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Executive Summary
Health is the most impactful sectors of Israeli high-tech because of the significant involvement of key local stakeholders and that massive potential market. (The global Cyber Security market is estimated to be $250B in annual revenue, whereas healthcare is over $10T).
The importance of healthcare innovation Israel cannot be understated. There is no other sector in high-tech that has such a massive global market potential and also such a significant economic impact in Israel. Healthcare innovation is a national asset that must be maintained.
Therefore, it is important to understand and assess investment activity over the first half of 2024 and the impact this will have on the future of the health innovation ecosystem in Israel.
While many reports have highlighted the continued resiliency of Israeli high tech, healthcare has unique complexities that must be addressed.
In short, the situation is not good. The continued war with Hamas has had a significant negative impact on investments in the healthcare space, particularly in the early stages.
Investors who are familiar with Israel and have invested in Israeli companies in the past are hesitant to make investments when the risk profile of the country is substantially elevated.
Investors who have not yet invested in Israel are extremely reluctant to take a first step given the ongoing conflict. In addition, Boycott, Divestment, and Sanctions (BDS) efforts have increased substantially over the last half a year and have started to affect the perspective of Israeli innovation:
An average of 60% decrease in private funding activity in Q1 2024 and Q2 2024 when compared to quarterly activity before October 7th.
Later stages are reliant on PIPE deals and earlier stages are reliant on extension rounds and grants, indicating that traditional investors are hesitant to deploy capital into Israeli companies. Neither of these are sustainable.
On the positive side, Mid stage (A / B) rounds noticeably increased in H1 2024 when compared to H1 2023, which is a testament to both the resiliency and quality of emerging startups.
Considering the unique relevance of healthcare innovation, both to the Israeli economy and global markets, it could be time to consider governmental interventions to address current issues and to build strategies to support continued innovation in the future.
All data in this analysis comes from Startup Nation Central and HealthIL.