2024 VC SurveyEveryone has a role in war - What is Startup Nation’s?
2024 VC Survey
Everyone has a role in war - What is Startup Nation’s?
eHealth Ventures joined CTech for its 2024 VC Survey to explore how it can help Israel fight for its economic stability in wartime.
“eHealth Ventures is backed by multinational investors, with representation from the United States, Europe, China, and Israel,” explained the VC firm. “Since the outbreak of the war, the overwhelming messaging and responses from our partners, including Maccabi, Amgen, Mayo Clinic, HHG, and Medison Ventures have been of support for Israel.”
eHealth Ventures joined CTech to share some of the ways the world responded to October 7 and how it is planning on helping Israel in times of war.
“The theme of our conversations in the early months after October 7th was that everyone has their role to play in the war, and it is our job as investors in high-tech to continue serving as the backbone of the Israeli economy,” it continued. “The soldiers were fighting for safety on Israel's borders, and we, both in Israel and through the support of our international investors, were fighting for the economic stability of the citizens on the home front.”
VC fund ID
Name of the fund/funds: eHealth Ventures
Total assets: $70M
Partners and Team: Talor Sax, Dr. Yossi Rosenblum, Yossi Lovton, Adv. Orly Sternfeld, Ophir Shahaf, Rose Schwartz, Aryeh Stern, Tali Lipsyzc
Latest investments in Israel: Wizermed, Sounds U, GaitBetter,
Selected portfolio companies: QLog, EFA Technologies, Olive Diagnostics, IdentiAI, GaitBetter, YonaLink
From your perspective, was 2023 a ‘lost year’, or can the events that happened during it be seen as a springboard for opportunities in 2024?
It is not a secret that even before October 7th total funding for Israeli startups was on a downward trend. Startups in 2023 received approximately $10 billion less in private funding than in 2022, but this is reflective of a greater decline in funding that also impacted 2022, in which startups received $11 billion less in private funding than in 2021.
Funding and startup activity trends within innovation ecosystems are often cyclical and 2023 performance was largely reflective of stagnant years following overperforming years. In 2023, funding was invested in a smaller number of larger-scale companies and the lowest number of new startups were established over the past five years.
The breakout of the war will only accelerate the trends that we have already been seeing. The mass layoffs of 2023 combined with the mass return of soldiers from reserve duty can act as a catalyst for a new startup boom in 2024, reinvigorating the spirit of “Israeli Innovation” that had plateaued after the relative stability of the years prior. 2023 was not a ‘lost year’, rather it created an opportunity for the Israeli startup ecosystem to reinvent itself once again in 2024.
What do you believe is more crucial to the state of Israeli tech: the influence of global processes and the global economy, or the local events ranging from the political protest to the war state?
It is easier said than done - but we are trying to “detach” our daily activities from the global downturn and local unrest - we continue seeking the most promising startups in our sector and stage focus, finding the best deal terms for us and our partners, and building value for our portfolio companies. This is not easy, but our partners and team, and the brand we have established as the leading early-stage Digital Health investor in Israel enable us to maintain this status.
Has the prestige of Israeli high-tech been damaged, or are the protests and the war merely a 'small bump in the road' from which the sector can recover within months?
Definitely not a “bump in the road”, recovery will take time but the sector is very resilient and it is already showing growth. This is a good time to be on the investing side (not so easy on the fundraising side…) - we see great opportunities at very attractive valuations and have a better chance of making a deal, as well as recruiting experienced and talented people for our companies.
How much effort was required of you to maintain the fund's status with your investors in 2023? What were their primary concerns and how did you address them?
eHealth Ventures is backed by multinational investors, with representation from the United States, Europe, China, and Israel. Since the outbreak of the war, the overwhelming messaging and responses from our partners, including Maccabi, Amgen, Mayo Clinic, HHG, and Medison Ventures have been of support for Israel.
The theme of our conversations in the early months after October 7th was that everyone has their role to play in the war, and it is our job as investors in high-tech to continue serving as the backbone of the Israeli economy. The soldiers were fighting for safety on Israel's borders, and we, both in Israel and through the support of our international investors, were fighting for the economic stability of the citizens on the home front.
How are you preparing for the most pessimistic scenarios, such as the continuation of the war in Gaza deep into 2024, the opening of another front in the north, or further reduction of government support for high-tech?
We were fortunate to complete the raise of our second fund in 2022 and are working on deployment of the capital with some very attractive transactions. We are also maintaining our holdings in the portfolio companies and making sure they will pull through these tough times, with the addition of non-dilutive grants (IIA and others) and also with the support and investment of our strategic partners and LPs. We are also opening up new deal flow channels from overseas and are about to close our first investment in a non-Israeli company.
Did you raise fund money in 2023 for an existing fund or a new one? What are your expectations regarding this matter for 2024?
We finished the raise for our second fund in 2022, so we did not raise capital for our fund over 2023. Both for startups and VC funds, it is a difficult time to raise capital. Both before the war and now, it is not an easy time for a raise. We expect the difficulties in funding will continue into 2024 and only CEOs who get creative and really fight to raise funding will succeed.
How many investments did you make in 2023, and how does it compare to 2022?
In both 2022 and 2023 eHealth Ventures made 13 deals. Despite the challenges of 2023, eHealth Ventures was able to maintain our momentum as an active investor and we ended up matching the number of deals from the year prior.
In your view, will the amounts and/or the number of deals in 2024 be more like those of 2023 or 2021-22?
We anticipate that the deals in 2024 will be more similar to 2023. It will continue to be a very difficult year for startups to raise capital, but as we mentioned prior it will be an opportunity for the ecosystem to recover and rebuild, and we expect there to be a large jump in funding in 2025 following the new innovations in 2024.
Which high-tech sectors will you focus on in the upcoming year? Which areas will maintain their prominence, and which ones appear less attractive?
We invest exclusively in the digital health ecosystem. In this upcoming year, we will be focusing more on software-related healthcare solutions than medical devices. Medical devices necessitate extensive clinical validation and elongated regulatory processes before they can reach the market and initiate commercial sales.
SaaS-based solutions typically have a shorter regulatory process, and accordingly, they can have a short product lifespan until they reach the market. The scale-up is also more straightforward with SaaS-based solutions, and there aren’t as many logistical and production constraints as there are with medical device products. Based on these considerations, we have shifted our focus towards SaaS healthtech solutions for 2024.
Which type of companies stand a better chance of garnering increased attention from VC funds this year - early-stage or advanced rounds?
As an investor in early-stage companies, we believe that early-stage companies garner an increased chance of getting attention from VC funds this year. As mentioned above, this year the mass layoffs from established companies that happened in 2023 are likely to continue to 2024. Skilled entrepreneurs and engineers who had the luxury
What changes will you implement in your approach to evaluating investments in startups in the coming year, compared to the previous two years? What practices will you abandon, and what criteria will you now demand from founders?
We are tending to shift away from more digital-health solutions that have a lot of hardware in favor of SaaS solutions.
Do you think it is likely we will witness encouraging IPOs, the emergence of unicorns, or remarkable exits in 2024?
Within the health-tech ecosystem, and the high-tech sector as a whole, we have been seeing fewer exits via IPO and more successful mergers via M&A. There will likely be some major exits via M&A in the upcoming year. There hasn’t been an Israeli Health-Tech Unicorn since 2021, and 2024 can be the year to break this trend.
Provide an example of an intriguing investment you made in 2023. What sets this company apart, or what is distinctive about its sector?
One intriguing investment we made in 2023 was IdentifAI. IdentifAI can perform a comprehensive NIPT testing panel at 6 weeks gestation and full genome sequencing at 12 weeks gestation, as opposed to standard NIPT testing that can test for a handful of genetic mutations at 12 weeks. This fem-tech company is poised to disrupt the prenatal testing market, by empowering mothers with the critical information they need way earlier on in pregnancy, and could eventually replace invasive prenatal testing.
Practical and current tips for founders planning upcoming money-raising efforts:
- Be realistic– it is a very difficult time right now to raise capital, throughout the world and specifically in Israel. The rounds and valuations that startups are raising now aren't those of 2021. Be willing to realistically ask and accept rounds of what your company needs on a lean budget.
- Sell your story–no one cares what your startup does, people care about why it matters. When pitching to investors, focus more on the impact of your product, how it is changing markets, and why this is the perfect time for your product to enter the hands of your end customers who need it.
Name two portfolio companies that you think will thrive in 2024:
EFA Technologies
Sector + description of the product/service: Medical Device Sector
Their flagship product, RevDx, is an affordable handheld blood test diagnostic tool. It’s a mobile end-point solution for performing automatic microscopy tests, including whole blood sampling and an automatic diagnosis of blood count.
Investment amount + total: $12M
Founders + year of establishment: Yoel Ezra, Founder and CEO, 2018
Reasoning why this is their year:
2024 marks a pivotal year for EFA due to several key factors. EFA's innovative technology, exemplified by the RevDx, has undergone rigorous clinical validation, distinguishing them from competitors and positioning them as leaders in the industry. The RevDx's successful completion of clinical validation has paved the way for commercial sales, which commenced in Q1 2024.
Moreover, EFA has secured international product orders, signaling global recognition and demand for their offering. EFA's entrepreneurial team has demonstrated resilience, strategic vision, and adaptability. Their ability to navigate challenges, capitalize on opportunities, and drive commercial traction underscores their competence and readiness to capitalize on the favorable market conditions of 2024.
Olive Diagnostics
Sector + description of the product/service: Olive Diagnostics has developed a noninvasive passive urinalysis sensor that provides real-time health alerts, early detection, and information on disease progression.
Investment amount + total: $10M
Founders + year of establishment: Guy Goldman, Founder, Established 2019
Reasoning why this is their year:
Olive Diagnostics is poised for success in 2024 due to several critical factors. The company's cutting-edge technology–a passive urinalysis sensor that produces results in real time– positions Olive Diagnostics at the forefront of digital diagnostics. They are in the very final stages of R&D, and are expected to have a product ready for launch by the end of 2024.
Olive Diagnostics has garnered recognition for its innovative approach to at home monitoring, which is a field that is going to boom over this upcoming year. Urine is hailed as “the new blood” and urinalysis at home will allow new levels of effective RPM (Remote Patient Monitoring). With the increasing integration of AI technology in healthcare, Olive Diagnostics is well-positioned to leverage this momentum to propel its business to success.
