This 10-part series looks at key potential growth areas around the world.
Last year, six of the 10 companies on Forbes's Top 10 Health Tech Changing the World were Israeli.
The country, already known as an incubator of high-technology businesses, is a strong player in a growing global medical devices market, which is expected to grow by billions of dollars in the next few years, according to market research companies.
Investment in startup tech companies in Israel has grown to more than $5-billion (U.S.) in 2015, according to Jon Medved, Jerusalem-based founder and chief executive officer of OurCrowd, an equity-crowdfunding group for those investing in Israeli and global startups.
Global tech giants are paying attention and transforming the country from simply a place where tech ideas come to life into a research and development hub. Waterloo, Ont.-based smartphone maker BlackBerry Ltd. acquired security startup WatchDox this year, joining giants such as Apple, Google, and Samsung, which all operate R&D facilities there.
While much of the attention has been on the success and eventual takeover of tech startups such as Waze (the GPS application acquired by Google Inc.) or LinX (a camera tech company purchased by Apple Inc.), the country is making great strides in medical products.
A 2012 study from Israel's ministry of industry, trade and labour found 656 medical device companies operating there and that it is the leading country in terms of patents granted per capita in the medical devices field. Israeli government figures compiled this year show 725 medical devices companies, comprising more than one-half its 1,380 active life sciences companies).
An aging world population bodes well for the global medical devices market as the over-65 population is expected to grow to more than one billion in the next five years, with much of that occurring in developed economies. A report by Britain-based market research firm Visiongain forecasts the medical devices market to swell to nearly $400-billion (U.S.) in 2017 from $321-billion in 2012.
"Israel, for 30, maybe 40, years has been a leader in basic medical research. They have some of the best practical operating hospitals and research hospitals in the world. They have pioneered all sorts of techniques. The speed of innovation from laboratory to practice is strong," says Steven Schoenfeld, founder and chief investment officer of BlueStar Global Investors LLC, a New York-based firm that specializes in the Israeli capital markets.
While the company offers an index tracking about 120 Israeli companies listed in a number of countries (of which 27 per cent are in the health care field), it plans to launch an exchange traded fund focusing on the Israeli tech sector. A couple of other companies offer Israel-focused ETFs, while some technology funds include Israeli companies.
According to one academic, Israel's unique, hothouse ecosystem is behind its success in the development of medical products. "There is a lot of willingness to experiment which doesn't tend to exist in other societies," says Guy David, a professor of health care management at the University of Pennsylvania's Wharton School.
Dr. David, who was born and raised in Israel, now regularly takes Wharton students to Israel to learn about medical and tech startups. It's the non-hierarchical, best-idea wins approach that is echoed by the country's citizen army (where orders are regularly questioned and teamwork is prized). That army experience is, he believes, a big part of the success story. Add in the unfortunate reality of frequent trauma and requirement for rehabilitation for many citizens because of wars and terrorism fuelling the success of companies such as ReWalk Robotics' customizable exoskeleton or medical imaging company Surgical Theater (founded by two former Israeli air force pilots).
"The medical society in the U.S. – and it is true for Canada as well – it is very stagnant in a way. Doctors are very skeptical when you come and introduce new things. I think it is in the culture both for patients and physicians in Israel to adopt those things."
The Wharton professor says Israel's "no rules" business culture is the reason most successful startups are eventually acquired by foreign firms. "It is startup nation, but not scale-up nation. To scale up things you need to follow rules, you need institutions, you need organization, you need order, you need patience. None of those characteristics exist in that country."
Israel is now looking to move its medical innovations from the idea and prototype phase to widespread use and acceptance. For instance, Israel is seeking to capitalize on clinical experience in Canada, says Rafael Barak, the country's ambassador in Canada.
Israeli life sciences companies "need clinical experience and Canada has it," he explains.
The ambassador points to the success that Teva Pharmaceutical Industries Ltd. has had in Canada as an example of what the two countries can do together. Teva, the world's largest generic drug maker, has extensive operations in Canada.
The two countries have more in common than they might think, he adds. "I think in a way we are suffering from the same sickness, that the American companies are buying us for cheap."
However, Israel has an advantage, says Henri Rothschild, president of the Canada-Israel Industrial Research and Development Foundation (CIIRDF), an Ottawa-based organization that promotes collaborative research and development between private-sector companies in both countries, with a focus on the commercialization of new technologies. The CIIRDF is focused on "the spillover effect of technology developed for one purpose applying to another," says Dr. Rothschild, a former chief scientist at Industry Canada.
"That is the essence of Israeli comparative advantage. It is not that they have capability in defence, capability in medical and capability in communications. They do in all those areas. It is that right now, technologies cut across the board."