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When Function Health announced its $298 million Series B at a $2.5 billion valuation in November 2024, the company revealed a striking statistic: members have completed 50 million lab tests since 2023. But behind the impressive headline lies a more complex question about the sustainability of the direct-to-consumer lab testing boom.
Using the 50 million tests figure, we can reverse-engineer Function's approximate revenue trajectory. With around 100 tests per panel and members testing twice yearly, this translates to roughly 250,000 paid member-years at $499 per membership, suggesting approximately $125 million in cumulative revenue over three years. If revenue growth accelerated recently, the company likely generated $50-75 million in the last twelve months alone.
At a $2.5 billion valuation, Function commands a 30-50x multiple on trailing revenue. While ambitious for most businesses, such valuations aren't unprecedented in the longevity space, where investors bet on future potential rather than current economics.
Yet Function's competitive environment raises questions about whether these numbers can grow sustainably.
Function partners with Quest Diagnostics to offer about 160 lab tests covering organ health, hormones, metabolic markers, and cancer signals. The problem? Nearly every competitor follows an identical playbook: partner with Quest or LabCorp, bundle comprehensive blood panels, add a dashboard, and charge an annual subscription.
Consider the competitive landscape:
Function responded by cutting its own price from $499 to $365, marketing it as $1 per day. This pricing pressure signals a classic race to the bottom in what's becoming a commoditized market.
The unit economics of direct-to-consumer lab testing present fundamental challenges:
Rising Customer Acquisition Costs: As more companies flood the market with similar offerings, the cost to acquire each new customer inevitably climbs. Function benefits from celebrity co-founder Dr. Mark Hyman's 3 million Instagram followers and investors like Matt Damon, Zac Efron, and Magic Johnson who provide organic distribution. But most competitors must spend heavily on marketing.
Thin Margins: Much of each membership fee flows directly to laboratory partners like Quest Diagnostics and LabCorp. Quest Diagnostics reported approximately $9.6 billion in 2024 revenue, while competitor LabCorp generated around $16 billion. These incumbents control the infrastructure and capture significant economics from each test.
Retention Challenges: Annual memberships mean companies must continuously convince customers to renew. Not everyone needs or wants 100+ biomarker tests twice yearly indefinitely.
Limited Differentiation: When every platform uses the same labs and similar test panels, differentiation comes down to user interface and "analysis," which increasingly feels like window dressing on commodity data.
The global direct-to-consumer laboratory testing market was valued at $3.44 billion in 2024 and is projected to reach approximately $8.07 billion by 2034, representing a compound annual growth rate of 8.90%. A Newsweek analysis noted the market was valued at $3.62 billion in 2025 and is expected to approach $6 billion by 2030.
While growth is solid, it's not explosive enough to support the dozens of well-funded competitors entering the space. For context, the direct-to-consumer testing market remains relatively small compared to Quest Diagnostics' core business, which serves over 150 million patients annually.
So why did 57 investors commit $298 million at a $2.5 billion valuation despite these headwinds? The announcement itself provides clues.
Function waited five months after closing the round to announce it publicly, timing the news with the launch of its Medical Intelligence Lab. This initiative aims to leverage hundreds of thousands of member blood test results to build proprietary research capabilities for spotting early disease signals and transforming health patterns into actionable interventions.
In other words, investors didn't just buy a lab testing subscription business. They bought:
Function has already begun this expansion, acquiring whole-body MRI provider Ezra to add advanced imaging to its offerings.
The optimistic view: Function becomes the "health operating system" for consumers, using its testing foundation to build an ecosystem of preventive health services. The Medical Intelligence Lab produces breakthrough research that creates defensible competitive advantages. The celebrity backing and distribution continue driving growth while competitors struggle with acquisition costs.
The skeptical view: Function faces relentless commoditization as competitors match features and undercut pricing. Customer acquisition costs rise while retention remains challenging. The core testing business becomes a low-margin commodity, and the promised AI and research capabilities fail to materialize into sustainable differentiation or additional revenue streams.
Several industry observers have noted concerning parallels. Steve Ardire pointed to cautionary tales including Forward Health ($660 million raised, shut down overnight), Olive AI ($850 million raised, sold for parts), Babylon Health ($4 billion valuation, collapsed), and Pear Therapeutics (FDA-approved, bankrupt).
For Function and its competitors to succeed long-term, several factors will prove critical:
Moving beyond dashboards: As one investor noted, these companies have built "engagement engines, not economic engines." The breakthrough comes when longitudinal biomarker data ties to measurable health outcomes, risk reduction, and cost savings that employers, insurance plans, and healthcare systems will pay for.
Clinical validation: Proprietary algorithms and "medical intelligence" only matter if they produce clinically validated, actionable insights that improve health outcomes. Without peer-reviewed evidence, these remain marketing claims.
Sustainable unit economics: Someone needs to prove this model works at scale with healthy margins, not just impressive top-line growth fueled by venture capital.
Regulatory navigation: As these companies grow, regulatory scrutiny around medical claims, data privacy, and clinical validation will intensify.
Function Health's $2.5 billion valuation reflects investor optimism about the longevity and preventive health movement more than confidence in subscription lab testing as a standalone business. The company's true test will be executing on its vision to transform commodity testing into a differentiated health intelligence platform.
The direct-to-consumer lab testing boom has democratized access to comprehensive health data, which represents genuine progress. But as pricing pressure mounts and competition intensifies, the market appears headed for consolidation. Not every well-funded startup will survive.
For consumers, this competition benefits them in the short term through lower prices and better services. For investors, the question remains whether any company can build sustainable competitive advantages in what increasingly looks like a commodity business, or whether the laboratory incumbents ultimately capture most of the value creation.
Function's next chapter will reveal whether blood testing can serve as the foundation for something bigger, or whether the company will become another cautionary tale in the crowded landscape of digital health disruption.