Accelerating interest: 'Everyone is converging in the healthtech space'

"We see a lot of convergence. We are looking at companies together with pharma companies, and examining companies together with some of the tech companies."

JANUARY 16, 2020 19:41

Accelmed Ventures II managing partner Dr. Irit Yaniv (L) and partner Amir Blatt (photo credit: OFIR GAFKOVICH) — Accelmed Ventures II managing partner Dr. Irit Yaniv (L) and partner Amir Blatt

(photo credit: OFIR GAFKOVICH)

From tech giant Google to insurance conglomerate AXA, digital health solutions and innovative medical devices are seemingly on the radar of every major organization.

The confluence of healthcare and technology represented one of the major trends of the last decade, with US digital health start-ups raising $7.4 billion in 2019 alone. As one of the leading nations in patents per capita worldwide, Israel has transferred its research to become a key player in the healthcare arena.

“Everything is changing, almost on a monthly basis,” said Amir Blatt, partner at Tel Aviv-based Accelmed, an American-Israeli group of funds focusing on medical device and digital health companies. “We see a lot of convergence. We are looking at companies together with pharma companies, and examining companies together with some of the tech companies. That is a big trend. Everyone is converging in this space.”

Accelmed’s fourth and latest venture capital fund – Accelmed Ventures II – announced its second deal on Tuesday, investing in Tzur Yigal-based radiotherapy medical device company BioProtect.

The family office of Consensus Business Group chairman Vincent Tchenguiz, an anchor investor in Accelmed Ventures II, led the $13 million Series D funding round, with the participation of leading Korean investor KB Investment.

Established in 2009 by Dr. Uri Geiger and Mori Arkin, Accelmed has invested in approximately 20 healthtech companies to date. The latest fund, led by Blatt and managing partner Dr. Irit Yaniv, aims to raise a total of $100m. from investors in Israel, Europe, the United States and Asia.

The first investment made by the fund was in Diagnostic Robotics, leading a $24 million round announced by the company in November 2019. The Tel Aviv start-up is the developer of an artificial intelligence-powered system geared to improve healthcare efficiency in hospitals, clinics and other care providers.

“In the last year or two, we have seen much more attention from large multinational companies. They are scouting around and looking for good technologies in the space of medical devices and digital health,” said Yaniv. “For us, this is great timing to raise a fund, because we are on the ground, see all the deals going on, and can discuss with them what they are looking for. I know what they are looking for and can bridge the gap for those technologies.”

Blatt and Yaniv aim to invest an average of $10m. in eight to 12 companies – both in Israel and abroad – and plan to collaborate with the country’s largest hospitals and leading innovation centers.

“The concept is to be close to the source of innovative companies. We want to be the first ones to know,” Yaniv said.

Israeli digital health start-ups raised $662 m. in 69 deals in 2019, increasing by almost one-third compared to 2018, according to Start-Up Nation Central. Approximately 580 digital health companies are operating across the country today.

In early 2018, the government approved a NIS 1b. ($290m.) five-year national digital health plan, aiming to accelerate technological development, international cooperation and regulatory changes to encourage data research.

“Previously, the challenge for US or European venture capital funds was that they would come to Israel, want to invest but did not have with whom to syndicate. They don’t like to invest alone in a foreign country,” said Yaniv. “Nowadays, the venture capital funds are much more mature and open to such syndicates. We see them working in syndicate with funds in Israel and this brings much more money and traction to the Israeli companies. We have to maintain this by building good companies at the end of the day.”

Israel’s competitive advantage in healthtech innovation and particularly digital health, Blatt says, is based on its “goldmine” of data. Clalit Health Services is the third largest health service organization worldwide.

“Israel has been computerized since the 1990s, almost 15 years before the rest of the world, gathering data from the day you are born until you die – whether in the community or at hospital,” Blatt said. Access to comprehensive data has played a crucial role in enabling Israeli start-ups to validate their technologies.

According to Yaniv, another advantage presented by Israeli start-ups is the trend of capital efficiency, when compared with similar companies from other locations. Venture capital firms, she says, have started to take notice.

“If a company in Israel is working on the same topic as a company in the US, they will use much less money to reach the same stage as the American company,” Yaniv said. “This gives us a lot of leverage in respect to money that can return to the venture capital firms later on. If a venture capital firm would like to invest and has two similar companies working at the same stage, they would tend to invest in the Israeli one because far less money has been invested.”