Introduction

Israel is considered to be one of the most innovative countries in the world. It has one of the most well established start-up ecosystems and is considered a pioneer in the technology industry.

Israel has also made great strides in establishing itself as a leading innovator in the Digital Health space. With around 400 companies in digital health, strong life science and medical research support from academic and medical institutions, favorable government policies and availability of generous funding from incubators, accelerators and venture capital firms, Israel has come up as a powerhouse in the digital health space. Leading global companies have lined up in Israel to take advantage of its innovation prowess in the healthcare space.

Israel healthcare startups are going global and creating innovative products to address the healthcare challenges of nations across the world. The increasing size of the digital health ecosystem in Israel is backed by investors from across the globe, including Chinese investors who are eyeing Israel to solve their nation’s healthcare problems and leading life science companies from Western countries such as USA who are making Israel the hotbed for their innovation pursuits.

INDUSTRY OVERVIEW - Size & Growth Rate

According to a recent report by Start-Up Nation, investments in this sector grew around 30% in 2016 to $183 million, with over 70% being grabbed by personal health tools and health analytics companies alone. 56% of digital health companies in this nation are still at the seed or R&D stage, which clearly suggests that the nation is sitting on a landmine of opportunities and innovation.

According to The Times of Israel (IATI), there are around 1350 active Life Science companies in Israel, out of which 612 were found between 2007 and 2016. 20% of all investments in high tech went to the healthcare sector alone in 2016.

INDUSTRY OVERVIEW - Focus Areas

The Health Analytics sector is the prime beneficiary of funding in the last couple of years, garnering 59% and 32% of total funding received in 2015 and 2016 respectively. The Clinical Workflow sector also received funding to the tune of $55 million in 2016. Another notable sector was wearables and sensors that commanded 25% of total investments in 2016.

Digital health companies in Israel have become highly focused on empowering the patients, resulting in strong growth of companies offering Personal Health Tools. As a result, 65% of companies are either following a B2C or B2B2C business model. Health Analytics technology has become the core of such companies offering personal health tools.

The Clinical Workflow sector has displayed muted growth and has remained relatively stable. Even though Israel’s capabilities in this area is one of the most advanced in the world, the possible reason for such slow growth is the fact that such products are customized as per the specific needs of healthcare institutions which vary greatly across different markets and hence, adaptation of such products across markets become very challenging for the companies.

Upcoming Startups

There are leading startups across different digital health categories in Israel that are making waves across the globe. For example, E-Shunt is a startup that has developed an innovative solution for treating glaucoma by developing an implant that stops the progress of the disease. Nutrino Health is a company that focuses on treating diabetes by leveraging big data technologies. The company makes use of data collected via wearables, sensors and medical devices and has created a digital signature of food stuffs.

Insulog is a player in the connected insulin pen space that has developed a pen cap for disposable insulin pens to support adherence. TilTalk2Me is a digital health startup that has combined gaming with speech therapy and voice recognition technology. Allerguard has developed a personalized allergen hazard sensor to assist people suffering from food allergies. Tytocare has devised a platform to enable remote examination and consultation with a doctor. EarlySense has raised $25 million to develop contract-free sleep monitor in collaboration with Samsung.

Funding Scene

Several startups have secured large volume of funding in 2016, such as MedCPU ($35M), Simplee ($20M), HealthWatch ($20M), LifeBEAM ($20M), and Zebra Medical Vision ($12M).

Most of the VC investments flowing into digital health startups occur at the seed stage, displaying the risk appetite and confidence of global investors in the quality of healthcare startups in Israel. It is also notable that even though companies focused on personal health tools have garnered a major portion of early stage funding, almost 80% of these companies have fully developed products. Rapidly growing sectors such as healthcare analytics and personal health tools are sectors that are observing major gaps in terms of product stage and requisite funding. These companies need to overcome complex challenges pertaining to product market fit across international markets, regulatory challenges and clinical validation and value before they can reap the benefits of their hard work and innovation.

Incubators, Accelerators & Investors

Israel has one of the most extensive incubator and accelerator networks for technology start-ups in the world and digital health is no exception to the same. There are a myriad of healthcare focused incubators and accelerators propelling the growth of digital health start-ups in Israel. Some of these incubators are backed by global healthcare, pharma and medical device companies that aim to leverage the strong digital health ecosystem of Israel.

eHealth Ventures is one of the leading digital health incubators backed by Israel’s leading HMO Maccabi, Cleveland Clinic, Biotech major Amgen, Medison Pharma and Chinese VC Fund and SCI.

Mindup is another leading digital health incubator backed by IBM, Medtronic, Rambam Medical Center which has a collaboration with Israel Innovation Authority. Its focus area of investments include Big Data, Predictive Analytics, Telemedicine, Cloud Computing, Wearable and Implantable Sensors, Advanced Point of Care Diagnostics, Personalized Medicine, Genomic Analysis and Hospital IT Systems.

Johnson & Johnson started a biotech accelerator with OrbiMed Israel and Takeda Pharmaceuticals known as FutuRx. Similarly, Teva and Philips started Sanara Ventures to back innovative healthcare technology companies. IBM has also launched an accelerator called IBM Alpha Zone to promote digital health companies. Microsoft also backs digital health start-ups through its Microsoft Ventures Program along with other multi-national investors such as Merck and GE.

A host of venture capital firms are active in the digital health space such as Pitango, Pontifax, Arkin, LionBird, Orbimed, and Triventures. In addition, there are newer entrants who are showing a keen interest in investing in digital health companies. Elevator is one such fund that now focuses on investment in the digital health space.

OurCrowd, a crowdfunding platform in Jerusalem is another digital health-focused fund that has collaboration with John Hopkins University to invest in early stage start-ups. Samsung Runway is an accelerator based in Samsung’s R&D center in Israel and focuses on mHealth companies.

MedXelerator is another accelerator backed by Boston Scientific, Intellectual Ventures, MEDX ventures and Sheba Medical Center and focused on medical device and digital health companies.

Other active incubators and accelerators include Alon MedTech Ventures, Next Generation Technology, RAD BioMed Accelerator and Trendlines Medical Misgav Venture.

Chinese authorities are also looking at Israel keenly for innovative digital health solutions. Israeli start-ups are attracting large investments from Chinese investors.

Academic Research Infrastructure

Israel possesses an extremely strong academic infrastructure for fostering innovation in life sciences. One in every three Israeli scientists specializes in life sciences. Life sciences comprises about 50% of Israeli civilian research activities in its seven universities, 10 research institutes, and five medical schools. A large number of world class academic and medical institutions in Israel are working towards fostering the growth of medical innovation.

Leading medical institutions include Jerusalem’s Hadassah Hospital, the Rambam Hospital in Haifa, Tel Aviv’s Ichilov Hospital and the Chaim Sheba Medical Center.

Leading academic institutions include Tel Aviv University, Weizmann Institute of Science, Technion, Hebrew University. These institutions publish a large number of scientific papers, file largest number of medical device patents in the world on per capita basis and have active technology transfer offices for commercialization of digital health inventions.

Recently, Baxter International and Tel Aviv University’s Ramot (Technology Transfer Arm of Tel Aviv University) announced joint research initiatives for evaluating new innovative healthcare technologies being developed at the University as well as Tel Aviv Sourasky Medical Center. Such collaborations between the industry and academia depicts the quality of the academic research in healthcare at Israel’s leading institutions.

Universities have also played a major role in commercialization of new innovations in Israel. Commercialization companies were involved in setting up 53 startups in 2015, out of which 85% of startups were located in the vicinity of universities.

Government Support

Digital Health is one of the fastest growing, lucrative and dynamic industries for Israel’s government. Israel Innovation Authority has been a major catalyst for the development of this sector by devoting 25% of its budget to the life science sector from 2005 to 2014. In the last decade, IIA has invested over $100 million annually to the healthcare sector via its different programs. Further, overseas companies investing in Israel can enjoy one of the lowest corporate tax rate of 8%. Eligible companies that chose to build facilities can even enjoy 30% of investment grant for eligible R&D spending and employee costs.

The Israeli Ministry of Health has laid out a strategy to integrate innovative Digital Health technologies in the public health ecosystem by launching three challenge tenders aimed at enhancing the efficiency of hospital and emergency care, tackling obesity and reducing medical errors. These tenders are a stepping stone for the start-ups to take part in government initiative and marks a new beginning for the relationship between the Ministry of Health and start-up ecosystem.

MARKET MAP

Future Prospects

The healthcare environment across the globe is rapidly transforming owing to ageing population, changing regulatory climate and new technology innovations that promise better quality and access to patients across the globe. In such a disruptive environment, Israel is well poised to become a global powerhouse in the digital health industry due to its strong start-up ecosystem, excellent research infrastructure and talent and dedicated efforts by the government to boost the healthcare sector.

References

Israel21c: Start-Up Nation report finds explosive growth of digital health in Israel

The Times of Israel: Futuristic health tech on display at biomed conference in Tel Aviv

The Times of Israel: Israel is Helping Lead the Global Transition to Digital Health Care

Startup Nation Central Digital Health Report 2016