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YOZMA -- by Yigal Erlich

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The programme that started the Venture Capital Industry in Israel

The programme that started the Venture Capital Industry in Israel


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  • תכונות של האשכול
  • Transcript

    • 1. The Yozma Program Success Factors & Policy Presented by: Yigal Erlich the Yozma Group Tel Aviv, Israel
    • 2. THE ISRAELI OPPORTUNITY The Right Ingredients Wealth of Human Capital Israel USA Japan Germany Mass Immigration • 140 82 80 60 # of Engineers/ Scientists per 10,000 people • • 1 Million people (mostly within 3 years) Quantity: 20% of Israeli Population Quality: 40% with Academic Degree Entrepreneurial Spirit • 2-3 New Startups every day • Highest Concentration of High-Tech Startups after Silicon Valley • 3rd in the world in IP (following US & Japan)
    • 3. Why Foreign Investors Choose to Invest in Israel •Entrepreneurial Spirit •Human Resources •Reputable Academic Institutes •Government Commitment to R&D •Strong Infrastructure for Entrepreneurs (CS, VCs, Incubators...) •International Activity (R&D centers, VCs, Corporations, Investment Banks) •Deal Flow Sources (Immigrants, Defense, Repatriate Israelis, Spin-offs, etc.) © Yozma Proprietary
    • 4. Deal Flow Sources Repatriate Israelis Defense Corporations Deal Flow Sources Spin-offs R&D centers Universities New Immigrants © Yozma Proprietary
    • 5. Israeli Venture Capital Before 1993 •Lack of investment capital for start-ups ($20 Million) •Lack of professional venture capital management •Successes in R&D vs. failures in marketing •Number of start-ups tripled from 1988 to 1992 © Yozma Proprietary
    • 6. Government Support for the High-Tech Industry- Pros and Cons • • • • Chief Scientist Tech. Incubators Gov’t Guarantees Venture Capital © Yozma Proprietary     Only R&D Only Seed No Risk Lowering Equity-Based
    • 7. Venture Capital – an Engine for Growth for High-Tech Companies • • • • • Equity-based finance  VC Need to go international quickly  VC Short product life  Higher R&D spending  VC Larger investment per Company Deep pockets  VC Need for management and marketing assistance  VC © Yozma Proprietary
    • 8. Government’s Entry Into Business – Preconditions • • • • • • • Government as a Catalyst Lowered Risk Market Failure Conditions Predetermined Exit Conditions Timed Entry and Exit No Government Control Indirect Investments (Funds) © Yozma Proprietary
    • 9. (Yozma Venture Capital (1 Mission: To create the venture capital market in Israel Method: To entice the private sector and foreign investors to set up new VC funds To participate as a partner in the new VC funds To secure an obligation of the new VC funds to invest in start-up companies in Israel Accomplished through: Establishment of a $100M investment company Use of proceeds: Establishment of 10 drop down funds together with strategic partners. 15 Direct investments © Yozma Proprietary
    • 10. ( Yozma Venture Capital (2 Basic principles: • Investment of $8M in each drop-down fund (minority position) • A 5 year option to Yozma’s partners to buy out the Government’s share at predetermined conditions Results: • 8 out of the 15 companies Yozma Venture Capital has invested in directly, went public or have been acquired • • 9 out of the 10 drop-down funds have exercised their option and bought out the Government The Israel Venture Capital industry has been © Yozma Proprietary established
    • 11. ( Yozma Drop-Down Funds (1 FUND PARTNERS •Eurofund •Gemini •Inventech •JPV •Medica •Nitzanim-Concord •Polaris •Star •VERTEX •Walden Daimler-Benz, DEG (Germany) Advent (USA) Van Leer Group (NL) Oxton (US/Far East) MVP (USA) AVX, Kyocera (Japan) CMS (USA) TVM (Germany) & Singapore Tech Vertex International Funds (Singapore) Walden (US) © Yozma Proprietary
    • 12. ( Yozma Drop-Down Funds (2 FUND CAPITAL MANAGED ($MM) Original size •Eurofund •Gemini •Inventech •JPV •Medica •Nitzanim-Concord •Polaris •Star •VERTEX •Walden Today 90 350 40 580 70 280 645 400 250 175 210 © Yozma Proprietary 20 25 20 20 20 20 20 20 20 25 2,880
    • 13. The Government as a Catalyst Government Intervention Market Failure $100M I nvestm ent Establishment of Yozma 1993 1997 Return>$100M © Yozma Proprietary Government Exits Yozma Privatized Problem Solved
    • 14. Countries Following the Yozma Example Czechoslovakia Taiwan Australia Denmark New Zealand Korea South Africa © Yozma Proprietary
    • 15. Venture Capital Raised 4000 3rd Wave 3500 3000 1st Wave: 2000 Establishment 1500 $M 2500 of Yozma 2nd Wave: Yozma Funds Raise Continuation Funds 1000 500 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: IVC Research Center
    • 16. Total Amount Raised by Israeli High-Tech Companies ($M) 3,500 3,092 3,000 2,500 1,985 1,822 2,000 1,012 1,500 600 430 1,000 576 500 0 190 240 1997 1,173 1,270 260 812 340 436 1998 1999 Israeli VC Fund Source: IVC Research Center 2000 Other Entities 2001
    • 17. Capital Raised by Technological Sector – 2001 and 2000 9% Internet Life Sciences 30% 16% 8% Other Technology 13% 6% Software 20% 16% 42% 40% Communications 0% 5% 10% 15% 20% 2000 Source: IVC Research Center 25% 2001 30% 35% 40% 45%
    • 18. Israel's high Tech Cluster of the 90s 00 Number of SUs: Number of VC Companies: Accumulated No of IPOs (hi tech): Accumulated VC-backed IPOs: % Foreign Sources in SU funding % IT Exports in Manufacturing Exports 90 80 ~3000 ~300 ~150 ~100 2 0 ~130 9 1 ~70 3 1 67% NA NA 45.7% ~33% ~20%
    • 19. Capital Raised in US Public Offerings of Israeli Companies (94’-01’) 3500 3000 2500 $M Venture Backed 2000 All 1500 1000 500 0 1994 1995 1996 1997 1998 1999 2000 2001 In total: during the past 8 years more than 100 Israeli companies raised ~$9B ; ~50% of them were venture-backed Source: IVC Research Center
    • 20. M&As of Israeli Technology Companies and Foreign Strategic Partners: 1996 $0.6B 1997 $0.8B 1998 $1.8B 1999 $2.9B 2000 $10.5B 2001 $0.6B Source: IVC Research Center
    • 21. Israeli VC Activity in 2001 • Total Amount Invested ($m) : 812 • No. of Deals : 656 • No. of Companies : 438 • Average Amount Invested ($m) : 1.2 Source: IVC Research Center
    • 22. Israel VC Industry - Trends & Challenges • Co-opetition • Volatile Capital Markets • Decrease in International Investments • Maintaining Existing Portfolios • Difficulties in Raising Capital • Focus on Future Technologies • Government Involvement
    • 23. Thank You © Yozma Proprietary
    • 24. VC firms development over the years 1993-5 1996-8 1999-01 Average Leading VC Size ($M) 20 80 100-200 No. of Venture Firms 15 40 60
    • 25. Share of Capital Invested by Israeli VCs (Financing rounds in which at Least One Israeli VC Participated) Other Entities 55% 55% 56% 59% 66% 54% 64% 50% 42% 58% 58% 45% 45% 44% Israeli VCs Q1/99 Q2/99 Q3/99 41% 50% 46% 34% 36% Q4/99 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Source: IVC Research Center 42% 46% 60% 54% 40% Q2/01 Q3/01 Q4/01
    • 26. First and Follow-on Investments by Quarter 100% 90% 80% 46% 42% 36% 32% 44% 44% 42% 34% 46% 48% 70% 72% 60% 73% 50% 40% 30% 54% 58% 64% 68% 56% 56% 58% 54% 66% 52% 20% 28% 10% 27% 0% Q1/99 Q2/99 Q3/99 Q4/99 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 First Source: IVC Research Center Follow-On
    • 27. Venture Capitalists – the Truth Revealed (part 1) SEED Hard & Fascinating First & Second Rounds Proof of Concept/Prototype/Beta (Good Chance) Third Round Product/Initial Sales (Attractive) Pre-IPO Profitability, Expansion (Love it) © Yozma Proprietary
    • 28. Venture Capitalists – the Truth Revealed (part 2) • Hate Risk • Management more than Technology • High return on investment (IRR>50%, X10 in 5 years) • Innovation, not revolution • Don’t want to control or micro-manage the company • No time, but always open for new ideas • As much details as possible • Usually long and tired investment process © Yozma Proprietary
    • 29. Korea Venture Fund Korean Government © Yozma Proprietary