Israel Builds It. Someone Else Keeps It.
The Israeli MedTech ecosystem is world-class at creating value. It’s structurally poor at capturing it.
There’s a story the Israeli MedTech ecosystem tells itself.
1,400+ companies. $3.4 billion in exports. The Startup Nation. A country of 9 million people punching above its weight in medical innovation.
It’s a good story. Parts of it are even true.
But there’s a question the story never quite answers: who actually benefits?
What Israel keeps
Strip out the multinationals selling into Israel, strip out the companies already acquired and now reporting revenue under US or European parent companies, and the independent Israeli MedTech revenue base is remarkably thin.
Novocure: $605M. Israeli-founded, R&D in Haifa, headquartered in Switzerland.
InMode: ~$364M trailing. Declining. Discretionary aesthetics is getting crushed.
Brainsway: $41M. Growing fast but small.
Nano-X: $11M. Still burning cash.
That’s essentially it for publicly traded independent Israeli MedTech. Four companies. One real revenue generator.
The rest of the celebrated ecosystem either hasn’t commercialized, already got sold, or is running on government grants and investor optimism. Given Imaging — the capsule endoscopy pioneer that put Israeli MedTech on the map — was acquired by Covidien in 2014. The revenue now reports through Medtronic. Itamar Medical, Mazor Robotics, Lumenis — all acquired, all gone from the Israeli balance sheet.
The science advances. The commercial ecosystem stays stunted.
The compounding deficit
This is where the comparison to Israeli cyber becomes uncomfortable.
Check Point didn’t just build a great company. It built an ecosystem. The founders, the early employees, the capital they generated — all of it recycled back into Israeli tech. Marius Nacht co-founded aMoon with the proceeds. Unit 8200 alumni built Wiz, CrowdStrike, Armis. The exits compounded into the next generation of companies, which compounded into the next. Israeli cyber is a self-reinforcing engine.
Israeli MedTech isn’t — at least not yet. Given Imaging built and sold. The next generation of Israeli GI founders started from scratch, with another IIA grant, rather than from inside a platform company with commercial infrastructure, a US distribution network, and a CEO who’d already navigated FDA.
Wiz sold to Google for $32 billion. That’s an enormous exit, and the founders are Israeli. But the compounding value of Wiz — the patents, the customer relationships, the talent flywheel — now accretes inside Google, not inside Israel.
The question isn’t whether Israeli founders get rich. Many do. The question is whether Israel gets richer. And on that measure, the scorecard is mixed.
The curse of the subsidy
The Israel Innovation Authority has been subsidizing Israeli tech since 1965. Today that means roughly $300-400M per year in direct grants and indirect capital — including a new $1 billion Yozma 2.0 fund running through 2026.
This is genuinely smart industrial policy. The original Yozma Fund in 1993 created the Israeli VC industry from scratch. The IIA incubator program has produced real companies and real science.
But it also creates a structural dependency that the ecosystem rarely discusses openly. The IIA grant de-risks the early stage so effectively that companies get built that would never survive market selection alone. The grant covers losses while the company searches for a US strategic acquirer willing to pay for the IP.
The model: build with IIA grants → reach clinical proof-of-concept → sell to a US multinational → celebrate the exit.
Except it works for perhaps 20 companies out of 2,000. The rest either flatline at single-digit millions in revenue for years — enough to survive, not enough to matter — or become walking dead: too far along to pivot, too small to attract a serious acquirer, burning through the last of the grant money while the founders wait for a call that doesn’t come.
The IIA subsidies create a very large pool of companies with just enough runway to fail most of the time.
DayTwo is the clearest illustration of what happens when the acquirer doesn’t show up. $85M raised. Gut microbiome IP that was genuinely interesting. Real clinical data. Shut down. The IIA grant was spent. The VC capital was spent. No Israeli anchor tenant absorbed the technology, the team, or the institutional knowledge. It just evaporated.
That’s not a failure of the founders or the investors. It’s what happens when your value capture strategy depends on a single exit event to a foreign acquirer or on the local domestic market.
The reimbursement ceiling
There’s a structural reason this pattern repeats.
You can win FDA clearance from Tel Aviv. Talented regulatory teams, good engineering, and enough capital to run a clinical study — Israel has all of that. FDA regulatory pathways to clearance are hard but navigable from anywhere.
You cannot win US reimbursement from Tel Aviv. CMS decisions require deep relationships with US payers, US hospital systems, US clinical champions. That infrastructure requires physical presence, years of relationship building, and a US commercial organization that Israeli startups typically don’t have the capital to build before they need to sell.
So the commercial scaling — the part that actually generates the recurring revenue that justifies a large acquisition multiple — almost always happens after acquisition, under US ownership. The Israeli company sells at a proof-of-concept valuation. The US acquirer captures the upside of commercialization.
This isn’t a criticism of the ecosystem. It’s a description of where the value accretes in the medtech value chain. Israel is excellent at science.
The returns live downstream of the science.
The cyber contrast
Israeli cyber doesn’t have this problem because the value chain is inverted.
There’s no FDA equivalent gatekeeping US enterprise sales. No 7-year commercialization pathway consuming capital before first revenue. US companies pay real SaaS dollars, on annual contracts, sometimes within weeks of a proof-of-concept. The feedback loop is fast enough that Israeli companies can build US commercial infrastructure before they need to sell — which means they can choose whether to sell, and at what price.
RAD-Bynet stayed Israeli and scaled Israeli and became a $BN incubator for companies like Radware and Ceragon. The RAD-Bynet approach was unique in that it encouraged engineers to leave the mother company, start their own ventures, and receive backing, mentorship, and support from the Zisapel brothers. The RAD-Bynet Group, founded by Yehuda and Zohar Zisapel, is often described as a private incubator and a cornerstone of the Israeli “Silicon Wadi.”
Check Point stayed Israeli and scaled Israeli. Check Point Software Technologies is often referred to as a “mother ship” for Israeli cybersecurity startups, with its alumni founding over 40 successful companies including Palo Alto and Cato.
That’s the model Israeli MedTech hasn’t been able to replicate — not because the founders are less talented, but because the underlying economics of the regulatory pathway and the curse of government subsidies make it structurally difficult to reach scale
and develop a self-sustaining ecosystem.
What this means in practice
For Israeli MedTech founders, the implication is that acquisition readiness is not the same as scientific readiness. The IIA got you to proof-of-concept. That’s the easy part. The hard part is convincing a US corporate development team that you’re a commercial asset, not a science project — that the FDA cybersecurity documentation is complete, the regulatory pathway is clear, and the regulatory risk is priced rather than hidden.
The acquirer’s DD team will find the gaps. Better to close them before the conversation starts than to negotiate around them during it.
For US strategics and mid-market device companies looking at the Israeli ecosystem — the analytical edge right now is understanding which companies have actually cleared the reimbursement and regulatory hurdles versus which ones are running on IIA grants and investor optimism. The ecosystem is deliberately opaque about this distinction. There are real gems in the 1,400+ company pipeline. They’re a small fraction. Finding them requires understanding the structure, not just reading the press releases.
A tool worth knowing
The data in this post came partly from Byte51, built by Matt Gibbs after the SVB collapse took down the life sciences analysis group and CipherBio with it. Matt had started CipherBio at SVB — the best source for life sciences transaction intelligence — and when it shut down he rebuilt it as Byte51. Same concept, same UI, weekly refresh on $2 trillion in life sciences transactions.
I first used CipherBio when I was working on an AI startup for oncology clinical trial risk. I needed to find the right investors. Matt’s advice was simple and exactly right: “Profile companies like yours and see who invested in them at seed stage — we’re the only ones who can do that precisely.” He was right.
If you’re mapping the Israeli MedTech landscape seriously, Byte51 is where I’d start.
If you’re an Israeli MedTech company preparing for a US acquisition conversation, or a corporate development team trying to separate signal from noise in the Israeli ecosystem, I’d like to talk. Reply to this email or find me at dannylieberman.com.
Danny was involved with 35+ Israeli MedTech companies, 13 FDA clearances/approvals, Amgen, Verily and the Fortune 1 company. He is the founder of OpenCRO — the AI Chief Risk Officer, providing FDA cybersecurity threat modeling to MedTech companies.
For $150, you’ll get a 60’ audit call, written evaluation and access to my pattern library.
That’s insane value.
This piece insightfully highlights that while Israeli MedTech excels at innovation, structural and commercial constraints prevent the ecosystem from capturing and compounding the value domestically