Austin’s bio and health ecosystem is emerging as a significant driver of economic development, with new projects and public policy efforts shaping the future of the sector, according to the 2024 Austin Bio & Health Report authored by industry analysts Jason Scharf and Jani Tuomi.

The report found Austin is now home to over 1,100 bio and health companies, employing 21,000 people and generating a total ecosystem valuation of $42 billion. Venture capital investment in the sector has also grown, with $3.5 billion raised over the past five years, positioning Austin among the top 10 cities nationally for bio and health funding.

Among the other findings: 40 companies within the sector are valued at over $100 million, with the average valuation for Austin startups seen as competitive with major hubs like San Francisco, Boston and New York. Also, as of last year there were 9.6 million square feet of bio and health space in Austin, which ranks fifth nationally for “brain gain” with a 70 percent rise in college-educated adults moving to the city.

The health care innovation district near the University of Texas’ Dell Medical School downtown has long been eyed as the driving force behind local leaders’ goal of making Austin a life sciences and health care hub. The city has also gotten involved, reaching an incentive deal years ago with the pharmaceutical giant, which exited the agreement without reaching its hiring goals.

Scharf emphasized the importance of focusing on the growth of Austin’s existing companies and helping to foster startups rather than solely recruiting large biopharma firms. This approach reflects lessons from established hubs like Boston and the Bay Area, where local innovation and support for small and medium-sized enterprises have been central to ecosystem success.

“The business of health success stories in the biomedical and tech stack are really starting to define what is Austin,” he said. “A lot of people stand up and say we want to go get the big biopharma companies to move here. … That’s been the biggest clash between looking at the data – looking what’s here, looking at what being successful.”

Last year, the health care startup BillionToOne announced a move to Austin that is projected to result in 1,000 jobs in the company’s 220,000-square-foot space in the EastVillage ATX development on Parmer Lane near Samsung Austin Semiconductor.

Ted Rohan, principal and managing director at commercial real estate company Avison Young, said the growth of young companies in the coming years will have a dramatic effect on the local infrastructure and other resources that will determine how Austin’s life sciences sector grows.

“Supporting the foundation that’s here, even if they’re little fish, is what will propel the ecosystem forward, because it’s not that the big fish wakes up one day and says, OK, we’re moving Austin,” he said. “There’s been a lot of momentum and a lot more interest in this space, but it’s high-dollar, high-risk and takes time, which has meant it’s been the developers and owners who specialize in the space who have been most successful because they understand the tenant base.”

In addition to local and state incentives, Scharf said other policies at both levels will influence how favorable of a business climate is offered. He notes that HB 1709, which seeks to regulate business uses of artificial intelligence could dampen enthusiasm for companies who see the technology as important in identifying health trends and creating new types of treatment for diseases.

Rohan said the many kinds of real estate demands for different portions of the life sciences sector mean they could locate in a number of areas around Austin and Central Texas, with available industrial space likely to attract tenants faster than vacant offices that would require substantial conversions over a roughly 18-month time frame.

“There’s a lot of work that goes into the planning, and a lot of these groups have been on the outskirts just by nature of how the market’s evolved,” he said. “But scientists like amenities too, just like office workers do. So a lot of it is functional and driven by the needs of the business and the process these groups go through.”

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