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 1999-2004: 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

0

100

200

300

400

500

600

700

800

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

$ m

illio

n

imports

exports

Export by Category

Exports by category, 1998

Electromedical equipment

30%Medical X-ray equipment

28%

Other8%

Miscellaneous medical &surgical

instruments34%

Export by Destination

Exports by leading destination, 1998

USA37%

Ireland16%

France3%

Other EU16%

Japan3%

Other16%

Germany5%

Brazil4%

c

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 employeesAll 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: $300-1000K 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