What Texas can learn from Israel: Takeaways from the Texas-Israel Alliance Healthcare & Life Sciences Innovation Conference

This past Friday (Oct. 25, 2019) the Texas-Israel Alliance held its Healthcare & Life Sciences Innovation Conference, which was conveniently hosted by UT Southwestern Medical Center, where I work. The event presented 5~6 panel discussions and fireside chats that featured speakers from a wide variety of institutions and business entities including the FDA, Microsoft, Rabin Medical Center, NASA, Start-up Nation Central, several venture capital firms, and others. All of the featured talks were of uniformly high quality, but one stood out for me in terms of 1) delivering insights into what makes the Israeli innovation ecosystem unique, and 2) providing lessons that can be derived from those insights that may be useful for further developing Texas's own ecosystem. This was the fireside chat between Guy Hilton, General Manager of Start-up Nation Central, and Dr. Claire Aldridge, Associate Vice President of Commercialization and Business Development at UT Southwestern (who, in the interest of disclosure, is my boss's boss).

Below are the highlights I took away from this conversation, which primarily consisted of Guy's responses to questions posed by Claire.

Q:  Because VCs tend to prefer investing in companies that are in their own backyard, Texas-based companies have historically had difficulty attracting funding from coastal VCs (or, on the flip side, when new ventures are established on the basis of technological breakthroughs created within Texas, they often end up establishing their operations within coastal hubs rather than within Texas). What's the secret behind Israeli companies' success in attracting funding from US-based VCs?

A:  A variety of factors have been responsible:
1. The Israeli government set up an initiative during the '90s (Yozma:  link, link, link) that provided matching funds to Israeli startups that received investment funding from overseas VC firms, which helped prime the pump for further investments.
2. The fact that so many Fortune 500 companies have operations within Israel helps lower the perceived risk of investing in Israel (in addition to providing opportunities for the corporate VC arms of those companies to seek out investment opportunities within Israel).
3. Israel has developed a reputation as being a place with a high concentration of serious serial entrepreneurs.
4. The success stories of Israeli startups have been used to actively cultivate Israel's brand as a center of entrepreneurship, both by the Israeli government as well as by non-governmental organizations such as Start-up Nation Central.

Q:  Scientific research is very robust and well-funded here in Texas, but how can the state best cultivate the management talent that is needed to run the companies that will be built around those technologies that arise from the basic research? Also, how can Texas best ensure it is developing a sufficient workforce with hands-on technical experience in working in GLP/GMP environments to meet expected future needs?

A:  Israel is facing similar challenges, in that its traditional education pipeline consisting of army service followed by university education is not expected to be sufficient to create a large enough trained workforce to meet the country's future needs for talent. Guy said that the Israeli government (as well as his organization) is taking active steps to cultivate talent within sectors of the Israeli population that have traditionally been neglected, e.g., its Arab and Haredi (i.e., Jewish ultra-orthodox) communities. Start-up Nation Central has been active in organizing community-building events directed to tech workforce promotion and training within both Arab and Haredi communities within Israel.

Other interesting points arose over the course of Guy and Claire's conversation:

Digital health as an important and robust component of Israeli healthcare innovation:

• Amazingly, Israel has ~25 years of nationwide electronic health record (EHR) data, collected by all of the four major Israeli HMOs (which collectively cover almost all Israeli citizens). These data can be made available to researchers and tech innovators in a de-identified matter, even to entities outside of Israel (more information available in this recent Forbes article here).
• Last year, the Israeli government announced a 1 billion shekel effort to fully mine this dataset to discover new advances in preventive medicine and personal medicine (link, link, link).

Aspects of the Israeli entrepreneurial ecosystem that may be surprising to those in the US:

• Israeli startups can be surprisingly open about sharing useful knowhow with each other, even with their competitors, e.g., regulatory knowledge, how to penetrate specific markets within the US, etc.
• Extreme flexibility can be found among Israeli serial entrepreneurs in the form of moving into very different fields as they progress. As an example, one might find an Israeli entrepreneur who got his start working in military intelligence during his army service who then moved into cybersecurity, and then into Agtech, and then into healthcare. In contrast, serial entrepreneurs in the US are much more likely to be pigeonholed into specific industry sectors, i.e., they are far less likely to successfully raise money if their new venture is within a field that is far removed from their previous effort(s). This unique flexibility adds to the robustness of the Israeli innovation ecosystem by promoting the efficient dissemination of useful knowledge, practices, and culture between disparate sectors. 

- Isamu Hartman