Israel: From Hub to Ecosystem, a Story of Maturation

The past few years have seen the Israeli Digital Health sector begin to truly flourish, evolving from a technology hub into a rich and varied ecosystem. The sector is based on a fusion of collective HMO data from a timespan of twenty years, a broad variety of AI solutions, and an assortment of recently announced (within the past twelve months) government and healthcare provider-backed initiatives and programs. Positioning Israel as an even more significant player in the global Digital Health sector is the entry into the local sector of fields in which Israel has a very strong presence and renowned capabilities, primarily cybersecurity and blockchain. According to Israel’s Digital Health Industry 2017-2018 H1, the latest of the Start-Up Nation Central Finder Insights Reports, this is just the tip of the iceberg.

Dedicated Digital Health VCs: Playing a More Active Role

It is worthy of attention that there is an increasing number of VCs dedicated to the Digital Health sector, both those looking to invest, and those actually investing – not to overlook the considerable interest in the sector from other cross-sector Venture Capital funds. Financial deals incorporating investors from across the globe has held steady at the 70% mark for the last three years, although deals involving Israeli investors has actually increased by 25% since 2014. Furthermore, recurring local investment by local VCs is becoming a real trend. The report states that of investors who participated in more than one financing deal within the Israeli Digital Health innovation ecosystem, nearly 68% were exclusively Israeli. The reasons behind this are the Israeli dedicated Digital Health VCs, which are really beginning to play a more active and significant role within the ecosystem. The increasingly large funding rounds seen over the past year and a half are a direct result of these VCs, in particular with OurCrowd, Qure, and aMoon raising the majority of capital during this time, with a remarkable $500M being raised by aMoon in a second funding round for investment in mid-to-late stage life sciences and Digital Health companies.

It’s not only the newly established Digital Health-dedicated Israeli VCs – Israeli cross-sector VCs are also shifting their attention towards the Digital Health sector, a notable example of which is Mercavia Holdings, which was not focused on healthcare in the past but is now actively seeking DH companies in which to invest. And it’s not just Israeli VCs whose attention the sector is attracting, but also global investors. A diverse selection of VCs across the world are now showing active interest in Israeli Digital Health; the USbased Bessemer Venture Partners, for example, launched funds dedicated to investing in the Israeli Digital Health sector, as well as the Chinese Glory Ventures and the Japanese-Israeli Corundum Open Innovation VCs.

Will Digital Health Become Israel’s Next Economic Growth Engine?

According to the report, if the Israeli government has anything to do with it, this is exactly what seems likely to happen. Recent Israeli initiatives have begun to transform Israel into a vibrant Digital Health hub. The Israeli government has approved a $300M initiative, part of which involves the beginning of government-sponsored pilot programs between Israeli start-ups and international entities. As a part of this initiative, a standard medical information infrastructure will be created, as well as a national research database in the field of genetics and medical information. The establishment of several Digital Health innovation labs is in the works, and the government also has plans to accompany and supplement foreign companies interested in investing in Israeli technologies. 

Not Only, But Also…

It isn’t just the government getting in on the Digital Health phenomenon. The report details how Israeli healthcare providers are actively investing time, money and energy into Digital Health innovation, utilizing medical data collected over nearly three decades. Innovation centers have been established at several well-heeled Israeli medical institutions, all of which have global ties and connections, and are centers of excellence in and of themselves. The innovation center launched at the Sheba Medical Center, the largest hospital campus in Israel, located near Tel Aviv, is dedicated to developing solutions that could have a profound impact on global healthcare. Sheba’s abundant digitized data will be the central driver of innovation, and the hospital’s infrastructure will allow rapid implementation of innovation in a real-world environment. BIOHOUSE Hadassah is another initiative, situated at the Hadassah Hospital campus, which will offer a physical and professional space for medical innovation. Both these initiative were established in conjunction with noteworthy multinationals, including Amazon Webservice, Deutsche Telekom and Google.

Israeli HMOs Supporting Innovation

The innovation initiatives being established are not only governmental, with the two largest local HMOs having also entered the arena. Maccabi, Israel’s second-largest HMO, is the latest to join the innovation race, with the establishment in 2016 of an innovation institute dedicated to improving health outcomes through big data analytics, predictive algorithms and machine learning, supported by a grant from Morris Kahn. This institute has developed a big data platform that enables researchers and innovative companies around the world to access Maccabi’s database. Clalit, Israel’s largest HMO, has a well-established research institute which it founded a number of years ago, in addition to further similar initiatives in the pipeline. And that’s not all. Watch this space for news of other healthcare provider initiatives, which are due to be revealed later this year.

Download your copy of the report here 

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