aMoon’s Marius Nacht and Yair Schindel lead the charge to make ‘healthtech’ a booming growth industry.
By JPOST.COM STAFFUpdated: SEPTEMBER 26, 2018 11:07Marius Nacht (L) and Yair Schindel (R)(photo credit: AMOON) In sweltering summer heat in 1993, three young engineers huddled in a Tel Aviv apartment and wrote a business plan for a start-up they called NSK. The initials stood for their family names: Gil Schwed, Shlomo Kramer and Marius Nacht.That business plan brought in $125,000 from an investor named Nir Barkat, who had earlier sold his software start-up, BRM, and who later became mayor of Jerusalem. Together with an equal sum from their own pooled savings, the three entrepreneurs launched Check Point Technologies, now a market leader in cyber security and firewall protection for networks.Where did the name come from? A checkpoint is a barrier where travelers aresubjected to security checks. Check Point software checks whether someone who wants to enter a network is legitimate or a dangerous hacker.Today, 25 years later, the shares of Ramat Gan-based Check Point are worth $18.2 billion, on annual revenues of $1.9 billion, net income of $817 million and a remarkable 43% net profit margin. Check Point is one of the last Israeli start-ups to grow to significant global size and remain independent, itself acquiring many other start-ups.Gil Schwed is still its Chief Executive Officer. He has shown a remarkable ability to reinvent his management style repeatedly as the company grew to employ 3,500. Shlomo Kramer left the company and has a long string of successful start-ups and exits to his credit. Marius Nacht is the non-executive Chairman of the Board – and now, has launched a venture capital firm focused on medical technology called aMoon. Dr. Yair Schindel is a cofounder.In May, the Swiss global investment bank Credit Suisse announced it would invest $250 million in aMoon.Schindel is a polymath – a medical doctor, entrepreneur, Harvard MBA, and expert on digital technology. He was the Chief Medical Officer for the Israeli Navy Seals, where he served for five years.Nacht, who is 55, studied Physics at the Hebrew University. (Note to budding young entrepreneurs – study physics. It will teach you why you do things, while engineering teaches you mainly, how.) According to Forbes magazine, his net worth is $1.7 billion.
Shoshanna Solomon, writing in the Times of Israel, observed that Nacht was inspired to launch aMoon after seeing his father battle cancer. Nacht is a leading example of how Israeli entrepreneurs’ creative talents generate enormous wealth, some of which is reinvested in other start-ups.According to the World Health Organization, global health care spending in 2018 will total $9.5 trillion. Can Israel make “healthtech” – the application of technology to healing and preventing illness – a booming growth industry? Nacht and Schindel believe it can and are leading the charge. They kindly responded to my questions by email.The Jerusalem Report: In 1993, how did you three young entrepreneurs know how to craft such an excellent business plan?According to Marius, “All three of us contributed to the business plan. I think the biggest contributor was Gil [Schwed], but we all had our share in creating it. It was actually first printed in my bedroom, which was our office at the time!“All of us had worked in different start-ups before we came to Check Point, so we had basic ideas of how businesses are run, how does one get to the customer, what does it take to get to the customer in terms of funding and human resources.“Time in the market provided us with a multiplier on all the conservative numbers that we put in the business plan. The market just exploded. It was not a coincidence that we started Check Point when we started it. We predicted accurately when the big wave would catch. We had a conservative business plan that matched normal years. Then the Internet arrived, and we had expected that, everything would be multiplied by 10 or 100.”Within the aMoon portfolio, companies are innovations that may revolutionize health care everywhere. Among them: AposTherapy, a biomechanical device that retrains muscles around the knee to relieve chronic conditions; Ayala, a personalized treatment for cancer; BiondVax, a universal influenza vaccine; Mapi, a once-monthly injection of glatimir acetate (Copaxone) to treat multiple sclerosis; CartiHeal, a knee implant that regenerates cartilage and bone; Igentify, personalized, supervised genetic counselling using advanced algorithms; Medial EarlySign, which uses artificial intelligence to detect early warning signs of health risks; Zebra, automated, accurate, timely medical imaging diagnosis, and Day Two, described below.The Report: The medical technologies of aMoon companies is amazing. How do you choose your start-ups? Is the principle really “invest in people, more than in ideas?”“With respect to the name aMoon, we intend a double meaning, in a play on the words ‘trust’ in Hebrew (emun) and also ‘a moonshot.’ We want some of our companies to be moonshots,” said Nacht.“Many of our start-ups I’ve invested in before, personally. The investment strategy of aMoon II is to invest in later-stage, lower-risk companies and to write larger checks. Prior to aMoon II, I was really investing in people and ideas. aMoon I was a form of basic training, in which I learned how to crawl. It was a sandbox in which I learned the science, technology, financial and investor environments, as well as the hospital settings and how the products are going to be used.“In order to get the product to market there are many components. You need a good solution, but you also need to get it to market, get it successfully funded, and know how to take it through regulatory affairs. There were many aspects that I was learning through investing, which is my way of learning. I learn by associating myself with those companies, people and technologies.”According to Schindel, “There is a famous phrase in venture capital, that it is better to have mediocre tech and an exceptional entrepreneur than vice versa, and we agree. We invest in the best talent we can find, but the tech needs to be exceptional, as well. There is a huge pool of over 1,500 healthtech companies in Israel. We can afford to be exacting and uncompromising in both areas.”The Report: Israel is a very small country. Yet our start-up entrepreneurs spread themselves across a vast array of technologies, including autonomous vehicles, quantum computing, etc. Are we spread too thin? Should Israel focus on selected technologies in which we have a chance to lead? “Start-ups do what start-ups do; they work according to the invisible hand of Adam Smith. As a country, however, where the government is focusing should be narrower. That does not mean focusing on a single growth engine, but on about three. High tech/cyber is one very strong leg. Health care should be No. 2. The question what the third leg should be depends on the size of the market and the number of companies in Israel. We need to do some serious analysis to establish that third leg. I think it is either fintech (banking and finance technology) or artificial intelligence,” said Schindel.Nacht adds, “We can find a niche in which Israel can excel in every sector. If you look at the global picture of telecommunications and computing, cybersecurity is a small part, but Israel has excelled in that space, thereby providing Israel with a lot of tax dollars and jobs. We don’t manufacture mobile phones, we don’t have cloud companies, we don’t do switches and routers, we only do cybersecurity when it comes to telecom, but for Israel it’s a sufficient market, a big enough niche for us. This applies in every domain. In agritech, fintech and healthtech, etc., we can, and should, find the exact niche where Israel has a unique advantage, and can excel, providing Israel with the next growth engine for the economy.“It is of paramount importance to first identify that niche and then for the government to support development in this area. This is tremendously important. There are also certain basic things happening in the scientific and industrial worlds that Israel simply cannot afford to neglect. While we are not a semiconductor superpower, we have to have an Israel with know-how and the abilities in the semiconductor space.“The same applies to the auto and engine industries, which is a kind of technology that Israel must have, and to quantum computing and biology and computer science. There are certain areas in which basic research must be conducted in Israel even though it will not translate into an economic success or billion dollar start-ups, because otherwise we will lag behind.“Quantum computing and quantum mechanics are important because we don’t yet know what can come out of that. Even if we’re not going to see financial benefits, Israel cannot afford not to invest.”The Report: With regard to the start-up Day Two: For years, doctors spoke about ‘personalized medicine.’ But little of it materialized. Now a start-up you guide, and invested in, Day Two, wants to tailor diets individually. What is the future of personalized medicine, and can Day Two stem the diabetes and obesity epidemic?According to Dr. Schindel’s way of seeing, it will take more than just Day Two to eradicate these diseases, but digital transformation, along with cultural and behavioral changes, will do it, eventually, and Day Two will be a significant part of the equation.“For years, endocrinologists and primary care physicians treated diabetes and prediabetics by addressing spikes in blood sugar based on the glycemic index of foods. Everything, even insulin dosage, was based on these numbers.“We now know glucose response is entirely personalized and can be treated accordingly. There are multiple factors in creating the best treatment plan, and Day Two has the best integrated solution computing the most data points including the microbiome, leading to the best plan, the best predictive information.“The demand for Day Two’s service is overwhelming. There is currently a waiting list of months, and the company is building new manufacturing facilities in Israel and abroad. The company also just signed a landmark agreement with Clalit, the largest health care fund in Israel,” said Schindel.The Report: An alarmingly high proportion of Israel’s 6,000-plus start-ups will fail. Why? What is the main cause? What part of Israel’s start-up ecosystem should be strengthened to reduce the high failure rate?Nacht believes that “the area that can be greatly improved is in go-to-market capability. We need to know how to best approach differing markets. This is true in hi-tech, fintech, telecom, healthtech, etc. We need to really know how to address each of these with precision.“Israelis sometimes think that if they solve a problem, then people are going to line up to buy whatever solution they are selling. They often underestimate marketing and sales. They think it’s sufficient to have a brilliant solution, and that is incorrect.“Many of our best technological minds cut their teeth in elite military units, where technological problems were presented, and they were able to solve the problems and come up with creative solutions. In the IDF, however, they had a customer right at the end of the corridor, so they never needed to think about where and how to market. These skills – sales, marketing, brand planning, brand awareness – must be learned, so that later, when addressing global markets, they know how to successfully go to market and are not lacking any of these capabilities.“Another important part of this is a character factor. To build a company, you need stamina – persistence and perseverance and a rigorous systematic approach to business administration. That is not something that you learn in an MBA program. It’s something that you have to have ingrained in your personality. Many move on to solving the next problem, instead of tackling the first one, which had already shown success, and building a big company around it. These are the factors responsible for the failure rate, and when addressed, will increase the rate of successful outcomes.”The Report: Marius, I understand that in the early (and even later) years of Check Point, you headed Marketing, which really was Sales. You traveled constantly and sold product. I teach that a start-up should have three founders, one of whom is good at (and likes doing) sales, as with Check Point. Marketing really comes much later; sales comes first. Do you agree?Nacht believes that “a team of three, with significant non-overlapping skills and ambitions, is a solid team. One might want to do engineering, another might want to do sales and marketing, and another one is an operations guy, a person who can build a company. Technology alone is not enough. There is an overlap, of course, but there needs to be sufficient areas of non-overlap, and a distinction between the individuals, in order for the company to come up with the complete skill set that is required.“It is absolutely correct that sales comes before marketing. Marketing helps sales. You can do sales without marketing. Marketing is like the artillery assisting the infantry – very much needed, but not as critical.”The Report: In general, as a later stage investor, do you see a problem in the lack of seed, or zero-stage, investment capital for start-ups, in Israel?Nacht says, “No, I do not. aMoon I is invested in companies at different stages, all the way from having founded them, as in Day Two, to public companies, such as BiondVax.“In aMoon II, in which we have co-investors and LPs (limited partners), we are very systematic and disciplined in the Triple L strategy. This is where I believe the financial opportunity lies. There is a lack of later-stage funding; this is why we started aMoon II. Without this, the start-ups would sell out too early and would not realize their true potential.”“Some of the companies in aMoon II, though our investment is recent, have very considerably appreciated. Beyond appreciation, the companies are crossing milestones and making progress. Zebra won FDA approval, Ayala is starting a pivotal study, Cartiheal has already completed one-third of a [three-stage clinical] FDA trial, as well. Biologic Design is a company that has already been profitable for a few years and is looking to grow and expand, and we are providing them with the necessary growth capital.”The Report: “Some believe Israel is transitioning in its venture capital industry from American firms and money toward Chinese. Is this the case? If so, this is a difficult and dangerous transition. China is known to be seeking advanced technology that it itself lacks. What is your view on this”?“China is now playing a much bigger role in the world economy, which, of course, affects the ecosystem in Israel. However, China represents a very different culture from the American and European ones that we have grown accustomed to, and Israel should be very cautious with doing business in an unfamiliar environment.“My father advised me not to do any business in an area that I do not understand. In the case of China, that is a culture that we do not really understand. It is vastly different from the culture that we have grown up in. While there are many Israelis who came from Europe and America, not a sufficient number came from China for Israelis to naturally understand and feel comfortable doing business there,” says Nacht.The Report: Dr. Schindel, you have an MBA from Harvard. Over the years, I taught many MBA students in Israel and abroad and am rather critical of MBA programs. Was your Harvard MBA valuable and what did you learn from it?According to Dr. Schindel, “There are three important components to a business school experience: 1) What you learn 2) Friends and colleagues 3) Access to the best places to work. These are all equally important. Harvard Business School (HBS) experience gave me and my classmates a chance to know each other. We have done much together since, in business and personally. It is a wide and committed network. I found my first job that way, partnering with two professors at MIT. In terms of learning, I acquired a solid base in finance, strategy, sales, negotiation, etc., which I didn’t learn at medical school or at Shayetet 13. HBS has a unique teaching method based on case studies only. It is very practical, engaging and interactive and puts you in the protagonists position, viscerally.”The Report: Dr. Schindel, you spent five years in the IDF, becoming the head doctor of IDF’s naval commando unit. I’m pretty sure you got wet during this time. What did you learn from this experience that you can share with our readers?According to Schindel: “1) Small, talented, passionate groups can get significant things done. 2) Try to stay warm, especially when you are wet!”The writer heads the Zvi Griliches Research Data Center at the S. Neaman Institute, Technion and blogs at www.timnovate.wordpress.com
