Opinion
Not just America: A strategic change for Israeli startups
"Israeli entrepreneurs should not treat the U.S. as their default market. It is highly worthwhile to consider Europe as an attractive and effective alternative," writes Talor Sax, Founder and Managing Partner of eHealth Ventures.
The size of the American healthcare market was estimated at $4.7 trillion in 2023, making it the largest and wasteful in the world. It’s no surprise that the vast majority of Israeli digital health startups view the U.S. as their primary target market, the one to conquer in order to grow into a successful company.
This approach has led to impressive successes for Israeli startups operating within the U.S. healthcare system. However, the barriers faced by young companies raise an important question: Should the American market really be the default choice for every Israeli digital health startup—or are there alternative target markets, such as Europe, that may offer more accessible paths to success and growth?
The American healthcare system is not only the largest in the world but also the most complex. This not a single national “healthcare system,” but rather a decentralized network across 50 states, comprising hundreds of thousands of hospitals, clinics, and healthcare providers, as well as pharmaceutical companies and insurance firms, each operating with its own payment and reimbursement models and under numerous, differing regulations.
Israeli startups often struggle to understand the interests, diverse models, and motivations of the players in this vast and intricate market. As a result, even brilliant technologies sometimes fail to break into the market.
In addition, the American market is dominated by giant corporations that can easily “crush” startups or drive them out of the market by integrating similar technological innovations into their own solutions. For example, Epic Systems, which dominates the field of electronic medical records, recently added a new transcription feature for doctor–patient encounters, wiping out about one billion dollars in value from startups operating in that niche in the process.
Additionally, the new budget law introduced under Trump is causing hundreds of billions of dollars in financial damage to healthcare institutions, making it increasingly difficult for them to invest in new digital solutions.
Europe as a Launchpad for Global Expansion
Israeli startups that address specific problems unique to the American healthcare system can and should focus solely on that market. For example, startups specializing in U.S. healthcare billing, mediation between healthcare institutions and insurance companies, or monitoring of local quality metrics are designed from the outset for the American market. There is no realistic potential for their operation in alternative markets.
Other Israeli startups may find the European market a more accessible and promising starting point, offering significant opportunities for success. The European Union, composed of 27 countries sharing a central regulatory framework and unified standards such as the CE regulation, encompasses a population of over 450 million people.
About 8–9 European countries operate under a Single Payer model where the government provides insurance coverage for a range of public and private healthcare services under a single regulatory system. Prominent examples include the UK’s NHS, as well as the healthcare systems of Italy, Spain, Norway, Sweden, Denmark, Portugal, and Ireland.
The centralized structure of these systems makes it easier for startups to scale widely following a single successful entry. For instance, the UK’s NHS network consists of around 266 hospitals across England, Scotland, Wales, and Northern Ireland—meaning adoption by just one hospital could potentially lead to widespread adoption across the entire network.
Moreover, government healthcare budgets in 20 of the 27 EU member states have been growing steadily since 2014. In 2022, healthcare spending reached 12.6% of GDP in Germany, 11.9% in France, and 11.2% in Austria. A significant portion of these expanding budgets is being allocated to medical innovation, creating valuable opportunities for Israeli entrepreneurs.
Finally, the European Union runs a wide range of support and funding programs aimed at fostering the growth of digital health startups, which can serve as a launchpad for entering the broader European healthcare market. These include EIT Health Catapult, EIT Jumpstarter, EIC Accelerator, EU4Health, Cascade Funding, and Horizon Europe.
In Germany, for example, the DiGA program offers an automatic reimbursement pathway for digital monitoring and therapeutic applications that require a doctor’s prescription. Once an application is included on the DiGA list, any doctor in Germany can prescribe its use—and all insurance companies are obligated to cover the cost.
It is not easy for an Israeli digital health startup to succeed. Not in Europe and certainly not in the United States. Successful companies must always bring to market a breakthrough solution that changes the rules of the game, delivers significant value, and ensures a rapid return on investment.
Of course, challenges stemming from the negative sentiment toward Israel currently present in both Europe and the U.S cannot be ignored.
Despite this, Israeli entrepreneurs should not treat the U.S. as their default market. It is highly worthwhile to consider Europe as an attractive and effective alternative. Moreover, success in Europe does not close the door to the American market—quite the opposite.
One of our portfolio companies, for example, secured a deal in Europe that led to deployment across 19 government hospitals, and is now entering the U.S. market with proven results and credibility.
Talor Sax is the Founder and Managing Partner at the venture capital fund eHealth Ventures.
