From singing to investing

In 2011, music serendipitously led Wallach into the world of startup investing.

During a meeting with a Facebook executive to discuss how his band could continue to use social media to grow their audience, he learned about a then-small Swedish company called Spotify. 

“When I tried Spotify for the first time, I fell in love,” he recalled. “It was a dream come true to have the world’s music recorded and accessible on your phone. Broadband internet had also gotten good enough that [the listening experience] was indistinguishable from having the actual music files on your phone as it had been with iTunes.”

At the time, music sales in Sweden and the rest of the world were dropping drastically due to piracy. “Essentially no one paid for music,” said Wallach. But he added that this also created an opportunity for entrepreneurs to test out novel business models, as Spotify founders Daniel Ek and Martin Lorentzon had done with the music industry. “Record companies then had nothing to lose because they weren’t making money anyway.”

The musician himself would go on to contact Ek and Lorentzon to make an early investment in their company—and to which they agreed. He also helped to set up their team in America, a market key to accelerate Spotify’s global success. “To me, I was seeing this thing early and felt that it had a kind of inevitability about it, where I can’t imagine other people not falling in love with it too.”

Spotify was Wallach’s first investment as an angel investor, and having seen it grow and achieve the returns he got as a result, he went on to search for other companies with similar growth potential.

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That led to early wins with other private companies that would hit the big time like Elon Musk’s rocket company SpaceX and cryptocurrency platform Ripple. But Wallach admitted that his inexperience as an investor was obvious from his naivety at the time. “From the Spotify experience, I thought, ‘Oh wow, investing is really easy! You put money into something you love and it takes over the world.’”

As he learned the ropes of angel investing, however, he started building the approach he continues to take today as an early-stage venture capitalist. “I would put small amounts of money into these companies, with the mindset that I’d run out of money if I did this more than three or four times a year,” said Wallach, who later co-founded two investment funds, Time BioVentures and Inevitable Ventures. “That taught me the habit of looking at a huge number of companies to ultimately only investing in a few.”

Funding the advancement of human health

Wallach began looking at investing in the healthcare sector in 2015. He initially built his portfolio with early-stage companies delivering last-mile healthcare to patients and telehealth. 

One of his first investments made in the space was Doctor on Demand, a Goldman Sachs-backed online platform for urgent care, mental health and therapy with more than 100 million users. He also backed another Musk-started venture, brain chip startup Neuralink.

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However, it proved an uphill battle trying to convince a highly traditional industry to be open to new technologies. “Incentives were so perverse that only breakthrough medical products would drive rapid change,” he said. “[In the US,] if you wanted to get hospitals to adopt some type of software, good luck, it’ll take you years and years.” 

So he shifted his energies to life sciences and biotechnology, investing in areas such as diagnostics and drugs, where he felt there was more “leverage space”. He said: “If you could develop a drug that is a step-change to bring to patients, the US system will find a way to reconfigure itself and bring it to the patient.”

In 2020, he co-founded Time BioVentures, where prominent drug developer Dr Tim Wright is also a general partner. The venture capital firm raised $100 million for its first biotech fund in 2022 to push its core mission of giving people time.

“Time is the most valuable thing in our lives,” he said. “As mortals, our time is finite. If you look at the businesses we invest in, the product we’re trying to give to patients is time. It could be living longer or living more quality years free of suffering or disabilities.”

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He also regards medicine as “one of the last great frontiers for society to invest in”. 

“At some point in our lives, we’ll think that medicine is the most important thing that humanity does. Whether it’s when we fall sick or a loved one does. It is intrinsically important work and where capital should flow.”

His investment North Stars

As a biotech investor, Wallach has three goals: To make medicine and the industry safer, more effective and more affordable. 

“Like the book [Medicine Without Meds] talks about, we have a [healthcare] system that is still primarily built around people delivering human services. This is inherently unscalable and it drives a significant amount of variables to the quality of care and outcomes. So [our firm] thinks a lot about how technology can bring a level of standardisation to this space.”

Wallach’s team reviews about 2,000 companies every year, and in line with the investment approach he’s shaped over the years, only four to six of these companies will get chosen to be invested in.

“The sort of companies we invest in are very difficult to build. [They are as difficult as] getting struck by lightning five times in a row! The reason I say that is because every dimension [of the business] has to be solid. Its people have to be great, as well as its tech, clinical plan, intellectual property and commercial strategy, even if it is years in the future,” he said.

That explains why Wallach and his team have specific requirements and expectations of a startup’s founding team. “Because the businesses [we invest in] take a long time to validate their tech, their skills to tell their story to the media, investors and employees end up becoming more important than in other types of businesses,” he said. “So what we look for in a founding team is a founder who’s truly technical and the other who’s very strong in branding and storytelling.”

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He believes both types of founders are critical to biotech and life sciences ventures, and without one or the other, “it would be hard to succeed”. 

“What we find is that the technical founder may be a genius, but however smart they are, they have no experience in regulation or commercialisation,” he said. But rather than obtaining that knowledge on their own, Wallach and his team prefer a founder who has the humility to recognise where they lack and who they should surround themselves with that complement their skill set.

“As each of the domains is specialised, you have to attract remarkably skilled people to join your team. Even in the first year or two [of a startup’s existence], this is a factor we look for. Has the founder built their network and made the efforts to find high-quality talent to join them?” he said.

“Like anything great in life, nothing happens with a one-person team. Success comes with having built it with a great team.”

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Wallach said there are three common qualities that the founders of his portfolio companies have: they are substantive, determined and ethical. 

“Substantive means having a good idea that makes sense. Determined is because most companies go through a valley of death, where they struggle to find their next round of funding or experience a significant setback. We want to find founders who don’t give up easily. And finally, being ethical just makes logical sense to me.

“VC is a relationship-driven business. When we sign up for a new investment, we expect to be in business with these people for 10 years, maybe more. These are long builds. So we want to make sure [the founders] are in it for the right reasons and making the right choices for their investors, employees and patients.”

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