This VC had a near-death experience and it totally changed what he invests in

Key Points
  • Zachary thought he had a rare form of cancer and was getting conflicting viewpoints from his doctors.
  • To get accurate results, he found himself taking matters into his own hands.
  • When he went back to investing, he turned from internet and software start-ups to biotech companies that are working to save lives.
Why top Silicon Valley VC George Zachary is placing all of his bets in biotech

Silicon Valley investor George Zachary has a knack for betting early on Internet successes, with Twitter and Microsoft-owned Yammer among his lucrative wins.

But you won't hear the venture capitalist touting those businesses anymore. Not since a doctor gave him the scare of his life. Two years ago, a sudden bout of intense abdominal pains sent Zachary, now 51, to the emergency room at Stanford University Medical Center for some tests and an X-Ray.

The next morning, Zachary got a call from the radiologist that changed everything. A mass the size of his fist was located near his pelvis. Based on a preliminary analysis of the image, the doctor said that it looked like sarcoma, a rare cancer found in connective tissues.

"I nearly fell off my chair," recalled Zachary, a general partner at Charles River Ventures, after hearing the doctor utter the word cancer for the first time. "That started the process of me learning whether I was going to live or die."

What followed was a firsthand view of a broken healthcare system that forced Zachary to take matters into his own hands, in a desperate effort to get timely answers and accurate results.

It's a story he's kept quiet about publicly until now. And it was the impetus for shifting his investment area away from consumer internet and software businesses, into what he describes as "advancing health through computer science."

"My experience as a patient was insane," he said. "I couldn't believe how screwed up the health system was."

George Zachary
Jeniece Pettitt | CNBC

It all started in 2010, when Zachary went on a health kick. His family has a history of heart disease and two close friends died of cancer in recent years. Zachary, who has a twin boy and girl, started testing his blood monthly, exercising regularly and experimenting with a protein-rich diet, inspired by his Greek ancestors.

Then came the excruciating pain in 2015 that led him to the hospital. He thought it was related to statins he'd been taking as a preventative measure. Following the X-ray, he knew it was far more serious, but he struggled to get answers. It would take two terrifying months to get a diagnosis.

"It was rough," recalled Zachary's close friend Jamis MacNiven, owner of the legendary Silicon Valley restaurant Buck's of Woodside. "We all sent him off to different specialists that we knew, but it was weeks before it was definitive."

My experience as a patient was insane.
George Zachary
partner at Charles River Ventures

An MRI couldn't be scheduled for several weeks. And after tapping his network of friends and family in the medical field, Zachary learned that a tissue biopsy could pose some serious risks. If the mass was malignant, an operation could cause the cancer to spread. When he asked his doctor about it, Zachary said the response was, "Do you have a medical degree?"

A pathologist at Stanford later diagnosed Zachary with a lipoma, a non-cancerous tissue growth that's typically not life-threatening. Zachary's gut told him there was more to it, but he couldn't convince the pathologist to take a second look. That was despite Zachary being categorized as a "VIP" after administrators learned of his successful venture career.

Eventually, Zachary headed north to San Francisco's UCSF Medical Center. His fears were confirmed: The mass was not a lipoma and it needed to be removed.

The decision to have surgery was particularly frightening. The surgeon told Zachary that he may have to amputate his leg to help curb the spread of the cancer. With a sense of helplessness, Zachary agreed to let him do it if necessary.

Hours later, he was relieved to wake up with both legs. And there was more good news: The tumor was benign. Zachary would live.

'I needed to do something to help these people'

Zachary didn't immediately jump into biotech investing after his recovery. For a time, he continued to meet with tech startups, but he fell into cycles of denial and depression.

"Some blah blah blah app would come in, but I wasn't receptive to listening to any tech-related thing," he said.

On a family vacation in the Virgin Islands the following summer, Zachary made the decision to invest in an area that would make a difference and save lives. When he returned, he told his partners that he had to change direction towards health care, or he would need to step aside. The experience of feeling like a "dead man walking," as he put it, got him thinking about other patients that lacked his network and resources.

Jeniece Pettitt | CNBC

"I needed to do something to help these people," he said. "That didn't necessarily mean bringing them a new better version of an app; it meant giving them the ability to live."

In April, Zachary addressed a roomful of CRV's limited partners about his new passion. He talked at length about the growing market for what he was calling "deep insight bioengineering," which would reshape the multi-trillion dollar health system. He said that he wouldn't be a traditional biotech investor, putting money into promising scientific research that requires decade-long development cycles.

What he saw instead was an opportunity to bring new technologies like machine learning to medicine, to help surface new diagnostic tools and therapies.

He got the green light, turning CRV into one of a growing number of Silicon Valley tech firms to focus on health care. Investors poured $4.2 billion into the intersection of health and technology in 2016: Andreessen Horowitz now has a bio fund, GV (formerly Google Ventures) has doctors and academics on its team, and Khosla Ventures has made a number of early-stage health hardware bets. CRV had made a few health-tech bets in the past, led by Zachary.

Some blah blah blah app would come in, but I wasn't receptive to listening to any tech-related thing.
George Zachary

Annie Kadavy, a former CRV investor, said Zachary was obsessive about doing his homework when assessing a deal.

"He was always the partner that had the most interest in health," said Kadavy, who sat with Zachary in dozens of briefings. "He'd walk into the meeting with a digital health founder, and know just as much, if not more, about the market."

Traditional life sciences investors have mixed feelings about Silicon Valley's heightened interest in the space, especially if tech investors bring the hype and drive up valuations to Internet company levels.

"I hope that (new) backers understand that patients' lives are at stake," said Alexis Borisy, a partner at biotech firm Third Rock Ventures, speaking about the growing number of tech investors in the space.

No PhD

On one cross-country flight, Zachary ended up seated next to a seasoned biopharma venture capitalist, who was looking into a health-tech company that Zachary was also pursuing. (Zachary declined to name the investor to avoid jeopardizing their relationship.)

As they were talking, the investor asked, "What did you do your PhD in to think you can invest in this area?" Zachary recalled.

Zachary responded that he didn't have a PhD. And neither, he added, did his friend Elon Musk, who's now developing autonomous cars and supersonic rockets.

"I would say every minute I am learning about this space," Zachary said. "It's very different than investing in tech."

His first deal was a start-up called Freenome. To make the case to his partners, Zachary wrote a 16-page memo. He spent six weeks doing his homework, which he said is more than the "sum amount of diligence" he did in the past 10 years of his venture career.

Freenome aims to use machine learning to detect early signs of cancer in the blood. To succeed, it will need to demonstrate the efficacy and accuracy of its test in a series of costly clinical trials, and then win over clinicians.

"He seemed really committed and read all the scientific papers that our technology was based on," said Gabriel Otte, a co-founder of Freenome. "We were very selective of our tech investors and wanted to make sure they had either knowledge or experience in our space."

Zachary isn't interested in trivial advances. He wants to invest only in companies that are chasing "big enough breakthroughs" to save lives and prevent their families from experiencing unnecessary misery.

He remembers what it was like being in a hospital bed, surrounded by other patients.

"I saw people with cancer waiting to hopefully live to return to their families and $15-an-hour jobs," said Zachary. "All I know is that I wanted to stay alive to take care of my wife and kids."