It is impossible to separate geopolitics from innovation in Israel in the current situation. The conflict that was started by Hamas has had significant impact on the Israeli economy and will undoubtedly have long term impact as well. This affects innovation across all sectors, of which healthcare is the most prominent.
Israel’s strength in health innovation traditionally stemmed from access to data, but data is not the full story, and healthcare data has become commoditized. Israel’s robust activity and prominence stems from three underlying factors that are unique to the country.
First, the high concentration of technical and medical talent creates unprecedented access to key stakeholders. Founders can access all of the key partners they need for innovation within two degrees of innovation, whether it be leading clinicians or potential industry partners. This creates a “virtuous cycle” of rapid ideation and productization, augmented to over two decades of digitized healthcare data and patient records.
Secondly, Israel benefits from a symbiotic relationship between corporate and industry partners, startups, healthcare organizations, and the government. There are 75 multinational corporations with a strong presence in the Israeli healthcare ecosystem, each one actively involved with supporting startups and scouting and working with the healthcare organizations on trials and clinical validations. The healthcare organizations, both providers and HMOs, have formalized innovative management practices that foster significant collaborations with other ecosystem players, including internationally. The government, through the Israel Innovation Authority, offers multiple pathways to support Israelis startups, from early grants for R&D through subsidies for international pilots.
Over the last year an additional factor has emerged that is unique to Israel: the proven and unprecedented commitment to business continuity and resiliency. The Israeli health innovation ecosystem has shown the world that founders and innovators are able to overcome extreme situations and maintain deliverables. This can be seen by the multiple high-profile engagements that have been announced over the last twelve months. This includes major acquisitions, like V-Wave and JnJ, significant partnerships, like Oracle and Imagene or Highmark and Laguna, as well as notable funding rounds, like NVIDIA and Pfizer’s recent investment in CytoReason. This also includes major pharmaceutical companies who overcame major obstacles in order to maintain ongoing clinical trials.
The healthcare organizations themselves have also exhibited unprecedented fortitude, proving that “necessity is the mother of innovation”. As a direct result of the conflict, the rapid response of Israeli hospitals and clinicians has spurned a new outcropping of startups to address challenges on the ground, specifically regarding mental health, emergency care, and rehabilitation. This is supported by governmental incentive programs aimed to integrate startups into these critical areas of care.
And while all of this is positive and impressive, cracks have started to show because of the continuing conflict, and there is palpable anxiety that Israel’s comparative advantage in healthcare innovation will erode as the conflict persists. There are many stories circulating in the ecosystem of investors delaying their deployment or even pulling their investments entirely. Israeli venture capital firms struggle to raise new capital from international LPs. C-level executives at multinational firms are postponing expanded activities at their Israeli sites, possibly indefinitely.
Between the Judicial Reform and the War, Israel has struggled for over two years to show stability and growth. All the while international competitors have continued to make strides and progress. The longer this conflict plays out, the higher the risk profile of doing business in Israel, and the greater the probability that politics will overpower business. There is only so long that “resiliency” can cover for the higher geopolitical risk profile, and their concern that the Israeli healthcare innovation ecosystem will be left out, irrelevant, or relegated to pariah status once everything returns to normal.
Therefore, the Israeli government must act now, before it is too late, to ensure the continued growth of the healthcare ecosystem and prepare for the day after.
For example, there are early discussions regarding unpacking and upgrading Israel’s legacy IP regulation to match international standards, which has become a hindrance to innovation in certain situations. The Ministry of Economy recently offered financial subsidies for Israeli startups to attend international conferences. Task forces have been created to explore the option of upgrading Israel’s EMR system, which could potentially unlock the next generation of healthcare innovation. Financial mechanisms have been created to offer downside protection for institutional LPs and encourage their participation in ventures. These are just some of the many targeted initiatives that are being explored.
Israel was dragged into a war they did not start by terrorist actors, much like the citizens of Gaza and Lebanon were dragged into a war they did not start by terrorist actors. The faster we get to a mutually beneficial ceasefire, the better for all parties involved. But in the meantime, it is imperative that the government take concrete steps to ensure the continued competitive advantage of Israeli healthcare innovation. If actions are not taken now Israeli innovation will no longer be relevant on the global stage.
The high-tech community in Israel is the critical economic engine of the country, and there are many in the government who recognize the strategic importance of supporting this sector. The steps that the government needs to take now to ensure the future is clear. The biggest worry is that other actors in the government will not do what is needed, and all of the Resiliency that Israeli founders have proven will be in vain.
About HealthIL
HealthIL is the governmental ecosystem for healthcare innovation in Israel. HealthIL works to address challenges in care for citizens worldwide through the successful integration of technology and startups into healthcare systems. Our approach is rooted in a holistic, extensive, needs-based assessment of healthcare systems, working cross-function across all of the key stakeholders in healthcare, including startups, healthcare providers, governmental agencies, multi-national corporations, and investors.
HealthIL is an independent NGO backed by the Israel Ministry of Economy, the Ministry of Health, and the Israel Innovation Authority.
www.healthil.org
About the Author
Yoav Fisher is the Head of Strategic Innovation for HealthIL, where he leads engagements with startups, investing entities, and multinational corporates. Prior to HealthIL, Yoav worked for a leading health-focused VC fund, and he still maintains investment activity as an angel investor. Yoav also operates as a consultant and advisor to both startups and investing entities. He holds an MA in Economics from Tel Aviv University.
