The Special Sauce of Austin’s Bio + Health Startup Scene: A Conversation with Investor Jason Scharf
I had the pleasure of interviewing Jason Scharf, a Bio + Health strategy leader and active early-stage investor in the life science and digital health sectors.
Within the corporate world, Jason has built and led teams in strategic planning, market intelligence, and innovation at large genomics, biopharma, and medtech companies such as Illumina, Amgen, and Becton Dickinson.
Jason invests in startups at the intersection of technology, biology, and the consumerization of health. He has served as a co-fund manager of the San Diego Angel Conference, an investor with NuFund Venture Group, and a mentor with both the NexCubed Digital Health Accelerator and the Illumina Accelerator.
In 2020 Jason moved from San Diego, California to Austin, Texas. One of the motivations behind this move was the observation that Austin was transforming into the next innovation powerhouse. To explore this evolution, teach regions how to build thriving ecosystems, and provide resources for innovators, he created and is the co-host of the Austin Next Podcast.
How did you break into tech investing?
I started my career wanting to be a molecular biologist. Ever since I first learned about genetics and DNA in middle school, the idea of playing mad scientist for a living was very appealing. That all changed in early college when I started working in a lab. Pipetting clear liquid from one vial to another hoping something appeared, while only occasionally seeing the big picture just broke my brain. Plus, I wasn’t very good at it.
Thankfully I could write and was taking an economics class on the advice of my father, so I was able to get a job doing PR for life sciences companies. That is where I realized there was a much better fit for me on the business side of science. And that quickly coalesced into a new vision around being an entrepreneur in the bio space.
My plan to execute that vision was to grow in the corporate world until I had the necessary credentials to raise money to build a company. It was only when that path stalled, I was asked why don’t I just start the company now. I began putting together a pitch deck and came to two important realizations. First there wasn’t a product or solution anywhere in the deck, as it was more trend oriented. Second at every step in my career I had gravitated towards roles that catalyzed innovation like strategy, intelligence, and market research, while avoiding builder roles like product management.
Realizing that investing might be the path forward, I came across the San Diego Angel Conference. Their goal was to activate new angels and teach them how to invest at this stage. At the time my perception of angels was that you had to write these huge checks to get in, but SDAC made it easy. They have a single SPV with a low per unit cost and the whole thing is structured as a 3-month pitch competition. So, the companies are working to get real investment and the investors take a learn by doing approach. And from there it was off to the races.
What is it that excites you about the Austin ecosystem?
Austin has benefited from being a 30-year overnight success. As we are seeing with the dispersion of innovation and capital away from the traditional hubs, Austin is primed to step into that slot as the next great region. I avoided saying the next Silicon Valley, because the key is being the first X and not the next Y. This applies as much to startups as it does to regions.
On the podcast we have broken down Austin’s special sauce into 6 superpowers
1. We are living in the future
- We are not only creating the future, we are deploying it. A great example is a local unicorn called ICON. They are using 3D printing robots to advance construction technology to build faster, cheaper, and better housing. Not only are they inventing this technology, but they are building the first 3D printed neighborhood right here in Austin.
2. We are cool
- South by Southwest, Austin City Limits, F1 Racing, Texas football, our growing food scene, and even our consumer goods like Yeti and Tito’s Vodka help export our culture and narrative around the country. People experience Austin for the 1st, 2nd, 3rd time through these events and products and it leaves a positive vibe. I think it was one of the big reasons we punch above our weight.
3. We have a culture of helping which leads to open networks and collaboration
- When I announced I was here in Austin and ready to meet and connect, I ended up with the beginnings of a network in Dallas, Houston, and San Antonio without even trying. If someone tells you they will make an introduction, 80% of the time they will. That is a hit rate unheard of anywhere else. This ability to easily connect increases opportunities for creative collisions and thus innovation more likely.
4. We are a part of the Texas Triangle and are creating a super region
- We have 4 growing hubs that are interconnected, but at the same time have unique strengths and identities. An example of this is playing out is the unicorn Colossal Biosciences, a de-extinction company trying to bring back the Wooly Mammoth. They have decided to lean into the triangle putting their CRISPR software development tech here in Austin and hardware in Dallas.
5. We build
- We have a manufacturing base that produces high end products like electric vehicles, rockets, semiconductors, and 3D printed houses. Not only does this create a differentiated talent pool, but also high paying middle class opportunities.
6. We leverage the power of “And”
- With all this sector diversity (space, life science, consumer package goods, consumer internet, hardware, semiconductor, quantum, AI, etc.), Austin is primed to be a leader in convergence technology. Bridging the gap between these sectors and mashing them together will create entirely new verticals and unicorns.
What has been your biggest challenge when it comes to finding the “right deals”?
The biggest challenge for me in finding the right deals is moving beyond the improved medical device or therapeutic. Traditionally when people see that you are an investor in this space, the first pitch will be I have this device or medtech that make this procedure 20% better. These innovations are necessary and we need to keep doing them; however, for me they are not as interesting because they have a very capped financial pathway and are not transformative. It is tough to create sustaining companies around these products, so they are primed for targeted M&A. That is great if that is your thesis. When looking for transformational companies with a sustained technology platform, they are harder to find. And someone saying they are a platform doesn’t necessarily make them one.
What major trends do you expect to see in HealthTech over the next 5 years that excites you?
The two major trends driving the sector over the next 5 years are 1) the consumerization of health and 2) the tech bio emergence.
The mantra for the 2010’s was that health companies needed to become tech companies before tech companies become health companies. Instead of big tech, what we have seen over the last couple of years is the retail giants CVS, Walgreens, Walmart, and Amazon making a bigger and bigger push into health and primary care. With Covid there was also the rise of telemedicine, when nearly 80% of all visits were virtual in 2020. Today it’s down to 25%, but compare that to 1% pre-pandemic. We have seen for the last 50 years a strong focus on the product innovation side of health, but I expect business model and delivery model innovation to result in a look and feel more consumer like over the next 5 years.
ChatGPT, Dall-E, and Quantum computing have all been the rage the past 18 months. These tools have quickly set their focus on the Bio + Health space with companies forming around them and others integrating them. At the same time biology is moving from something that is discovered to something that is engineered. The Bio Tech stack is taking shape where we can read and write everything from DNA to cells. The skills needed in the sector will start looking more like the traditional software sector and possibly create value at the same trajectory.
If you had to share, “words of wisdom,” with a Founder who’s about to start their own startup, what would they be?
Learn the art and skill of storytelling. A founder needs to craft a narrative that resonates and is digestible by customers, employees, and investors.
How can our readers follow you on social media?
Your readers can find me on LinkedIn and can find the Austin Next podcast on our Website, Twitter, YouTube, LinkedIn, Apple Podcast, Spotify, and all major podcast platforms.
