The Israeli HighTech

1
The Israeli High-Tech Venture Capital Industry
Presented by The Israel Export International
Cooperation Institute 2005
2
Israel at A Glance

• Year Established 1948
• Area 22,145 square kilometers
• Population 6.77 million (79 Jews, 18 Muslims)
• Economic Facts (2003)
• Gross Domestic Product (GDP) 103.7 billion
  (US)
• Growth in GDP (2002 to 2003) 1.3
• Expected Growth in GDP (2003 to 2004) 3.4
• GDP Per Capita 15,500 (US)
• Annual inflation rate -1.9
• Unemployment rate (year-end) 10.7

3
Israeli High-Tech Companies

• 2165 High-Tech Companies from seed to revenues
• Main Sectors
• Communications
• IT Enterprise Software
• Life Sciences
• Internet
• Other Technologies Agro Technology, Energy,
  Nanotechnology, Industrial Technologies and
  others
• Privately owned, not acquired by other
  entities, as of July 2004

4
Number of Israeli High-Tech Companiesby Sector
and Stage (7/04)
5
Capital Raised by Israeli High-Tech Companies by
Sector (M)
6
How did it all Start?

• 1950s
• IBM opened its first RD center outside the USA
  in Tel Aviv
• The Weitzmann Institute built its first computer
  named Golem
• RAFAEL - The Armament Development Authority - was
  building its own digital computers
• 1960s
• Motorola (64) and Vishay (69) established RD
  centers in Israel
• The IDF established MAMRAM - its own computer
  unit

Most Israeli high tech companies have spun out
of these early beginnings!
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What characterizes the Israeli Start-Up Scene?

• Educated Workforce and Academic Excellence
• 77 of the population graduated from high school
  30 of the workforce holds university degree
• Israel ranks second in the world in
  academic-papers-per capita and third in
  citations-per-capita
• Israeli academy offers technology-focused
  programs, with the number of students in high
  tech related fields at a steady rise since the
  mid 1990s -- about 5,000 students graduate each
  year
• 40 of the recent immigrant population (mainly
  from former Soviet countries) holds academic
  degree, many are successfully integrated into the
  industry
• 2 of the workforce has engineering training

8
What characterizes the Israeli Start-Up Scene?
(continued)

• Military\ Defense Influences
• MAMRAM, RAFAEL and the IDFs education programs
  Atuda and Talpiot train able engineers and techs,
  and contribute to their pool of knowledge later
  applied for civilian uses
• Military service enhances the formation of close
  social networks of would-be entrepreneurs
• Entrepreneurial Culture
• A culture that stresses creativity and innovation
  as a way of life
• A strong drive for success and achievement
• Serially successful entrepreneurs breed the next
  generation and pass on their experience in their
  new roles as venture capitalists

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What characterizes the Israeli Start-Up Scene?
(continued)

• Developed VC industry and good access to world
  capital markets
• Approximately 80 VCs and Corporate VCs operate in
  Israel
• More than 350 Foreign Investors
• Over 200 foreign VC funds
• Over 30 Corporate VCs
• Over 70 Investment Companies

10
Capital Raised by Israeli High-Tech Companies
from Israeli VCs\ Foreign and Other Investors
11
Capital Raised by High-Tech Companies Israel
Vs. Europe
12
Exits

• Mergers and Acquisitions
• Initial Public Offerings (IPOs)

13
Mergers and Acquisitions of High-Tech Companies
(M)
14
Capital Raised by High-Tech Companies In Public
Offerings (M)
15
Israeli High-Tech Companies, Newly Established
Vs. Ceased Operations 1997-2003
16
Government Incentives

• The Office of the Chief Scientists (OCS) offers
  a wide variety of Support Programs
• Pre Seed Programs
• Seed Programs
• RD Programs
• Competitive RD
• Generic RD
• At the Ministry of Industry Trade
• Bi-National\ International Cooperation Programs
• Bi-National Funds
• Bi-Lateral RD Programs

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Pre-Seed Programs

• Technological Incubators
• Providing framework and support for development
  of new ideas, with added benefits in the form of
  experienced, involved management teams
• 25 active Incubators, 7 are owned by the
  government
• Government initiated incubators are privatized
  after an initial period
• Provide 85 of RD expenses for resident
  companies
• Annual Budget 30M

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Pre-Seed Programs (continued)

• Tnufa
• Providing individual entrepreneurs and start-ups
  with initial funding
• Provides 85 of total costs, up to 47,000 per
  project, per year
• Noffar
• Supports applied academic research with
  not-yet-specific industrial applications, mainly
  biotech-related
• Provide 90 of RD expenses for resident
  companies
• Annual Budget 10M

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Seed Programs

• Heznek Government Seed Fund
• The Fund matches an investment in a seed company
  made by selected investors in exchange for shares
  
• Investors are encouraged to buy the government
  out at a later stage
• Funding is up to 1M, for two years, up to 50
  RD expenses
• Annual Budget 10M

20
RD Programs

• RD Grants
• Supports competitive industrial RD projects
• 1000 projects approved each year
• Grants 20-50 of RD expenses, depending on
  project costs, chances of success and preference
  for specific technologies developed
• Requires royalties 3-5 of annual resulting
  products sales
• Annual Budget 300M

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RD Programs

• MAGNET
• Supports pre-competitive RD projects preformed
  by a consortium of companies and academic
  researchers
• Focus is on generic technologies with future
  potential for next-generation products
• Grants 66 of RD expenses incurred by companies
• Grants 80 of RD expenses incurred by academic
  partners
• Annual Budget 60M
• Mini-Magnet (Magneton)
• Promotes technological transfer from academia to
  industry
• Grants 66 of RD expenses

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The Israel Export Institute (IEICI)

• Founded in 1958 by the
• Ministry of Industry Trade
• Manufacturers Association of Israel
• Hevrat HaOvdim
• Established to promote Israel's industrial
  capabilities through business cooperation on all
  levels
• Technological
• Industrial
• Commercial

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Mission Statement
Promoting sales of Israeli companies abroad and
their intertwining into the global market, while
creating further added value in research,
development, employment and manufacturing in
Israel.
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Spectrum of Activities

• Provide business and manufacturing community with
  a variety of services
• Promote Israels international trade
• Support all forms of international cooperation
  joint ventures, strategic alliances and more
• Link overseas inquiries with relevant Israeli
  companies
• Serve as the exporting community lobby in
  Israels decision-making organization

25
The IEICIs Services

• Organizing outgoing business delegations
• Promoting Israeli companies in international
  exhibitions and conferences
• Organizing business forums and seminars
• Business consulting to exporters
• Business information and intelligence
• Help in locating distributors and sales agents
  worldwide

26
High-Tech Division - Structure

• Telecommunications IT
• Computer Hardware Software
• Life Science
• Start Ups
• Electronics

27
The Start Ups Unit

• Assistance in exposure to potential investors
• Providing access to potential funding sources
• Assistance to entrepreneurs with applying for
  private and government funding
• Facilitating business meetings between young
  companies and international investors including
  VCs, IBs and multinationals
• International exposure and marketing assistance
• Locating potential partners, distributors and
  agents worldwide
• Commercial delegations to key markets
• Business development
• Consulting services for the preparation of
  business plans
• Expert legal advise IP, patents, contracts,
  capital structure etc.
• Seminars and business forums

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Thank you !

• for more information
• Amit Scheinmann
• Tel [phone]
• Fax [phone]
• amit_at_export.gov.il