Medical Device The Israeli Case

Objectives Drawing a general “profile” of the Israeli entrepreneur and to draw lessons on the following issues: 1. The origin of entrepreneurs and their motivations. 2. Means of financing according to stage of development 3. Means of protecting IPR. 4. The dynamics of strategic partnering 5. Recruiting of personnel

Medical devices - Definition An instrument, apparatus, implement, machine, contrivance, implants, in-vitro regent, or other similar components, parts or accessories intended for use in the diagnosis of disease or in the cure, mitigation, treatment or prevention of diseases.

The world Market for Medical Devices  $100 billion  $ 43 billion in the U.S market  Expected annual growth : 9%  Multinational manufacturers are continuously consolidating in order to establish better presence around the world

The Israeli Market  150 companies  market value: $ 400 million  $300 million is imported  2/3 of the imports are from the U.S.  Annual growth: about 1%

Israel’s Export and Import

Export by Category

Export by Destination

Research Sample  10 case studies of companies  3 interviews with incubators  4 incubator companies  1 public company  5 companies employs less then 25 employees  4 companies employ more the 50 employees  All companies exist more the 4 years (av. 6.2)

Background of Entrepreneurs Incubators’ entrepreneurs  Extensive academic background  Lack of industrial background  Founding the company alone and not as a team

Background of Entrepreneurs – cont. Independent entrepreneurs  Extensive industrial experience  Experience in entrepreneurship  Companies are founded by a team of entrepreneurs

Triggers Incubators’ entrepreneurs  Frustration from the academic world  Self-fulfillment  Idea directly relates to their academic field

Triggers – cont. Independent entrepreneurs  People with entrepreneurial lifestyle: inventors with many ideas who often implementing one idea and continue to the next one  Self-fulfillment as a senior employee  Firing – Either by their employer or by the VC who insist to replace them

Source of Finance Pre-Seed  Self financing: raising money from family, friends and personal bank loans  Angels: wealthy individuals who invest in start-ups  “Tnufa” program of the MOIT

Source of Finance – cont. Seed  VCs: $ K  Technological incubators  Self financing  Personal bank loans (characterize companies founded in the early 90s)

Capital for Company Development beyond Seed  Strategic investors: J&J  Rounds of capital raising from other VCs  Combination of VCs and strategic investors  IPO: $60 million

Contribution of the investors Incubators  Administration  Management  Attracting investors and strategic partners  Allowing entr. to dedicate themselves to R&D activities  Learning environment

Strategic Investors  Door opener  Accessibility to information  Strategic partnership in marketing  R&D assistance is often limited

Venture Capital  Management - mainly as board members. Assist in issues from daily problems to business and marketing  Human resources: assist in recruiting senior staff especially abroad.  Search for strategic partners  Assist in raising capital  Limited contribution for experienced entrepreneur

Profiles of Entrepreneurs  The academic  The senior employee  The serial

Conclusions  Incubators are mostly used by the entrepreneurs of the academic profile  Good incubators provide proper framework for un-experienced entr.in this field

Conclusions - cont  Companies initiated by a team tend to develop faster  Incubators’ rules do not support start-ups to recruit the best team  In some cases incubators assist in the technology transfer process  The contribution of the incubators is directly related to its management quality

Conclusion – cont.  Un-experienced entrepreneurs tend to benefit more from VCs  The contribution of VCs is a function of their specialization in the field.  More emphasis should be given to IPR issues and regulation process. Differences between European and U.S law impede companies development.

Policy Recommendations  Incubators should enable start-up to recruit best management teams. Rules regarding salaries and team occupations need to be changed.  Incubators should give more attention to business development  As success of start-up companies is directly related to the quality of the incubator management there is a need to build a monitoring system to evaluate the incubator mangers performance.

Policy Recommendations – cont.  Incubators are designed to achieve technological achievements. More emphasis on business development is necessary.  There is a need to build a best practice model for incubation based on the international experience in the field  Support should be given to the creation of professional IPR and legal services  Tnufa program should be expanded and work more closely with incubators