 before being taken private again by European private equity firm Permira in 2012 at a valuation of about $1.6 billion. In April of 2016, Silver Lake and GIC, Singapore's sovereign wealth fund, acquired large stakes in Ancestry in a deal that valued the company at $2.6 billion.

Sullivan said Silver Lake and GIC are expected to be long-term investors and that an IPO is "one path" forward. "We see strong profitable growth for the foreseeable future," he said. People close to the company said it plans to go public as early as this year.

Ancestry now employs some 1,700 people, most of them in Salt Lake City, though a 200-person team mostly focused on data science is based in San Francisco. Sullivan joined from Match.com, where he was chief executive officer, more than a decade ago.

Artlicle written by Miguel Helft, Forbes.