MadeRight CEO: Israel’s start-up biotech economy will “rebound” from wartime struggles

14 Nov 2023 --- The Israeli government needs to give its start-ups, including those in the packaging industry, sufficient clarity over compensation and long-term financial support, according to Rotem Cahanovitc, co-founder and CEO of biotech company MadeRight. 

Despite start-up industry players helping one another and the “commendable” efforts made by The Israeli Innovation Authority, some fundamental and unanswered questions leave many Israeli entrepreneurs in the dark regarding their futures. 

Since the October 7 Hamas attacks, Israeli businesses are facing the prospect of a protracted war, which means a continued strain on the nation’s economy — from labor shortages and currency fluctuations to military spending. 

“The Israel Innovation Authority has taken significant steps to address the challenges faced by Israeli startup companies amid the conflict. A notable initiative includes establishing a NIS 400 million (~US$104 million) rapid grant fund, specifically designed to assist start-ups with substantial assets and limited financial runway,” Cahanovitc tells Packaging Insights. 

Due to the war, MadeRight’s employees had to evacuate, halting company operations. But with help, the team found a new lab within a week.The funding specifically aims to aid companies needing help in securing capital from existing investors. MadeRight secured seed funding of US$2 million from Fresh Start food-tech incubator, joined by Arkin Holdings and ARC Impact, for its fungi-based packaging this year. 

“The current consideration for compensation schemes revolves around supporting businesses in covering expenses incurred due to the evacuation of employees or their service in reserves during the conflict. However, the specifics, such as the amount of compensation and the associated deadlines, remain unclear,” Cahanovitc explains. 

“For instance, the compensation may only partially cover expenses and could be retroactive after 12 months, introducing operational challenges for businesses. Clarity and precision in compensation terms are essential, requiring proactive measures from the government to provide businesses with the necessary security and guidance.” 

Social cohesion for biotech 
Cahanovitc says that a strong “start-up ecosystem” of businesses has helped keep smaller enterprises afloat since October 7. 

“Everyone is actively involved in assisting one another in various aspects. People readily share their homes, cars and time to aid those in need. In our case, we managed to secure four locations that agreed to host our workers and lab after we had to evacuate.” 

“The current conflict has undoubtedly impacted start-ups in Israel. Several, including ours, have had to be evacuated, and many employees have been enlisted into reserves to safeguard our borders,” he says. 

MadeRight specializes in improving plastics with mushroom-based biomaterials, through a fermentation process that employs fungi cultivated on industrial organic waste, such as wood chips. The compounds are mixed with bioplastics to create pellets. 

“I firmly believe that biotech innovations to enhance global sustainability standards can alleviate human suffering and bolster security. Improving the overall quality of life for humanity at large is crucial in reducing the prevalence of wars and conflicts,” says Cahanovitc. 

MadeRight uses funghi as an alternative solution to fossil-based plastics.However, concerning the conflict with Gaza, he believes that “prevailing antagonism directed at Israel” is producing biases that “could adversely affect Israeli businesses.” 

Continued struggles 
Before October 7, concerns over Israel’s future as a start-up tech nation were raised following the election of a new government, which is widely deemed the most far-right in the country’s history. Mass protests against government corruption and judiciary reforms ensued, sparking fears of a tech industry exodus. 

Research released in July by Start-up Nation Central showed that 68% of Israeli start-up companies had begun taking active legal and financial measures, such as withdrawing cash reserves, changing HQ locations outside Israel, relocating employees and conducting layoffs.

Further, 22% of companies reported they had diversified cash reserves outside Israel, and 37% of investors said they had withdrawn and moved them abroad.

However, Cahanovitc says the outbreak of war “has unexpectedly fostered a sense of unity, shifting attention away from prior political and social divisions. Consequently, concerns about the impact on the tech economy have diminished as collective efforts focus on addressing the immediate challenges of the conflict.” 

“Looking ahead, there is a renewed hope that the government, as a whole, will be held responsible for any malfunctioning that occurred leading up to and during the war. This accountability is seen as essential for justice and fostering a stable environment that encourages growth and investment in the country’s tech scene,” he says.

“There is optimism that the tech economy can rebound, with private funding potentially recovering and creating a more resilient and prosperous ecosystem for innovation. I firmly believe that the Israeli start-up ecosystem will emerge from this period even stronger.” 

By Louis Gore-Langton