Venture capital fund aMoon has announced a new venture to fund applied science projects in academic institutions, with the aim of bringing them to a stage where it can establish companies based on their applied science. The fund, helmed by Marius Nacht and Dr. Yair Schindel, will invest about half a million shekels in each project, and has defined three main areas of interest: fibrotic (scarring) diseases; digital therapeutics; and synthetic biology. aMoon intends to invest in seven initiatives, hopefully divided between the three categories, and aims to issue requests for proposals in other areas every six months. The project is called aMoon Explorer.
Leading the project is Dr. Yaron Daniely, an aMoon fund partner and head of the aMoon Alpha division, which is intended to play a more active role in forming and providing operational support services to projects in which aMoon invests. This activity operates within aMoon Velocity, which is responsible for the group's early-stage investments.
"We have been following with concern the decline in the number of groundbreaking new life-science startups," Daniely said. "In the past, we used to say that Israel had no problem founding companies, and that its challenge was in growing them. Thigs have changed, and this has happened, paradoxically, because there are mature companies to invest in and money available for investment, so that many funds have shifted their investments to later stages. The average funding round has increased, which is excellent and in the past was something lacking for mid-stage companies, but there are companies that are not yet suitable for large investment, and their funding sources have shrunk."
As a result, the supply of start-ups has also declined. "The Velocity Fund has seen, so far, perhaps 1,800-2000, projects that are just starting out, but they were so early-stage that, as a fund, we couldn't invest in most of them," says Daniely. "In the past we were used to projects coming to us after a feasibility study, maybe even trials on animals. Today, we come across far earlier stage projects that have failed to raise even the minimal amount of funding needed to reach the feasibility stage." It's at this point that aMoon's current initiative wants to help.
Another reason for the change is probably that some resources previously directed towards medicines and medical devices have been diverted to digital health.
aMoon understands that it's now incumbent upon it to help create these companies. "The most interesting companies for us are the ones we really pull out of the lab, and build from scratch," Daniely explains. "We’ve done it before. Now, we’ll do it in a more orderly fashion because, apparently, there are more of these kinds of opportunities than those ones we manage to get to.
"Most academics don't want to be entrepreneurs. They're not interested in it, and that's okay. They don't have the desire or ability to found a company, and that's not their job. Prof. Amnon Shashua (the legendary entrepreneurial CEO of Mobileye) is one in a thousand." For this reason, if a development is deemed suitable for support with proven feasibility, the fund will help establish a company including recruiting an appropriate, experienced management team.
"Helping to build companies that fit our needs"
Daniely has the insider view on the challenge of founding companies from within academic institutions. He is the former CEO of Yissum, the Hebrew University of Jerusalem's technology transfer and commercialization arm. "It always bothered me that venture capital funds wouldn't tell me what they were looking for. They'd ask ‘What have you got’, and I'd show them relatively advanced projects we had on the shelf. What's on the shelf is usually what's left over. We want to be more active, help academics build new companies that meet our needs, not just market what there is."
How did you pick these areas of activity?
Daniely: "You have to start from somewhere. To elaborate: we've selected areas we believe have potential in Israel. Digital therapeutics are applications that not only manage your disease, but actually intervene in it. For example, Akili Interactive, a computer game start-up that has proved in clinical trials that it can improve the functioning of children with attention-deficit/hyperactivity disorder (ADHD). The US Food and Drug Administration (FDA) has issued guidelines for interventions of this kind, which opens up the category. Now, the pharma giants are starting to look at this field.
"As for diseases that produce scarring, we're on the lookout for products that employ a mechanism that hasn't been detected so far, because the drugs employing the known mechanisms don't work very well. Israel is a creative research environment, and its successes, in general, have arisen from going in directions that haven't been taken before.
"The third area is super-interesting, super-hot, the next big thing: synthetic biology. There are all kinds of definitions for synthetic biology. I'm targeting any solution that uses synthetic building blocks to create a natural biological system, for example building red blood cells in the lab, but not from stem cells or existing cells, but from nonliving materials where you end up with a product that functions in the body like a blood cell. Couldn't Israeli engineers build this sort of thing? Another aspect of synthetic biology is machines that make nonliving products, but incorporate live components into the machines, in order to produce in a way that couldn't be done without the living element."
About a year ago, aMoon announced a joint venture with pharmaceutical company Roche to invest in digital healthcare companies. However, the project focuses only on digital health and data analysis, and on advanced, already established companies, not academic projects.
Daniely notes that he hopes to collaborate on this and other projects with a new Israel Innovation Authority (IIA) initiative to support young, risky companies together with venture capital funds. "This project is designed to enable funds to invest in companies at an earlier and more risky stage. Apparently, the Innovation Authority sees what we see. The IIA invests together with the fund, and within three years, the fund has the option to buy them out, or they get shares in the company. We are already piloting an interesting Hebrew University project with them; hopefully there will be more like these."
The aMoon group of venture capital funds, established in 2016, manages over $1 billion and is one of the largest healthcare investment entities in the Israeli market. aMoon II is the single largest healthcare fund, with $750 million under management; it invests mainly in later-stage companies in Israel and around the world. The aMoon Velocity fund, which specializes in earlier-stage companies, manages $100 million.
*** Full disclosure: Marius Nacht is the former life partner of Anat Agmon, one of the controlling shareholders in "Globes". The two are in dispute.
Published by Globes, Israel business news - en.globes.co.il - on June 13, 2021
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