Time BioVentures: D.A. Wallach
“I love technology. I love learning about new algorithms. But at the end of the day, we just want to solve problems.”
Listening to music is a highly personal experience. Next time you attend a concert, just watch the audience.
Some will nod their head in time to the beat, a faint smile on their lips. Others will throw their heads back, close their eyes and belt out beloved lyrics. The neurologist Oliver Sacks sums it up: “Music is part of being human.”
We can use science to understand this subjective human experience: sound waves from the stage travel through the auditory canal, across the tympanic membrane and into the cochlea. Tones of certain frequencies cause cochlear “hair cells” to “deflect,” sending electrical signals via the vestibulocochlear nerve to the auditory cortex. Other sensory inputs (smell, vision, vibrations), memory and higher order processing (frontal lobe) combine to create patterns of neural activity in the brain—ones that underlie the different behaviors exhibited by concertgoers.
That we can understand art and complex human behavior through science is a concept called “consilience by reduction,” coined by biologist E.O. Wilson. “The argument [Wilson] made was that one should try to understand everything through an integrated, ultimately reductionist approach. There shouldn't be an ‘air gap’ between the physical sciences and fields like sociology, anthropology and psychology,” explains D.A. Wallach, General Partner and co-founder of Time BioVentures.
Wallach found the concept of “consilience” to be seductive. He first read Wilson’s work in 2008, while he was on tour with his band Chester French: “That line of reasoning just walked me right across the bridge into the hard sciences. The way that he [Wilson] depicted biology…I just started to perceive how much intellectual richness there was there.”
Wallach founded Chester French whilst an undergrad at Harvard college, and was signed by Interscope Records in short order. After graduation, Chester French went on tour with musicians like Pharrell Williams, Weezer and Lady Gaga. In 2011, Wallach met the founders of Spotify, invested in the company, and became the official “artist in residence.” There he helped other musicians get comfortable with the Spotify model, build out the platform’s functionality (e.g. the artist analytics dashboard) and secure venture capital investment.
During his experience at Spotify (2011-2015), Wallach developed a broader passion for tech investing and started making his own bets as an angel: “When you meet [founders] who are unique, they stick out. Whenever I see that— I want to learn more, I want to talk to them more, I want to understand how they're seeing the world.” He counts Ripple, SpaceX and Box.com, amongst some of his earlier non-biotech investments. During this time, Wallach also continued to learn about biology, and became increasingly concerned about the state of healthcare: “How do we get better health outcomes for less money? How do we reallocate [spending], so that scalable products with zero marginal cost are doing more of the work in caring for people?”
In 2021, Wallach decided he wanted to scale up his healthcare investing and start a dedicated firm. He was introduced to physician and pharma-veteran Tim Wright; the two noticed an immediate synergy: “Tim and I got together, and we felt like there was a great complementarity between our respective skills. I'm an outsider to medicine and science in multiple ways. Tim is a consummate insider—one who's very creative and has always deployed creative strategies to be successful as a physician, and in drug discovery/development.” In 2021, they partnered to found Time BioVentures and “invest in the re-imagining of medicine.”
At Time BV, Wallach and Wright look for generationally important companies poised to change the practice of medicine: “Occasionally [in biotech/healthcare] someone builds a Genentech, Genzyme or Moderna. For example, my friend Martine [Rothblatt] built United Therapeutics…these founders are more like the traditional tech entrepreneur.”
Yet Wallach recognizes that biotech requires a different mindset than “traditional” tech investing: “Biotech, I think, is the opposite of tech investing, in that in that it's largely about risk mitigation…mistakes are extremely expensive. For example, picking the wrong indication can be a $20- or $30 million-dollar mistake.” For drug development, experience (and past failures in particular) educate one in risk mitigation: “I think one mistake that people who come from the tech world make is adopting this idea that everything is about to change [due to AI approaches], and that all the rules are being rewritten…This idea is quite naive and can make you susceptible to thinking that things are going to be easier than they are,” says Wallach. To supplement their team’s own experience, Time BV has assembled a board of advisors that includes Jim Allison, Pam Sharma, Bob Nelsen, Jay Flatley and Dan Vasella.
Though few would liken it to music, drug development is a deeply collaborative, and human, endeavor. Academics, physicians, investors, entrepreneurs, lawyers, manufacturers, and regulators must work in concert to produce a life changing medicine. Many things can go wrong. Yet companies that get it right have the power to shape human experience.
To identify these successful (and exceedingly rare) ventures requires deep expertise in drug development. Yet the fresh optimism of a self-described “outsider” may also help uncover things that insiders have missed. Wallach sums it up: “We have also got all these amazing new technologies that are going to turn into new products…I don't know how quickly we're going to get there. But there's just so much opportunity for medicine to be better than it is today.”
Below is an interview with D.A. Wallach, General Partner of Time BioVentures, from April 2023:
1. What was your first positive experience with science that piqued your interest? What about your initial experiences were lacking?
I read an E.O. Wilson book when I was on tour in 2008 or 2009—shortly after I finished college. When you are a touring musician you have some time to kill—you do a show at night but then you're sitting around a lot of the time in the day. I read two “pop science” books back to back: one was The Fabric of the Cosmos by the physicist Brian Greene. Right after that, I read EO Wilson’s Consilience. It blew my mind. The book was a unique bridge from the world of the humanities and the social sciences, which I studied as an undergraduate, into the hard sciences.
The argument E.O. Wilson made in that book was that essentially one should understand everything from a reductionist approach. There shouldn't be this “air gap” between the physical sciences and fields like sociology, anthropology and psychology. Obviously, you are going up in terms of levels of organization, from basic physics, to chemistry, to microbiology, to organisms to then populations of complex organisms. But really, it should all be studied as a continuous set of questions [with increasing levels of organization].
That line of reasoning and argument just walked me right across the bridge into the hard sciences. The way that he depicted biology—I started to perceive how much intellectual richness there was there. In high school, I took an intro bio course and it just felt like it was all memorization without much theory. Wilson created this intellectual scaffolding that allowed me to start to see some of the ideas [and theories] that were present in the biological sciences.
[How did a training in the humanities inform your current approach to science/biotech?]
I think most of the questions that people tackle in the humanities are top down: looking at patterns or trends in economic history or characterizing macroeconomic states like recessions. To me, these “epi phenomena” were always super interesting.
As I started to immerse myself in microbiology and genetics and the other areas that are relevant to biotech investing, it gave me much more of a flavor for the “bottom up” way of asking questions. The practice of medicine is where these two different approaches converge, right? Doctors want to treat these emergent and complex disease states to restore health. In this context the “humanities” way of approaching things becomes important: What are the taxonomies that we use to characterize health and disease? How does the philosophy of medicine shape the way that drug discovery is conceived? As an investor, you have to look at all of medicine from a 20,000-foot view and identify the action. Where are ideas moving quickly and what will be the next paradigm shift? Modern medicine is pretty new [as a discipline], and lots of shifts will happen—I mean 40 years ago people were treating depression with lobotomies.
2. Are there any lessons you learned from your music career that inform the way you look at science, medicine or [biotech] investing?
A couple of things. One is very practical: audio engineering has come in handy by giving me a framework for thinking about signal transduction as a general subject in biology. There is a fair amount of computer science in music making these days. A lot of what I have done in terms of making music and understanding audio engineering principles has given me a head start on topics in life sciences. This is especially relevant when I'm looking at research tools that involve optical or acoustic readouts—for example we invested in a company making novel ultrasound sensors. We've got another company, NanoMosaic, that has a proteomics research platform. They fabricate these nano needles that your target molecules attach to; when these proteins attach, they change the resonant frequencies of the needles. So that’s very similar to dynamics one must understand in a recording studio.
Another more general learning: there are views I developed as an artist about what makes for a successful collaboration, and how to create as a team. The big lesson was about subsuming the ego to the team’s well-being. In many ways, a high performing band is like a high performing leadership team at a company. It may be corny and cliched, but a successful [venture or band] needs very talented people who don't have totally overlapping talents. It's very obvious in a band where you need drums, bass, vocals or whatever—but in some ways it is the same idea in a company.
[On science, music and commercialization]
A last point, which may be a little tenuous. There is a similarity in the relationships that musicians have with the music industry, and those that scientists have with the biotech and pharma world—where art or science meet the economy.
Understanding what this interface feels like, from the point of view of a musician, has given me a real empathy for the way that scientists often feel about the commercialization process. For most scientists, like most artists, the “point of it all” is the work itself —the song or the discovery or technology. Yet in both cases, the importance or power of that creative accomplishment is amplified by commercialization. What’s the point of your great idea if it never gets to listeners, or patients?
3. Briefly, what were some high points from your time touring with Chester French?
It was so great to be surrounded by people at the top of their game. I've always wanted to be the dumbest guy in the room, or the least talented musician in the room. I enjoy being surrounded by people who I think are much more talented than me. I always want to feel like I'm with people from whom I can learn a lot. I think we [Chester French] were pretty good. We were learning how to write songs and beginning our own career as artists. When we came out to LA, we were instantly thrust into this world with Pharrell, Lady Gaga, Weezer and all these artists who we looked up to. To be in the studio with those people and see how they wrote songs, and how hard they worked on tour, was a masterclass in creativity. It was just great.
We also got to have these very memorable moments: like being on tour and playing to a stadium full of people. Those are such unique experiences. We also got to see the world on tour. Some of my fondest memories are of just being 22 and playing some small town in Germany. It's a lot of fun because on tour everyone you meet is so excited: it's their night out and they are going to a concert to have fun. So [on tour] you're just constantly surrounded by people who are having a great time.
4. What were some lessons learned investing in tech companies like Spotify, SpaceX, Ripple etc.? What about these founders enabled them to build impactful companies?
Venture capital investing is so elusive. In the investing landscape, people have a need to create “narrative.” In venture this is especially difficult, because there are so few hugely successful companies—the N isn't big enough to really derive rules. People will often look for “common traits” amongst these companies, but they are all sort of obvious—like founder determination or having really smart people…OK sure it's hard to build Microsoft if you're not smart. But the best crystallization that I've heard from other investors is that the “signature” is often that the founders of these hugely successful companies don't remind you of other people. After meeting one of these folks, you are not like: “I know 10 other people just like that.” They're usually very unique people that build very unique businesses. I heard an investor at Bailey Gifford say that they like companies that “don't remind them of other companies.” This idea really stuck with me.
Now this concept is not an investment criteria…but it is something I always keep in the back of my mind. When you meet people who are unique, they stick out. Whenever I see that I want to learn more, talk to them more, and understand how they're seeing the world. I think there are two paths in biotech investing. One is very well worn: hiring people who've done it before—the 46-year-old guy in La Jolla who likes surfing, is a serial biotech CEO, and has that sterotypical “alpha” operator vibe. These types of companies are essentially outsourced Research and Development for pharmas. And they are sort of “rinse and repeat” company models: as a population some percentage fail and some succeed, get some great data and either IPO or get acquired. This story is totally fine, and we [at Time BV] will do some of these deals opportunistically.
But there is this other universe, where occasionally someone sets out to build a Genentech, Genzyme or Moderna. For example, my friend Martine [Rothblatt] built United Therapeutics. I'm more attracted to these companies and people. These founders [in healthcare and biotech] are much more like the traditional “tech entrepreneur”, in that they're searching for a very different business model, are very creative, don’t want to sell prematurely and want to find a “hack” on the traditional biopharma finance treadmill.
5. What motivated your move into biotech investing, as opposed to other healthcare sectors? How did you adjust your mindset from more “traditional” (non-biotech) investing when considering these companies?
The way that we think about it is that we are investing in the re-imagining of medicine. The US economy last year spent four and a half trillion dollars on healthcare--about 80% of that is spent on services or “human labor.” About 20% is spent on products, which would be drugs, diagnostics and devices. I believe that the exciting opportunity is to shrink the 80%. How do we get better outcomes for less money? How do we reallocate [spending] so that scalable products with zero marginal cost are doing more of the work in helping people. Human labor, which delivers very uneven outcomes, is not scalable, and is very expensive should make up less of the spending “pie.” So this attitude biases me towards investing in medical products. It also makes us [Time BV] interested in healthcare delivery models or software that might give humans a lot more leverage, because that is another way of reducing labor time and costs.
[What were some adjustments you made mentally, in evaluating biotech companies?]
In the tech investing work, I think you need to really be focused on how big things can become if they work. So, you don't want to get overly fixated on every reason Spotify or Uber could fail. What is attractive about the asset class is that when the when these tech companies do work, the upside is so asymmetric [to the downside] that they can generate enormous returns relative to the risk. Biotech is the opposite of that in that it's all about risk mitigation. Mistakes in building a biotech company are extremely expensive and picking the wrong indication can be a $20 or $30 million dollar mistake. My mindset shifted much more to how to systematically de-risk early-stage projects to give them the highest probability of success.
6. What resources did you use to get up to speed in the world of biotech VC? What was this process of learning like?
I've had the huge advantage of having a partner, Tim Wright, who is a very seasoned drug developer, scientist and a physician. Tim has lived through running an NIH funded lab and doing basic research, to then doing translational early-stage work for most of his career, and then running the late stage portfolio at Novartis.
Tim has this incredible breadth of experience in all stages of bringing new medicines to the market. I've picked up a huge amount of very specific knowledge from him about what kinds of de-risking strategies you can implement at every stage, and what the right questions are to ask of particular projects. I think, as with most things in life, approaching it with a lot of humility is critical. I don't believe that there's a great way to learn drug development other than learning through experience, and especially learning from failure. One thing that I have developed over time is a sense of whose opinion is credible or not, on a particular, narrow topic. Drug development is a team sport. It requires narrow expertise. When we're looking at a very complex preclinical package, Tim will bring in one of his former colleagues who can zoom into a small detail of the preclinical work and assess risks.
I don't think anyone knows it all. Evaluating companies effectively is about bringing together different types of expertise and knowing who is credible. That credibility is born from a lot of experience and a lot of failure. I am incredibly skeptical of people who have had one big success, and they think they're a genius. They're sort of born on third base and think they hit a triple. That’s very dangerous in biotech.
Tim has been a big resource, and then reading papers and books has been super helpful. I think one mistake that people who come from the tech world make is adopting this idea that everything is about to change [due to computational/AI approaches], and all the rules are being rewritten. These people see everyone in big pharma as an idiot, and think we just need the tech people to “show them how it's done.” This idea is so wrong. [This attitude] can make you susceptible to thinking that things are going to be much easier than they are.
[On the catchphrase “techbio”]
We define ourselves as healthcare investors. Honestly, I don't care what the technology is. I love technology. I love gizmos. I love learning about new algorithms. But at the end of the day, we want to solve problems. And we should be agnostic to which technology is the right one; it should be whichever one is going to solve the problem. We tend to like companies that have a well-defined problem they are aiming to solve. I've learned over time that companies that are hammers looking for nails can be dangerous. Technology alone is usually not a good reason to start a healthcare company.
7. What is the founding story of Time BV? How did you get connected with Tim Wright? What factors did you consider when making him your partner?
I've been doing healthcare and biotech investing for about eight years. I had been working with a single investor here in Los Angeles named Ron Burkle, who is a great investor. I just decided that I really wanted to start a firm to scale up. I got introduced to Tim by a mutual friend named Jim Schaeffer, who used to be at Merck. Tim and I got together, and we felt like there was a great complementarity between our respective skills and perspectives. I'm an outsider to medicine and science in multiple ways. Tim is a consummate insider, but one who's very creative, and has always deployed creative strategies to be successful as a physician or in drug development. We felt that this is a moment where medicine is going through very dramatic historical changes. With this shift, there will be the emergence of very interesting and potentially big companies.
[On choosing Tim Wright as a partner]
It’s finding that balance between being aligned in some ways, and in other ways being very different to have that “creative tension.”
There are some areas where you want to be totally aligned: ethics, communication, egos. Tim is a great person, who is very ethical and is a very straightforward communicator. When there are disagreements, trust is critical. The core of a high performing team is trust.
Last year we saw 1400 companies, and we did four investments. Most of what you do in VC, sadly, is to look at things that you don’t invest in. So, you have to be empathetic to the entrepreneurs, but you also have to be unsentimental. Tim and I have established a great behavior that if either of us doesn't like something, we are able to just move on. We have decided to only do the things where we both love it. Sometimes it takes a little longer for one of us to click on it, but from the beginning we have had very little drama. This makes working together a pleasure—we are not fighting or trying to “sell” each other on some idea or company.
8. What gets you really excited about an investment opportunity today?
It really depends on the subsector that the company is in. On the drug development and therapeutics side, we are very data driven. We need the company to have enough data for us to make a decision. We have shied away from companies that are earlier than having a clinical candidate--because we need there to be a large enough body of evidence for us to evaluate. We're looking for that existing data package that we can really sink our teeth into. The other characteristics are common across all of the companies we're looking at—obviously great management, exciting, fundamental scientific insights, significant prospective benefit to patients. We are not looking for companies that provide incremental benefit relative to standard of care.
We often try to find areas where the standard of care is not good—where we think this company's solution could represent a real step change in the standard of care. The rule of thumb is that if I told my mom: “hey here's what we got today, and here's this thing.” Would she go: “Wow, that's clearly five or ten times better.” Or does one have to squint at the ROC curve to believe that it's a great thing for the world. We also put a lot of scrutiny into Use of Proceeds planning. Because we're a small firm, we cannot afford to just keep putting money into a company if it's not making progress. We really care about ensuring that they have a plan with enough cushion to enable them to achieve value creating milestones before the next financing. We want to see that mapped out pretty granularly—we like Gantt charts with lots of numbers. This is also a way of understanding the quality of the thinking on the team. Did people make the right assumptions about what things will cost? Are they doing the appropriate experiments in the appropriate order? Do they have the right vendors lined up on the CMC front or for clinical work? Ultimately, we want to see all of those boxes ticked.
9. Which broad areas of science and medicine are you most excited about seeing develop in the next 5-10yrs? (Any portfolio companies you want to mention here?)
On the clinical medicine side, I'm very excited about software that gives leverage to physicians and patients. That’s a broad category, but it’s an important one. We are also interested in any care models that move care out of hospitals. I hope that the hospital model is going to be in decline over the next 30 or 40 years. I am excited by these new vertically integrated stacks that encompass pharmacy, PBMs, insurance, retail, and now increasingly healthcare services, like primary care. I think this is great because it creates an alternative to the hospital model.
Within biotech, I think research tools will continue to be a great area. There's an endless trajectory to the demand for greater resolution, lower cost and higher throughput assays. This is going to be relevant in proteomic and epigenetic analysis of clinical samples. On the therapeutics front, I'm really excited by technologies that are 20 or 30 years old, because they are finally mature. I love gene and cell therapy, but to me those are brand new technologies. They're very intellectually exciting, but also very risky to invest in. By contrast, I think we're now at a point where we still have just scratched the surface on what you can do with antibodies, bispecifics, ADCs and other peptide [biological] modalities. I just think there's so much there to be harvested. We have enough experience with these technologies that they've been de-risked in some meaningful ways.
10. Evidence-based medicine is only a little over 100 years old as a discipline. In another 100 years what do you think this discipline will look like? What parts will be similar, and which will be totally unrecognizable?
Medicine will hopefully be closer to a bona fide science. I think medicine in many ways is still a pseudoscience. The fact that so-called “evidence-based medicine” is not simply synonymous with medicine, speaks to this point. No one should be ashamed of that, but we should be honest about it.
There's a lot of paternalism and ego in the culture of medicine despite how primitive it remains. There are studies that demonstrate the average time it takes for gold standard evidence to be clinically implemented is 17 years. When you walk into a doctor's office as a naive patient, you would assume, based on the aesthetic of medicine, that: 1) you’re getting the same treatment that anyone in the world would receive 2) you’re receiving the most current evidence-based interventions possible and 3) they're using all of the latest technology available to understand and cure your disease. None of those things is consistently true. For medicine to become a true science, it has to create equality in the care that people receive and that care has to be grounded in evidence. We're a long way from that. The truth is that medical care today still hurts and kills large numbers of people. We don't acknowledge that. So medicine as science will be much less dangerous to patients. And I believe it will be driven increasingly by curative products and protocols than by highly variable human decision making and ambiguously effective interventions. As the concept of “personalized medicine” suggests, I also assume there will be much more individualized diagnostic and care approaches, which is already clearly becoming the norm.
11. Any advice for entrepreneurs pitching in 2023?
Make sure your numbers add up. As we are now in a “value” investing regime, financeable companies are those that have a real plan for creating value, not just a high-concept.
12. Any updates or announcements you want to make about Time BV?
None for now, but we are open for business and excited to meet anyone in our ecosystem!