Pitango partner Ittai Harel: The digital revolution is reaching healthcare.
Israeli venture capital firm Pitango has announced the first closing of a new Health-Tech Fund, dedicated to investments in the HealthTech Domain. Up until now, the firm has mainly been active in high-tech, although since it was founded it has allocated sizeable amounts of its funds to life sciences and has had partners specializing in this area, and has even garnered successes, but this is the first time that it has raised money specifically for this field.
Pitango aims to close the fund at $150 million. The first closing is of "a substantial part of this amount," according to Pitango managing general partner Ittai Harel. The new fund is managed by Harel together with the firm's other partner specializing in life sciences, Dr. Guy Ezekiel. The team will be joined by Dr. Seth Rudnick, an investor in US venture capital firm Canaan Partners, as a consultant partner.
Talking to "Globes", Harel said, "The fund will invest in medical devices, digital health, drug development, and also ag-tech (agricultural technology) and food-tech. In the past, we focused most of our efforts on classic life sciences and medical devices. In the past few years, this area has seen fewer acquisitions, because of consolidation among the big companies, and less openness on the part of global capital markets, but today its situation seems to be improving. We have actually recorded successes even during these less easy times in the field. We believe that in the specialized fund, medical devices and digital health will account for half the fund or more, but no final decision has been made."
What led to the establishment of a dedicated healthcare fund at this particular time?
"Israel in general and Pitango in particular combine know-how in digital and life sciences that can be exploited to take advantage of this trend.
"Although the number of potential acquiring companies has fallen in medical device, in digital health there are a lot of acquisitions, and classic tech players have also entered this field. The market has also become global, and today you find acquiring companies in Japan, China, Australia, and Europe, and not just in the US."
On healthcare in Israel, Harel says, "Up until three years ago, the ceiling for a healthcare exit was around $350 million, with perhaps one exception - Given Imaging. Suddenly we are seeing more mature companies with larger exits, and also companies raising tens of millions of dollars on the stock market. It seems that the industry has finally developed the ability to grow a company beyond the initial stage."
From the crisis of 2007-2008 until a few years ago, you were one of the only entities investing substantial amounts in medical devices in Israel. Did you manage to take advantage of opportunities in this period, in which you were almost the only player?
"Yes, we were working here with few other funds alongside us. There was a real shortage of money for the field in comparison with the talent and ability that exist here. And so we took advantage of opportunities, and it was also a period of gaining experience and learning."
What companies should we watching in your portfolio?
Variantyx, Pitango’s first investment from the newly-launched Health-Tech Fund, is pioneering a paradigm shift in genomics diagnostics with its proprietary Genomic Intelligence technology. Varaintyx’s Unity test is the industry’s first comprehensive Whole-Genome-Sequencing Based diagnostic effectively combining all genomic tests into one.
Harel: "I lobbied for it among the other partners for several years. The unique opportunity is mainly in the digital revolution coming to the medical world. For other industries, the digital revolution brought amazing opportunities. Healthcare is a little behind, but now the revolution is starting here too, and this is a $7 trillion industry.
"EarlySense is a strong and excellent company, and is now one of the outstanding companies as far as commercial growth and potential are concerned. Magenta is looking very promising. Medisafe has posted substantial growth, and I might also mention DouxMatok, Clew, and CyberMDX."