Looking your best is one of the safest drugs there is, with zero side effects, says Shimon Eckhouse, whose two decades as a serial entrepreneur in the field of medical aesthetics and equipment makes him Israel's uncrowned king of high-tech beauty.
"What can make us feel better than waking up in the morning and being pleased with what we see in the mirror? This is one of the most important things in terms of health. The overall feeling makes us healthier."
Beginning his professional career as a physicist at Rafael Advanced Defense Systems, Eckhouse's first success in the startup world came as the founder of Lumenis, a maker of aesthetic laser devices known originally as ECS Medical Systems. After leaving Lumenis in 1999 he founded Syneron Medical, a developer of cosmetic devices, which he still heads. Along the way, Eckhouse, 68, has invested in some 15 other medical technology companies, of which seven or eight are still active. These include Tulip Medical, with 13 employees, which develops devices for liposuction and fat transfer procedures; Rapid Medical, with nine employees, which specializes in stroke treatments; and RealView, with 10 employees, is developing what it says is the world’s first three-dimensional holographic display and interface system for medical imaging.
Last year he decided to consolidate all his startup ventures under the umbrella of the chief scientist's technological incubators program, winning a tender a year ago to operate the Alon Medtech Ventures incubator in Yokne'am, south of Haifa. Incubators serve as a home to startups, enabling their founders to concentrate their time and money on research and development while the incubator management provides administrative services and mentors the budding entrepreneurs.
Because it operates in an outlying region, Alon Medtech will receive NIS 2.12 million in government funding to cover 85% of its needs, with the remaining 15% invested by the concessionaire. It is managed by Daphna Hefetz, former CEO of the drug delivery company TransPharma, and will shortly be opening its doors to new companies.
Becoming a business
With the help of government funding, the incubator program will enable Eckhouse to invest even more in medical equipment companies while lowering his risk. "This is a unique incubator dedicated to health services, particularly medical technology and equipment," he says. "It's a field where the risk is too big for a single investor. In the incubator framework, we can be more daring and take technological, clinical and marketing risks."
Explains Hefetz: "The high level of risk that entitles us to government funding provides the chance to develop more exceptional things. The company's potential is important to us: the entrepreneurs, interesting and ground-breaking technology, and an interesting market."
The incubator, which isn't committed to any annual investment quota, will continue to be involved with its companies after they leave the program at the end of two years. Eckhouse and Hefetz intend to surround entrepreneurs with experienced professionals in clinical, technology building, management and business development with the aim of helping them turn the high-tech venture into a business.
Eckhouse describes the difficulties faced by life science companies in raising capital and reaching maturity. "On one hand, the business environment for health services isn't developed in terms of financing," he says. "On the other hand, Israel has developed loads of talent. No other country in the world has so many entrepreneurial physicians, but all this will start to dry up if there's no funding.
"Entrepreneurs in this field have nobody to turn to," he explains. "They go to the investment funds but those don't invest in early stages. Many of the private investors financing medical companies made their fortunes in other fields so they can't supply the necessary knowhow. We hope to give entrepreneurs in the incubator business environment they need." Many of Israel's medical entrepreneurs come from the defense industries, he says.
Right time, right product
In the past decade about 1,000 medical technology ventures, including biotech, have been launched, Eckhouse estimates, noting that some 70% have been financed by incubator money. The returns, however, have been disappointing. Most weren't focused on the medical field and dealt with areas such as Internet, software, communications and energy. Meanwhile, regulation in the medical field have tightened and the cost of clinical trials is constantly on the rise, he says.
According to Eckhouse, the large capital requirements of medical startups, which often reach tens of millions of dollars by the time the product is ready for the legally mandated clinical trials, force the founding investors and entrepreneurs to heavily dilute their holdings as they raise additional finance.
His incubator, Eckhouse claims, will help solve that problem for its portfolio companies. "We're different than most incubators in that we have the ability to continue financing," he says. "I've raised over $100 million myself from funds and private investors for that companies I've started. I raised more than $600 million on Wall Street. I managed to finance companies and bring them to maturity without diluting myself and my investors too much. One reason I chose appropriate projects, and another is plenty of luck. You need to be at the right place at the right time with the right product."
Since leaving Lumenis 14 years ago, Eckhouse has combined capital investment with a management role in the companies he has joined. "It wasn't planned in advance. In the last two or three years, when I started analyzing what happened, I understood that I had been actually managing my own private incubator without enjoying the advantages provided by the chief scientist's incubator program."
The companies Eckhouse was involved in received funds from the chief scientist's office, particularly high-risk ventures, but nothing like the 85% funding that the incubator program offers. His typical investment before the incubator were in the range of hundreds of thousands of dollars, with the largest having been over $1 million.
Eckhouse joined the new generation of chief scientist incubators established two years ago when competitive procedures were introduced. Operators of the new incubators include international players like market research firm AC Neilsen and Hong Kong's Hutchison Whampoa conglomerate, along with Israeli companies and investors such as Elbit Systems, Jerusalem Venture Partners and the Gitam BBDO advertising agency. What they all have in common, besides wanting to invest and be involved with early-stage startups, is deep pockets that will enable them to nurture the companies and providing them with capital as needed.
The chief scientist's incubators have one drawback, namely the government itself, which is constantly looking over the shoulders to the companies operating the incubators - a change for someone coming from the free-wheeling world of startups. "When you're an incubator you need to report on every expense," complains Eckhouse. "There's a lot of bureaucracy. The chief scientist created a long process of examinations and screening before we received the license, and now the bureaucracy should be relaxed so business can flow. One of the biggest pleasures I experienced with the 15 companies I was involved in was that the decisions were mine."
Investing government funds in companies participating in the chief scientist's program is of immense benefit to the country, Eckhouse contends "The return received from the chief scientist's program is amazing – from the simplest things like income tax," he says. "I am proud that with my initiatives over 20 years I created 5,000 jobs. The indirect result is tremendous and not always easy to measure."
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