Bennett: Jury still out on Israeli start-up exits

At a BioMed conference in Tel Aviv Economy and Trade Minister expresses uncertainty about whether exits are positive.

June 12, 2013 01:25
2 minute read.
Economics and Trade Minister Naftali Bennett speaking at Ramla conference, April 2, 2013.

Naftali Bennett at Ramla conference 370. (photo credit: Courtesy Ramla conference)

Economy and Trade Minister Naftali Bennett has mixed feelings about Israeli “exits,” such as Tuesday’s sale of start-up Waze to US-based Google.

“Many people are frustrated by the big exits. ‘Why do we sell, why do we sell?’ I think the jury is out on that one,” he said on Tuesday at the annual IATA-BioMed conference in Tel Aviv.

A recent report found that 95 percent of Israeli start-ups, when faced with the choice of going public or selling to foreign investors, choose the latter.

The roughly 6,000 leaders in the fields of health, pharmaceuticals life sciences and biological technology from around the world who gathered at the conference likely agreed with Bennett.

In Israel, the biomedical industry has to look abroad to survive; a country with a population of eight million cannot sustain such research-heavy businesses alone. As a result, the quickly maturing biomedical industry in Israel often looks to sell its products, technology or entire start-ups to bigger business with the proper economies of scale abroad.

“Many of the top-selling biologics world-wide carry a concealed ‘Israel Inside’ label,” says Ruti Aloni, who co-chaired the conference.

According to Aloni, bio-technology conceived in Israel (but developed and commercialized abroad) generated $24.6 billion of revenues in 2012, putting Israeli fingerprints on nearly a fifth of worldwide biotech sales. And the industry is growing. Of the 920 biotech companies that have sprouted up in Israel, two-thirds of them were founded in the past decade alone.

In his brief remarks, Bennett noted that purchases by foreign companies can benefit local startups.

Cyota, the anti-fraud software company he founded, has grown from employing 120 people to employing 400 since its sale to Bedford, Massachusetts-based RSA Security in 2005. Working with big, international companies can teach Israelis skills in management and marketing, and prepare them for new ventures.

Exits can also be beneficial for the state; US investor Warren Buffett’s recent acquisition of Iscar netted the state NIS 1.7b., bringing the monthly budget in May from a deep deficit into surplus.

But not all exits leave the companies fully functioning in Israel; Facebook shut down two Israeli start-ups after acquiring them, and its failure to promise Waze that it wouldn’t reach a similar fate reportedly scuttled an acquisition deal between the two companies earlier in the year.

Yet as Israel’s Biomed industry follows in the footsteps of hi-tech in the coming years, Aloni says, she hopes it will have more potential to stay rooted without necessarily relying on international companies.

“One would hope that in the future, based on current trends, the local biotech community will form a core of substantial companies that will evolve into a mature industry capable of reaping the benefits of furthering local product development and commercialization,” she says.

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