Armon Sharei, “Biotech Rockstar IPOs”

SQZ’s successful IPO validates the vision laid out by Armon Sharei, PhD in this interview recorded two years ago. In accessible language, this genius founder explains the approach that has big strategic players excited. SQZ is the model I have in mind when I invest in biotech companies. Find out why.

Armon Sharei wants to train our immune system to fight cancer. We hear a lot of claims like this, however when a mega-pharmaceutical company like Roche inks a $1.3 billion deal to work on it, we pay attention. At age 29, Armon convinced not only Roche but gimlet-eyed VCs to back him. How did he do this? How did he go from a boy living in Iran to being one of the stars of MIT’s storied Langer Lab?

Part of Armon’s secret is the ability to explain thickly complex ideas in accessible language that does not over simplify. He is that rarest of creatures, a scientist of the first rank who speaks lucidly and acts practically. I am grateful that Armon took time out from curing cancer to share his experiences with us in this inspiring interview.

If you are a scientist thinking of founding a company or an investor thinking of investing in a biotech startup you could learn a lot by listening to this interview with Armon Sharei and then going to searching under the biotech topic.


  • Armon Sharei Bio
  • Childhood Spent in Iran & Dubai, Finished High School in Marin County
  • Why Armon Sharei Wanted to Be a Scientist
  • Why Leave Edenic Bay Area for Purgatorial Boston?
  • SQZ Technology Comes from Failed Attempt to Shoot Genetic Materials into Cells
  • How the Idea of Starting a Company Came About
  • “I think one of the main examples, which is kind of the subject we’ve been pursuing most deeply at the company in two different projects, is the idea of telling the immune system what to target in the context of cancer”.
  • SQZ Technology Excels at Getting Protein Fragments into Cells – Very Promising Method of Training Our Immune System to Fight Cancer
  • Sal Asks Listeners to Subscribe & Review on iTunes – Podcast Has Great Guests & Sound
  • Biotech Fundraising Is Hard – Armon Sharei’s Advice on Fundraising
  • Armon Sharei Finds a Lead Investor for His Angel Round
  • SQZ Biotech’s Pivot from Selling their Tech as a Tool to Looking for Therapies
  • “…over 70 or 80% of scientists want to put stuff into cells for some reason. I think aside from looking under a microscope there’s nothing that they want to do more”.
  • Therapy Research Is Risky, But Tool Business Was Harder Than It Looked, Besides Armon Really Wanted to Do Science
  • The Board Was Essential in the Pivot from Being a Tool Company to Becoming a Therapy Company
  • How Does a 29 Year-old Negotiate a $500 Million Deal with a Major Corporation?
  • Hiring the Right People Is the Most Important Thing a Founder Does, Look for Cultural Fit

Transcript of Armon Sharei, “Biotech Rockstar IPOs,”


Sal Daher’s Intro

Sal Daher: Hi, this is Sal Daher of the Angel Invest Boston Podcast. I’d like to tell you about Armon Sharei, founder of SQZ Biotech, S-Q-Z biotech. I’m relaunching my interview of him. It was done a couple of years ago because SQZ Biotech has just had its IPO. You can look it up S-Q-Z or the New York Stock Exchange. Anyway, Armon Sharei is a really compelling founder. I called him the “Biotech Rockstar,” and I think there’s a lot of tremendous lessons to be learned from this really, really just stellar biotech founder. I’m focusing my investing on biotech startups and the model I have, when I look for a company, is SQZ biotech, and the kind of founder that I want to invest in is Armon Sharei this guy who was absolutely genius level IQ can explain stuff to you in the most basic way that everybody can understand. And if you listened to the podcast now, and then listen to the video interviews with Armon Sharei out there at the time of the IPO, you will see how true he was to the vision that he had when he founded SQZ. This is a really stellar interview; I highly recommended.

Sal Daher: Welcome to Angel Invest Boston, conversations with Boston’s most interesting angel investors and founders. I’m Sal Daher, and my goal for this podcast is to learn more about building successful new companies. The best way I can think of this is by talking to people who have done it. People such as biotech researcher and founder, Armon Sharei. Armon, I’m honored, really honored that you’re joining us in our 16th episode. Welcome.

Armon Sharei: Thank you. Thanks for having me.

Armon Sharei Bio

Sal Daher: It’s great. Armon Sharei is a researcher of the first order. He publishes in the most respected journals and trained at MIT’s famed Langer Lab. Unlike many researchers, Armon also has a gift for communication and is able to explain complex ideas to laypeople. Even more unusually, Armon is an entrepreneur. 

He received his BS with honors and distinction from Stanford University, and his PhD in chemical engineering from MIT under the guidance of Professor Klavs Jensen and Professor Robert Langer. He was a fellow at Harvard Medical School and has won numerous awards. 

He is co-founder and CEO of SQZ Biotechnologies. SQZ is developing new ways to deliver materials into cells that act to transform cell behavior. Their work has been highlighted by many sources and was named one of the Top 10 World Changing Ideas of 2014 by Scientific American. 

Armon is a co-author of 16 peer review publications and is an inventor of 10 patents. At age 29 Armon led SQZ in signing a $500 million collaboration with pharma giant, Roche. 

Sal Daher So, Armon, you were born in California, near Stanford University-

Armon Sharei: Yup.

Sal Daher:…but grew up in Iran and Dubai before returning to California. Please tell us a bit about your experience overseas, your life there.

Childhood Spent in Iran & Dubai, Finished High School in Marin County

Armon Sharei: Sure. I was about four when we left the Bay area to go to Iran. I, obviously being a four year old, couldn’t remember much, but I do have vague flashes of how much of a change it was to move there, and I think in the end it was a very interesting experience. We lived there for eight years, and even if you were used to certain, I’ll call it luxuries of the west, it was really not an issue to adapt to that, and it was really a great place to live. I love the people, and we were very well integrated. I think the only oddity about my family is that we spoke English at home, whereas everybody else spoke Farsi at home, obviously. Went to school there. It was definitely a really interesting experience to grow up in a developing country, and I think it gave me a really great sense for what a lot of the world is like and how there can be big contrast depending on just even where you’re born can make a huge difference there.

I lived in Dubai for three years, so after I was done with middle school we moved to Dubai. I lived there for my first three years of high school. That was a bit of a very different place. Dubai is interesting because it’s a commercial hub, but most the people who live there are expats. I think only 15% of the population is local. So, over there was a much more international feel. Did high school, and finally moved back to the US on my own to finish up my last year of high school in Marin County, which is close to San Francisco, and then after that went to Stanford.

Why Armon Sharei Wanted to Be a Scientist

Sal Daher: When did it dawn on you that you wanted to be a scientist? What prompted that?

Armon Sharei: I have always been very motivated by making the world a better place, and I was generally good at math and science. But what really made me want to go to grad school and pursue science as a career is that if you want to make a difference, there’s many ways you can imagine doing it. You could become a politician, a lawyer, whatever, there’s many different ways to try to effect change. The reason I landed on science was because I felt that that was a change that was irreversible. So, if you signed a new treaty or formed a new form of government, somebody else 10 years down the line can come and screw that up. But if you cured a disease, no one could ever take that away again. Like, polio is not suddenly going to become a massive scourge again, because it’s been cured, and it might exist in pockets in some places, but you can never take that back. So, that’s what I liked about it.

Sal Daher: Interesting. I hadn’t thought of that. That’s very true, very true. What did you get out of the five months you spent as an intern at Cobalt Biofuels? This is after Stanford.

Armon Sharei: Yeah. It was interesting. It was my first exposure really to working at a company, especially a startup company. It helped me realize what’s very different about mindsets on the more academic side versus on the company side. I think it was a great chance to experience how simply applying analytical skills and thoughts to a problem that you’re not familiar with can still help you get to new solutions and help you guide the direction of a bigger project, even though you’re very new to it and not experienced in it. 

I think it was a really great experience to learn those things and get a sense for what a real world management structure is like, and have a little bit of visibility into what the trajectory of the company looks like. What they’re worried about, what they’re not worried about, because I think they were about a ten-person company at that time.

Sal Daher: So it must have been quite an experience. In an environment like that, a ten-person company, you get to do a lot.

Armon Sharei: Yeah.

Sal Daher: Even if you’re just an intern. You probably had a lot of responsibilities.

Armon Sharei: Yeah, I mean, the analysis we would do would get presented to the CEO, and part of me was like, “Why on earth are you trusting me with this?”

Sal Daher: There’s nobody else?

Armon Sharei: Are you really going to make decisions off of what I just told you, because this is definitely my first rodeo.

Sal Daher: Yeah, there’s nobody else to do it.

Armon Sharei: Yeah, but it also gives you a lot of visibility and access to them, so you get to learn a lot from what they’ve been doing.

Why Leave Edenic Bay Area for Purgatorial Boston?

Sal Daher: That’s tremendous. Now, here’s a real mystery. What caused you to give up delightful Palo Alto for chilly Cambridge?

Armon Sharei: That is a good question.

Sal Daher: As you shiver.

Armon Sharei: Yeah, I know. As we do this in the winter still. Well, really when it came to grad school I had narrowed it down to two main choices. One was to go to UCSF and Berkeley’s bioengineering program, which is a great program and seemed really exciting, and the other one was to come to MIT. There were many, let’s call it academic pros and cons, like MIT was bigger and good at everything, UCSF’s bioengineering program was smaller and pretty specific to what you could do as far as what the professors involved were. And I could have gone either way on some of those, but to be honest, at the end of the day what swung it for me is that I felt I loved the Bay Area, I’m kind of used to it, I wonder what it would be like to go to a different place. 

I also got the feeling from MIT that this isn’t going to be easy. There’s going to be some pain and suffering involved, and I was like, “Okay, if I’m signing up for grad school and doing this for five years I should do it right and not take the easy way, the easier way out.”

Sal Daher: Put on a hair shirt.

Armon Sharei: Yes, exactly. So, that’s what led me to come to MIT.

Sal Daher: Excellent, excellent. What’s it like working with towering figures such as Klavs Jensen or Robert Langer?

Armon Sharei on the Ins & Outs of MIT’s Famed Langer Lab

Armon Sharei: I mean, it’s definitely humbling and a great learning experience. I mean, on the one hand with figures like that it’s not like they have a lot of free time to get overly involved in certain projects and micromanage them in any way. That being said, I think that’s also the best part of it. I mean, some people like having that more established figure close by to help guide specific details of an experiment or of a scientific project, but I actually really liked the independence that came with working with them, and the high level guidance they can provide. Where they had a much higher level view of the world and how things are going so they could provide a lot of really insightful direction in that respect, but when it came to the specific problems you were facing they almost by nature of their busyness would give you time and space to kind of learn through your mistakes and hit your head against the wall a few times, because they can afford to let that part take longer for you to learn. Ultimately that was extremely helpful, and I think I learned a lot both on the management side as well as the scientific side from them. 

And when it came time to launching the company it was also a great source of validation for what we were doing, that these established figures were kind of willing to put their name behind it. And it was clear that they cared about it and thought it was going to be impactful, too. Because no one cared what the bright-eyed grad student thought about this, it’s really about these names that we know, what do they think about whether or not this is going to work?

Sal Daher: So you get it to work, and when you get it to work you get an audience. You’re not going to be crying in the wilderness-

Armon Sharei: Yes, exactly.

SQZ Technology Comes from Failed Attempt to Shoot Genetic Materials into Cells

Sal Daher:… with your brilliant discovery, because Klavs Jensen and Bob Langer will get an audience. Yeah, it’s been said that the Langer Lab is working in the Pasteur Quadrant. You know, the idea that they are doing basic science and also applying it, and then adding another component to it, which is commercializing it. I understand 40 startups have come from the Lab. So, I imagine that their approach is, you know, they have a very high bar to get into the lab, you have to be the best of the best, but then they sort of let you sink or swim on your own and they give you some directions, and people who thrive in those environments produce incredible results. So, please tell us more extensively the story of how SQZ technology was discovered. I think it’s really fascinating.

Armon Sharei: All right. So, when I was interviewing for lab spots, Klavs had something, Klavs Jensen had a project in his lab, which was a microfluidic gun to shoot stuff into cells. You don’t have to tell a 21 year-old grad student much to get them excited about a small gun that’s going to shoot stuff into cells. I’m like, “That sounds super cool. And I don’t know why you need to get stuff into cells, I don’t know how big of a problem that is.”

Sal Daher: Better to shoot plasmids than potatoes, right?

Armon Sharei: Yes, exactly. Yeah. It’s more complicated than a potato cannon, it can potentially have an actual impact. Aside from breaking a neighbor’s window.

Sal Daher: …or frozen turkeys.

Armon Sharei: I never went that far.

Sal Daher: They shoot those off, too. So, you were shooting these genetic material into the cell, right? That was the idea.

Armon Sharei: Yeah. So, we were going to try to shoot materials into cells using this jet system, and that project became really interesting to me. In parallel to that I was also really interested in a lot of the stuff Bob Langer’s lab was doing, but as an individual project, Klavs’ thing was the most exciting to me. So, I really was, I guess trying to be a little overly ambitious and wanted to have the best of both worlds as far as having Bob involved and the resources and the type of lab that goes with that, but also I really liked Klavs and I also really loved that project. Most of Klavs’ lab is chemistry, which was a little less what I was interested in. So they agreed to co-advise me on this, and Klavs was kind of my primary mentor in this context, and Bob was initially the co-advisor. That all evolved into a more 50/50 circumstance down the line. But it was amazing to get going on that.

We were flogging away at this jet for, we called it the jet system to shoot stuff in, for about a year to two years, and we just could not really figure out how this worked or to get it to work properly. What we started to do is we thought that okay, as the cells are passing by this jet maybe they’re kind of dodging away from it. Based on the way fluid flow works there was good reason to believe that’s probably happening, so we decided to really jam these cells up against the jet. That caused this kind of constriction to form in our channels where the cells were basically getting squeezed and going up against the nozzle of this gun that was then going to fire it into them. So, we’re like, “The hell if these cells are going to get away from us now.” 

At that point the thing started to work. We’re like, “Great, we have a jet that works, this is going to be awesome.” But the parameters didn’t make any sense, it just did not behave the way you thought it would and that really had us scratching our heads. Then one day we just turned the jet off and we saw that the whole thing was still working. We were still getting stuff into cells, but there was no gun.

Sal Daher: So, you had some kind of a pressure gradient that was pushing the cells through the grid-

Armon Sharei: Yeah.

Sal Daher:… but there was no gun shooting it at high speed.

Armon Sharei: Exactly. The cells were going through the channel, they were going through this constriction point that was squeezing them against the nozzle, but the nozzle wasn’t firing.

Sal Daher: Right. Now, for those that are against animal abuse, the cells are not mistreated. They’re squeezed and made uncomfortable, but then they recover and they’re very happy in their new life.

Armon Sharei: Yeah. And these are cancer cells, so even the people that are worried about animal abuse I think wouldn’t take issue with that. Because those were the types of cells we were playing with. So, yeah. They would go through that constriction point, it would cause stuff to go in, and then they were still healthy. We were trying to figure out what happened, and it basically turned out that by constricting them you end up disrupting their membrane, so anything that’s outside goes in, and then the cells detect that and seal it back up. 

What was amazing was that this seemed to translate across a lot of areas that people had previously had problems with. So, we were trying to develop a gun, but that wasn’t the only way to try to get things into cells. People had developed all kinds of different things. Like, you can electrically shock cells and stuff will go in. But what was fascinating about what we observed with the squeezing phenomenon is that it worked across cell types. Cancer cells are kind of the whipping boy of biology as far as they’re so ways to work with, no one gets upset if you kill them, but we had also gotten this to translate to cells from humans, cells from mice, and all kinds of different cell types that were conventionally difficult to treat. For example, stem cells and immune cells are conventionally very difficult to get anything into. So, not only could we deal with all these different cell types, we could also get in whatever we wanted to, whereas conventionally people were limited in what they could get in, and therefore were limited in what they could make those cells do. But because we could get in basically what seemed to be everything we could get the cells to do a lot of different very interesting things. 

Finally, it goes back to your point, the third distinction was that almost surprisingly the cells really didn’t get their functions altered by going through the chip, in the sense that they weren’t unintentionally altered. They behaved relatively normally after coming out, whereas again, going back to the other approaches people were using you would dramatically change the function of these cells. The electric shock version that people would do, that would make the cells all frazzled afterwards and they would act really strange. So, even if your stuff got in that cell was being really weird and wasn’t really itself anymore.

Sal Daher: Yeah, electric shock therapy will do that to you.

Armon Sharei: Yeah, I’ve heard.

How the Idea of Starting a Company Came About

Sal Daher: What was the genesis of the idea turning the cell squeezing technology into a company?

Armon Sharei: What happened was that after we first published on the technology and got good amount of scientific recognition around what we had appeared to kind of accomplish, a lot of outside groups started to ask to use the system in collaboration. A lot of academics were really interested in this, companies started reaching out. So, initially we were just starting to collaborate with a lot of different people academically, and then we very quickly realized, hey, there’s a lot of people interested in this, maybe we’ve really come across something exciting. Should we start a company to at least initially, in those days, get things going as kind of a tool sales platform. People are clearly demanding these chips that do the cell squeezing, so what if we formed a company that can sell the chips to all the people that are interested, and that’s how we got going. Is that we formed a company to go after selling chips to generally academics, but also some industry people that were interested in it.

The other interesting part was that we still maintained a really deep academic presence while we were doing this, because we had gotten really interested in some of those functions that we could engineer and that we could start to get these cells to do things they couldn’t have done before, and could that be useful for therapeutic. So, if I could dial in a new function into an immune cell, could I really make that cell then go and target a cancer cell, and could I suddenly hijack the immune system of a patient to destroy the tumor for them, and could that be far more effective than what anyone’s been able to accomplish with conventional chemo. This is something that people had always speculated and dreamed about and had some points of evidence that if you could get this to work it would be amazing, but no one had really been able to pull it off. 

So, as we did more and more work on mice and started to learn more about how this all works, we did really start to see a lot of promising signs that we can in fact have a really good shot at making a big difference here. That’s where we kind of went through a pivot where we thought that with the tool sales side people were using this to do things they used to be able to do, but just slightly better. It was rare for people to want to use it for something that was truly novel and exciting, and that we felt wasn’t making the best use of the technology, nor from a company perspective, capturing as much value as you could have.

Sal Daher: Yeah. This is where research technology, it was not fully spec’d out, fully developed, so the full potential of it was not evident in the work that these people in their various lives were doing.

Armon Sharei: Yeah.

Sal Daher: They were not-

Armon Sharei: They were not exploiting it.

Sal Daher: Exploiting it to the extent that they didn’t have the interest to exploit it. I mean, they were interested in doing their project, not developing the squeeze technology to its fullest extent.

Armon Sharei: Exactly.

Sal Daher: I understand. So, explain a little more deeply the significance of what you’re doing. You’ve discovered a way where you can take a cell and you have many more choices of things to get into that cell so that that cell is transformed a certain way that it behaves differently.

Armon Sharei: Yeah.

“I think one of the main examples, which is kind of the subject we’ve been pursuing most deeply at the company in two different projects, is the idea of telling the immune system what to target in the context of cancer”.

Sal Daher: So, go through some scenarios of the tremendous impact that this technology could have.

Armon Sharei: Yeah. I think one of the main examples, which is kind of the subject we’ve been pursuing most deeply at the company in two different projects, is the idea of telling the immune system what to target in the context of cancer. Your immune system is a very complex, very sophisticated system that has really some quite impressive capabilities in what it can do. The area that we’re going after is a function where you have T cells that kill tumor cells, and these T cells are really fantastic killers. But one issue that tends to occur in cancer is that they may not know what to go after. So, the T cells need to know exactly what does that tumor look like, and if they know that they will find it, they will hunt it down and destroy it. They are very effective at that part, but one disconnect is that they don’t know what it looks like. 

Now, the way the T cells are instructed in what the tumor looks like is that there’s another cell type called antigen-presenting cells which will take tumor fragments and show it to T cells in a special way that’ll make those T cells get activated against it and then go and hunt it down and destroy it. For these antigen-presenting cells to be able to actually show that material effectively they need to have that tumor related material inside them. Somehow that tumor related material needs to make it inside, and then that will go through a pathway that presents fragments of it to the T cells and then they’ll go kill your tumor for you. 

SQZ Technology Excels at Getting Protein Fragments into Cells – Very Promising Method of Training Our Immune System to Fight Cancer

I think you’re kind of seeing where I’m leading in with the squeeze side, where these tumor-associated materials, which are generally protein fragments, are something that people can’t deliver with conventional techniques. But because we could deliver those protein fragments into these antigen-presenting cells we’re actually able to kick start that whole process where if you can just get these tumor fragments into the APCs, or antigen-presenting cells, they’ll do the rest of the work for you. They will go show this to the T cells, the T cells will get activated and they’ll go kill the tumor, and you should be able to get a really productive response by doing that. 

So, that’s just an example of a very simple step that we were able to do with squeezing really help the body along and kick started this natural process that was going to go and give a whopping response against your target.

Sal Daher: What’s significant here is that in the previous technology that existed you weren’t able to get these proteins into the antigen-presenting cells so that they could then train the T cells to attack.

Armon Sharei: Exactly.

Sal Daher: Because proteins are, they’re difficult to manipulate in the existing cell transformation technology.

Armon Sharei: Exactly, yeah. That was the disconnect. People knew that theoretically if you could do this it should be able to kick start the whole system, but there was no good way to do it. And it fed back into those examples where people were using the technology initially for relatively incremental things, like something they could do, they were just trying to do it better. It was rare for people to go after the things that they couldn’t do, like this antigen-presenting cell side, and that’s what really led us to lean harder on that front.

Sal Asks Listeners to Subscribe & Review on iTunes – Podcast Has Great Guests & Sound

Sal Daher: Tremendous, tremendous. Coming up next I’ll ask Armon Sharei what advice he, as a founder of a hugely promising startup, would give to biotech founders on fundraising. I mean, biotech founders really, really struggle with fundraising, but I think this is a tremendously important question and I’m going to pose that question after I speak up a little bit for our podcast.

First, I wish to thank listener Zoso13PX, nice name, for this review. “The series is insightful and honest. A must for any startup, tech and non-tech.” Thanks, Zoso13PX. Sounds very athletic.

Armon Sharei: I know.

Sal Daher: Awesome. Thanks a lot. You see, the Angel Invest podcast has outstanding guests, such as Armon Sharei. It’s professionally produced, has no commercials, and comes to you free. The only thing we ask in return is that you help get the word out. Please tell a potential angel or founder about us. Take a minute to review our podcast on iTunes. Sign up at Angel Invest Boston to be notified of new episodes and of upcoming in-person events, and there are some scheduled already. You know, just do your bit. Armon has come out on a cold, windy day to be here, and we’ve got this whole setup in the studio. All we ask of you is just to sign up and tell people about the podcast. Thanks a lot.

Biotech Fundraising Is Hard – Armon Sharei’s Advice on Fundraising

So, Armon, you raised money from angel investors and then you went on and you raised a couple of rounds of money from venture capitalists, and you’ve now also done a collaboration with Roche and you’re working on other collaborations. So, what would you say to biotech startups that are trying to get funded?

Armon Sharei: At which stage?

Sal Daher: Well, starting out where you started, with the angel money.

Armon Sharei: I think angel money I would argue, especially with wonderful people like you involved, is definitely the way to go at the early stages, because when it comes to biotech I think one thing that really distinguishes it from tech is the amount of money it takes to make progress and the timeframes involved until there is some kind of return. Where with tech you have very little overhead, you can get a lot of proof of concept going very quickly, biotech requires a lot of work, science and biology take a very long time. 

So, in the early days it can be very important to go the angel route in the sense that control becomes very important factor, where I think angels don’t expect as much control. And in some ways, to their credit, much more willing to go with kind of a crazier, less fully thought-out idea, whereas venture capitalists I think have a much more researched and preconceived notion as to what they’re going to invest in and what they’re not, and if you’re kind of strange that confuses them.

Sal Daher: If you don’t fit the profile.

Armon Sharei: Exactly. If you’re not a square that fits the square hole they get confused. And when they come in the tend to come in really aggressively, as far as control elements and what they’re going to dictate, so you might destine yourself towards an outcome with them that may be the wrong one. For example, with us, given that we started more tool like, ended up more therapeutic, I think that if we had taken VC money that early on it would have been very confusing and-

Sal Daher: You would have been boxed in.

Armon Sharei: Yeah. We were-

Sal Daher: The wrong direction.

Armon Sharei: Yeah, they would have kept us boxed in. On that front I think some of the most important things when it came to that fundraising side is really having a story that you can communicate and for people to understand and appreciate why it’s important. I think finding the right champions and the right people in the angel investment community was critical. Where if you had someone that understood what you were trying to do and kind of was a believer, they can really help drag in a whole bunch of others and get hem excited as well. If you don’t have that it becomes a very difficult process where everyone has very disparate interests and it can be really hard to corral. So, I think that’s something that-

Armon Sharei Finds a Lead Investor for His Angel Round

Sal Daher: It’s like herding cats.

Armon Sharei: Yes, definitely. I was trying to avoid the cliché, but it is exactly what was in my head.

Sal Daher: You have to find a lead cat that the other cats can follow.

Armon Sharei: You need an alpha cat.

Sal Daher: Yeah, an alpha cat.

Armon Sharei: Named Sal.

Sal Daher: No, no, not at all. But from my perspective, Armon, I was very enthusiastic about this, because I looked previously at companies doing something somewhat similar what you’re doing, in a different space, but involving technology that resembled this one, and I was intrigued by this. Then I was very impressed by the fact that you presented very complex ideas in a very approachable way, so it’s much to your credit for that. Then I bought the entire thesis that you guys are going to be a tool, that was going to be your base camp, and the summit was you’re going to get the clinical side of things, into therapeutics and so forth, but that you could develop this business as a tool facilitating other people’s research. And it was the wrong thing, I believed the wrong thing-

Armon Sharei: So did we.

Sal Daher:… and you guys believed the wrong thing at the time, and much to your credit you were able to perform really an impressive pivot. I want to get back into, you mentioned the pivot before.

Armon Sharei: Yeah.

Sal Daher: I want to get back into that more fully, because that is so important. Startups are all about pivots. Michael Mark, who is really the guy who … Because Michael Mark came into this investor group I think a lot of other people came in, so it’s not my credit at all. My credit is just putting this in front of Michael and getting him interested, and he said, “Oh, this makes sense.” By the way, he didn’t quite believe the tool thing. He was kind of like, “I like the guys. They’re really smart, they’re very capable,” so he was looking farther down the road than I was. And I was like, “The tool’s going to work, it’s going,” you know. Totally up the wrong tree. But he’s invested in over 200 startups, and he said that one of them actually went according to plan, and all the other 199 plus were pivots. They had to find a new way to approach what they’re doing. 

SQZ Biotech’s Pivot from Selling their Tech as a Tool to Looking for Therapies

So, please go over again in more detail your initial supposition, explain the tool theory, and then explain the clinical approach that you’re taking now and how you went about that. Which is great credit to you and to your colleagues. Patrick Rivelli also, in his episode, he was interviewed here, and he talked about this extensively. He was very impressed with the maturity that the management showed. So, Michael Mark was right, that it was a good team.

Armon Sharei: That’s true.

Sal Daher: So, please go over that again.

“…over 70 or 80% of scientists want to put stuff into cells for some reason. I think aside from looking under a microscope there’s nothing that they want to do more”.

Armon Sharei: Yeah, so our initial theory, as you pointed out, was that because we had these chips that everyone wanted for various reasons … Because it was certainly applicable across a broad swathe of biology, I think some of the stats we were citing at the time we were pitching this is that over 70 or 80% of scientists want to put stuff into cells for some reason. I think aside from looking under a microscope there’s nothing that they want to do more.

Sal Daher: They want to put stuff into cells.

Armon Sharei: Yeah, exactly. So, it seemed very compelling to go after a system where if we do have a better mousetrap for this application, of course a lot of people would want it and we could get the tool sales going. Even though we had this dream of having therapeutics it was too conceptual at the time for that to be worth pursuing fully. It would have been too risky, so we should get the tool part going, and that is really something that should be able to get real value and-

Sal Daher: When we say tool, tool is something that enables other people’s research, that you sell as a tool for other people to do research, rather than you do your research yourself.

Armon Sharei: Exactly.

Sal Daher: Or making collaborations with people who do research and having a stake in developing that research. So, it was basically just selling-

Armon Sharei: There’s a razor razorblade model.

Sal Daher: Razor razorblade. Selling the razorblades.

Therapy Research Is Risky, But Tool Business Was Harder Than It Looked, Besides Armon Really Wanted to Do Science

Armon Sharei: Yeah, exactly It was selling them the system that runs the chip, and then the chip is consumables, and the math looked exciting on that front based on our calculations. That all looked great, and that is what we started off trying to do, because we felt doing our own research was too risky and all that. As we went down this path what we did start to see from what people were doing is that even though they found our system really exciting, there were kind of two significant issues. One is that the system wasn’t as plug and play as what was out there for the competition, so it required significantly more training for people to get it. And in an interesting way, because the way it worked was so different, people weren’t used to thinking about it. So, it wasn’t even a matter of can they turn the right knobs and press the right buttons, but they wouldn’t think about how they were doing this process appropriately.

Sal Daher: It was cutting edge technology. The existing systems have all been shrink wrapped and work through and so forth. It’s like-

Armon Sharei: We were competing against technologies that were at least 20 years old.

Sal Daher: Yeah, so all the bugs have been sorted out and so forth.

Armon Sharei: Exactly. They were very idiot-proof at that point. But ours was cutting edge on that front, so that was one element of adoption that made it tricky.

Sal Daher: In that case it’s not idiot-proof, it’s Mensa candidate-proof.

Armon Sharei: There you go. Yes.

Sal Daher:… because the lab researchers are all 150 IQ.

Armon Sharei: Yeah, that’s true. But then on the other hand, it was that in a way almost shocking to us how people’s instinctual reaction was to just do what they’re already doing, but try to use this to make it slightly better. So, they’re using their already, as you put it shrink-wrapped systems in something that they know that thing will work, which is a fairly limited scope of things, and they wanted to plug in our new, kind of funky-to-get-a-hang-of system and try to make that a little bit better. Clearly you were going to run into this problem where people were like, “Okay, this thing is harder to use, and it’s for like that much extra trouble I’m only getting a little bit better of a result. So, do I really want to go through this pain, or should I just stick to the devil I know and worry about all my other issues?”

Sal Daher: And in order for you to get it to be effective for them you had to spend a lot of time, have a scientist showing them how to use it, the new technology and so forth, and it just wasn’t worth it because they would buy the thing for three months and at the end of three months…

Armon Sharei: Yeah, and consumption by researchers is very, very unpredictable and project oriented. Like, they might have projects that they can for reasons way beyond their control, and we’re just stuck with, we sunk so much time training them and getting them up and running, but that project got killed because that post doc left or the professor changed their mind about what they want to do, or if it’s an industry their whole departments get canned all the time. So, it was a very labor intensive and expensive process to acquire those customers and make this work. 

That being said, it also seemed clear that if we were willing to spend the time to do a lot of product development to make this kind of a shiny box that’s, you know, you press one button and no one can get it wrong, this really had potential. And there were tool companies that were talking to us that really wanted this. They were the ones selling the technology from 20 years ago and they really wanted something new, and this to them was really exciting. 

While all of this was going on the more tool oriented side, what was happening on the lab side was that we were really starting to get more and more momentum on what we could do with this that people couldn’t have done before. With some of those collaborations and some of the internal work we were really finding that we could engineer mechanisms like that antigen-presentation side I spoke about earlier, where we could potentially make a really big difference. We could get the immune system to turn on for certain things, we could manipulate stem cells to do certain functions, we could approach certain scientific questions in ways people couldn’t have done before. That really started to make us think, “Okay, is there much more potential on the therapeutic side?” It’s something that we always dreamt about but felt, okay, it’s too risky and it would take a lot more money. But that equation started to change over time where that thing started to look less and less risky and more and more rewarding as far as what we could do. 

On the other hand, the tool side seemed less trivial as far as getting it off the ground, so that’s where a big turning point was that we sat down and really tried to think about how is this tool sales stuff going, how is the more therapeutic side of things going. And speaking with our board members, they also started to feel to agree that if we really want to take a chance on this and make that big difference we should go the route of doing the therapeutics. You can see how that probably maps back to why I said I wanted to be scientist. It also spoke to me more on that side. It really felt like, okay, now we can actually make the world a better place, whereas before we’re selling the tools, it’s a little bit better but it’s not a lot better.

Sal Daher: Someone else is going to be making the world a better place, but we’re not directly involved in it.

Armon Sharei: Exactly. So, that’s what eventually led to our pivot, and it was definitely kind of a big risk to do that at the time that we did it. We were abandoning the old model and we needed to raise significantly more money to go down this very uncharted path. To kind of spare the gory details there, even going into the therapeutic side, we were definitely getting pushed into doing therapeutic things that were more incremental as opposed to truly novel. That was a whole different kind of battle that we had to fight internally with various stakeholders to make sure that we stuck to the things we thought we could really make a big difference in. That’s when we did the Series A with Polaris, and they were willing to kind of take a chance on figuring out what we wanted to do therapeutically as things went along. 

And Roche, in the end, ended up becoming kind of the big validating win when we did this, because Roche came in not for something incremental when they did the $500 million deal with us, they came in for one of the new things. They saw a project that we were doing, nobody else was doing that kind of thing, and they were like, “This seems like it would be great. It’s early, it’s different, but if it works it could be amazing. And we’re willing to take the chance on this thing right now.” And that suddenly made a huge difference as far as perceptions and validation that actually using the system for something novel could really be worth it. Since then, we’ve been very much focused on doing those more novel things and generally avoiding the more incremental side.

Sal Daher: Tremendous, tremendous. So, the history was that you raise a million from the angels, then you raise another two million from Polaris-

Armon Sharei: Five.

Sal Daher: Five million.

Armon Sharei: Five million, Series A, yeah.

Sal Daher: Yeah, five million, Series A, and then you went for another round, which was a Series B.

Armon Sharei: Yep, 24 million.

Sal Daher: 24 million, and that was to fund your own internal therapeutic work.

Armon Sharei: Yep.

Sal Daher: Yeah. Excellent.

Armon Sharei: And we had money from Roche, too, so that helped.

The Board Was Essential in the Pivot from Being a Tool Company to Becoming a Therapy Company

Sal Daher: In this conversation you mentioned the board. Unpack a little bit how the board helped you in that.

Armon Sharei: Our board has been great every step of the way. So, how did they help with the investor process, or just the pivot, or both?

Sal Daher: With the pivot, and also the investor process, because the board had someone from the venture community and so forth.

Armon Sharei: Yeah, from the very beginning the board members starting off were, aside from myself it was Klavs Jansen and Bob Langer were the starting board members. As we moved along they were always very supportive in trying to help get us in front of some of the VCs or some of the angels that they knew. As we added people on, like Jonathan Fleming, who had been one of my professors at Sloan and used to be a career VC, he had a lot of insight into how this whole world works and how people look at the value of these companies and what it takes to actually get things moving. So, they were all very supportive as far as helping us both operationally and strategically. And when it came to the pivot side they kind of understood that this is something that happens, and they were comfortable taking the risk to make that pivot, because obviously at the time it was far from a dead obvious choice.

Sal Daher: Now it looks brilliant, but at the time it’s-

Armon Sharei: Yeah, no at the time it’s terrifying and it’s not that obvious, and so much of you just want to stick to the old track because it’s the safer thing to do. You won’t get pummeled for sticking to that track and failing, but if you took a crazy risk-

Sal Daher: Yeah. It’s not working, but it’s the safer thing to do.

Armon Sharei: Yeah, exactly. But if you took the crazy risk and you were wrong then you get beaten over the head for it.

Sal Daher: Right, right, right.

Armon Sharei: But they were very supportive of that, and they understood that this is just a risk that one needs to take, and this has kind of propagated through as we’ve added others. I mean, another very important character throughout this story has been Amy Schulman, who’s our executive chair. She used to be part of the executive leadership team at Pfizer. When she joined us she really kind of was a whole new species to me as far as how great she was at working with investors, and learning about culture and management, and how to run a company. Those were all tremendous help, both when it came to strategic side investors and also even learning what to do operationally for some things.

Sal Daher: You’ve spoken very eloquently in favor of having a serious working board.

Armon Sharei: Yeah.

Sal Daher: Thanks. That’s one of the enduring themes of this, is I want to get founders, and angels also, to think in terms of really having strong boards.

Armon Sharei: Who you have on the board is I think extremely important, and in the end of the day I would argue you want people that are more advisory than they are forceful, in that they have to have a certain trust in you that if you’re proposing this, they can help you think through it. But in the end of the day they will tend to be deferential on what to do, because they’ll believe the team is closest to it. And we’ll voice our opinions and concerns and our advice, and that will tweak the approach, but in the end they’re the ones that are going to have to do this and they’re closest to the problem, so we should rely on that. And them kind of really believing and trusting in the team is of paramount importance, because if there is that distrust, or it’s kind of a side gig for them that they don’t care about, it really can lead to fraying of that relationship.

Sal Daher: Who actually mentioned the idea of the pivot first? Do you remember where that came? This is not working, who actually uttered that?

Armon Sharei: There was a difference between the idea of pivoting and uttering, “It doesn’t work.” The idea of pivoting actually was something that was pushed by Amy Schulman when she joined us, from her read of the situation. Because there was this disconnect where in a funny way she could see that I generally cared most about the therapeutic stuff and was spending a lot of time running the academic team that would do that. And then the team that was doing a lot of the sales side of things was a different world from that. So, she had already sensed what was going on there as far as, “Okay, this is clearly where you guys deep down believe the biggest thing is, even though you won’t say it, or it’s not what your kind of party line is right now.” That series of questions led us to think, “Okay, let’s think really critically about how this part’s going, and be honest with ourselves.” And that’s where it kind of came out from digging in with the people that were involved in the sales stuff and how those things actually play out. You really start to learn, okay, that part’s not working well, and if our hearts seem to be really on the therapeutic side should we just go and do that.

Sal Daher: So, the help of a board member really was important in that.

Armon Sharei: It was critical in that one.

How Does a 29 Year-old Negotiate a $500 Million Deal with a Major Corporation?

Sal Daher: Excellent, excellent. Now, going back to the Roche deal. You’re negotiating that, you’re 29 years old, how did you get the resources to … I mean, you have a technical knowledge, you have the science, but negotiating a strategic deal of that consequence, how did you get the resources to do that?

Armon Sharei: We obviously had a good legal team, so good outside counsel. In this case Amy was very helpful, because she used to be actually general counsel for Pfizer, too, so she had done these deals. Like, when Pfizer bought Wyeth it was her project. So, that was very helpful, and also a lot of it was just learning on the job, which is definitely a theme to being an entrepreneur. You face so many things you’ve never seen before and you better learn them quickly, otherwise they’ll come back to bite you.

Sal Daher: That is tremendous. Just tell me briefly, what are your current plans for SQZ and how are they progressing?

Armon Sharei: It’s going really well. I mean, the company has 42 people now, which is crazy to think about, because just, I think three years ago we were at four or five. Our plan in the end of the day is to really exploit our capability to deliver materials into cells to engineer their function to treat disease in novel ways that people couldn’t have done before. We’ve been starting with cancer, and we have the collaboration with Roche, and our own projects in what to do in cancer. We’ve also started to work on concepts that could go after autoimmunity, so instead of turning on an immune response can we shut it down? And we’re optimistic that we’re only scratching the surface of what you could do if you could really start to engineer cell functions. There’s much more you can start to imagine in the worlds of regenerative medicine or infection disease, where if you can engineer these cell functions you could really make a big difference there. What really want to do is be great at cell engineering and using your own cells to fight the diseases for you.

Sal Daher: Right, right. That is really a beautiful goal, and I really and sincerely hope you get there. This is really the last question here, do you have any advice for other biotech startups on hiring people?

Hiring the Right People Is the Most Important Thing a Founder Does, Look for Cultural Fit

Armon Sharei: Hiring people is the most important thing they’re going to do. I honestly didn’t appreciate this early on. I thought, you know, the science is going to get you there, or the more money you have the more likely you are to get there. But at the end of the day I think it’s all, all, all about the people that you’re hiring or recruiting to your board or whatever. If we didn’t have an Amy Schulman come in on the upper part maybe we would have called that pivot question too late, or we would have fumbled the Roche deal. But obviously also the people that are going to be on your team. Like, having a good scientist, or HR person, or operations person makes such a tremendous difference relative to having a mediocre one. This stuff I used to read but not really believe that your best employee is 10 times or 100 times better than your average employee? I didn’t understand it until I had to live it. 

I think the thing that people often don’t account for enough is cultural fit. Where they’ll think, “Okay, this person on paper sounds great.” But what if they’re not a great cultural fit? That alone can often make things crash or be the difference maker as far as things going well. If they really gel, and work well together as a team, and are committed to the same vision it makes a huge difference and it’s very motivating. And it propagates, so that whole one bad apple spoils the bunch thing is very true where if you have just a few actors that are not great fits they can really start to poison the whole dynamic. On the other hand, if you have a group that really gels together it’s amazing what you can accomplish.

Sal Daher: Excellent. Excellent advice. It really brings to life some excellent lessons. That’s great. Armon Sharei, I’m exceedingly grateful to you for participating and helping make this a great podcast, I know you’re extremely busy. Thanks a lot for coming out on a cold day and being with us.

Armon Sharei: Always for you, Sal.

Sal Daher: Thanks a lot. I’d like to invite our listeners who enjoy this podcast to review it on iTunes. I’m Sal Daher, this is Angel Invest Boston, conversations with Boston’s most interesting angels and founders. I’m glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman-Maynard. Our host is coached by Grace Daher.