Mapping Israel’s Digital Health Ecosystem

By Emanuel Timor, Liran Hason, Naama Zalzman-Dror

Healthcare is one of the largest industries in the world. It is also an industry in need of change due to the rising demand for health services, the aging global population, and the industry’s rising costs. We believe that Digital Health holds the promise to transform the healthcare industry and improve our health and wellness.

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Defining digital health

It’s not easy to define the term ‘digital health’. The best definition we have heard so far is that doctors are used to prescribing pills, not apps — and digital health is here to change this.

In our view, digital health means leveraging machine learning, wearable devices, data, and smartphones to create a more personalized, preventive, and cost-effective health system, as well as provide patients with better tools, knowledge, visibility, and perhaps even responsibility.

Our fund has always sought out markets undergoing disruption while displaying the potential for high growth. We also look for new business models and the opportunity to build new world leaders. This is why we decided to map the landscape of Israeli startups that are active in the field of digital health. Moreover, we have recently invested in Nucleai and Datos, which are active in NextGen Imaging and PGHD platform categories.

Digital health startups in Israel

Israel is one of the countries where digital health startups are thriving. Today, more than 300 digital health startups exist in the country. As our map shows, approximately 100 of these have raised significant capital that has enabled them to begin developing their products. In the last three years, digital health startups in Israel have raised a total of approximately $800 million.

This reflects a global trend. The sector raised $2.8 billion worldwide in 2018 Q1, making it the top performing quarter ever in terms of digital health funding.

Several tech giants have already entered the space in full power. Google is working on numerous healthcare projects and platforms. Apple is one of the leaders in wearable sensors through its iWatch. Amazon made it clear that it also getting serious about healthcare when it announced a joint healthcare venture with J.P Morgan and Berkshire Hathaway. It also acquired online pharmacy PillPack for nearly $1 billion. Salesforce announced a Health Cloud initiative. In addition, Google, Apple and Microsoft have filed over 300 patents filings in healthcare between 2013 and 2017.

The Israeli startups that are active in digital health are spread over a relatively large number of categories, which is no surprise considering the complexity of the healthcare system as well as the multidisciplinary nature of Israeli entrepreneurs. The 100 start-ups in our map include a few dozen companies that have raised more than $10 million, as well as dozens more that are still in their early stages.

Two of the sectors that have attracted the highest amounts of capital to date are:

  • AI-based solutions, mainly in the fields of imaging and predictive analytics;
  • Data platforms that collect, present, and contextualize data.

One of the areas we are excited about is Patient Self-Care and Personalized Treatment. For example, we think that the ability to use your smartwatch to diagnose and monitor yourself, coupled with big data and insights, could create very interesting and fast-growing start-ups.

Another sector we think could be interesting — but may take more time to grow — is Elderly Care. Given that around two-thirds of healthcare system expenses are used for treating our senior population, this field presents a significant need and opportunity.

Digital health is at the cross-roads of several mega-trends, led by big data and artificial intelligence, which permeate a range of solutions, from genome research to wearable devices. At the same time, the need to share massive amount of data across different networks in real time has spurred the development of health information exchange (HIE) systems, an area Vertex was an early investor with its successful investment in DBmotion, now part of AllScripts.

Israel as a global leader in digital health

What’s unique about the digital health industry in Israel is that it combines Israeli talent and entrepreneurial experience in machine learning and big data, gamification, sensors, and digital marketing together with the exceptional Israeli health system and ecosystem.

Israel has been considered a world leader in healthcare technologies for several decades now. This includes drug development — Israel is the home and source of about 10 blockbuster drugs, as well as numerous innovations in the areas of medical devices and diagnostics technologies. Another fact that plays in our favor are that the Israeli HMOs have digitized all the medical records and data of their patients around 30 years ago, creating a unique data-set that is available for research.

Another boost for the growing Israeli digital health ecosystem is the government’s $300 million National Digital Health Plan, which aims to support tech startups that are active in the digital health space.

We are impressed with the quality and diversification of the entrepreneurs in the field. Many are second-timers, coming from different sectors within the Israeli startup ecosystem. This strengthens our belief that Israel is on its way to becoming one of the world leaders in the field of digital health.