Venture capital plays a vital role in the future of the life science sector in particular, and Israel in general. VC finances 30% of all innovations in the drug and medical device sectors.
The truth is simple: without these funds and the management capabilities they hold, innovation in the medical sector will grind to a halt. On the other hand, given adequate resources, the venture capital community can contribute to innovation, for the good of the industry, patients and Israel.
The state of the sector is important and cannot be taken for granted. The industry suffers from a significant lack of investment following a fall of 50% in support in 2009. In order to deal with the problem, the Israeli government must be proactive and work with the universities, hospitals and health institutions as well as private investors.
I'd like to suggest five steps that it is worth the government taking during 2009 and 2010 to increase investment in venture capital.
1. Allocating resources to VC: The government should allocate resources to venture capital through the Chief Scientist of the Ministry of Industry, Trade and Labor and other authorities that are involved in early stage financing. $50 million should be allocated over 10 years. This sum would be divided among existing funds by a supervisory fund and a fund or two would participate in every category. In order to receive financing a fund must raise private capital of at least double the amount being offered by the government. Only funds that invest at least 25% of their capital in Israel would be eligible.
2. Raising funding of innovations at universities: The government should encourage the universities to raise their funding of innovative applied research. At the same time universities and hospitals should support investments in start-up companies through between 5-10% of their donation reserves.
3. Tax benefits for VC investors: Capital taxes should be cancelled on all money invested in funds that was raised from 2009-2011 and at least 25% of capital is invested in Israel.
4. Income tax must be reformed to make Israel more business friendly. The required change would raise income from taxes and attract capital and jobs to Israel. As part of the reform in taxation law pre-rulings should be discontinued and when a pre-ruling is necessary a solution must be provided within a month at most.
5. There should also be reform regarding clinical trials: This reform should include changes and improvement in the supervision process for clinical trials by government regulators and hospitals, and this would speed up approvals and the start of new trials without compromising hospital safety. Israel can learn from procedures in the UK and US.
Kenneth Abramowitz is a co-founder and managing general partner of NGN Capital
Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009