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Arie SADOVSKI Center for Study of Organizations
 

Arie SADOVSKI Center for Study of Organizations

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Arie SADOVSKI Center for Study of Organizations Arie SADOVSKI Center for Study of Organizations Presentation Transcript

  • Arie SADOVSKI Center for Study of Organizations & Human Resources University of Haifa
  • IFISE Objectives
    • Validation of two complementary financial mechanisms for the creation of high-tech start-up companies in Israel: The Yozma and the Technological incubators programmes . Analyzing the success factors and identifying those that may be relevant to Europe
    • Validation of a methodology for the creation of seed and start-up financial sources for new high-tech firms and dissemination to prominent European policy-makers
    • Planning of one or more public programs for the creation of seed and start-up financing sources in Italy and presentation to Italian policy makers
  •  
  • The Yozma and Technological Incubators programs were put in place by the Office of the Chief Scientist Ministry of Industry and Trade
  • THE YOZMA PROGRAM
  • Venture capital funds in Israel today (Funds and other capital sources as of December 31, 1998)
    • Funds Number $ Millions
    • Technology venture capital funds
    • Yozma funds 10 256*
    • Private funds 43 1,512
    • Public and other funds 4 98 Total 57 1,866
    • Other private equity Funds 31 764
    • All funds 88 2,630
    • Investment companies 13 236
    • All capital sources 101 2,865
    • (Source: Reiter & Klein 1999)
  • Venture capital in Israel up to 1992 ? N=1
  • Yozma biography
      • Established as a wholly-owned Venture Capital Company by the government
        • Total capital : $ 100 million
      • Inaugurated in mid 1992, began operation in 1993
      • Privatized in 1997
  • Yozma objectives
    • To create VC industry as a source for capital for the emerging hi-tech start-up companies
  • Yozma methodology
    • To entice the private sector and foreign investors to set up new VC funds
    • Participation of Yozma (Government sponsorship) 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
  • Yozma operational guidelines
    • Yozma investments in the new VC, up to 40% of the VC’s capital and not more than $8 millions per fund
    • The incentive to the private investors: An option to buy the government (Yozma)
    • shares during the first five years of the funds’ existence at the government investment price plus Libor+1% and 7% of the future profits
  • Yozma programme agenda (1/2)
    • Importing knowledge and experience to set up and operate VC funds and creating local management teams
    • Raising capital for investment in the high-tech start-ups.
    • Creating an international network with foreign VCs and other investors.
  • Yozma programme agenda (2/2)
    • Government shares the risks and takes a leading role for a limited period of time
    • Creating up to 10 small size new funds
    • To invest directly in start-up companies
    • (Invested in 15 companies)
  • Yozma 10 baby funds and the leading foreign investors
    • Eurofund Daimler-Benz, DEG (Germany)
    • Gemini Advent (USA)
    • Inventech Van Leer Group (NL)
    • Jerusalem Ventures Pacific Oxton (US/Far East)
    • Medica MVP (USA)
    • Nitzanim-Concord AVX, Kyocera (Japan)
    • Polaris CMS (USA)
    • Star TVM (Germany) & Singapore Tech
    • VERTEX Vertex international funds
    • Walden Walden (US)
  • Yozma baby funds growth
    • From $ 200 millions take off capital to managing $2.9 billions capital, collectively
    • Yozma baby funds take a prominent position in the list of the 20 major funds that comprise the leading VC funds in Israel
  • Yozma baby funds maturity
    • ($) millions
    • Capital Planned for 2001
    • Eurofund 72 150
    • Gemini 350 -
    • Inventech 100 -
    • Jerusalem Ventures Partners 255 350
    • Medica 70 -
    • Nitzanim-Concord 270 -
    • Polaris 700 -
    • Star 600 350
    • VERTEX 150 100
    • Walden 120 70
    • Yozma 180 150
    • Total 2.87 1.17 billions
  • Acknowledgement The assistance of Mr. Yigal Erlich [email_address] Chairman&Managing Partner THE YOZMA GROUP And the initiator of the Yozma Program to the 1st part of the presentation is gratefully acknowledged
    • Government sponsored
    • TECHNOLOGICAL “INCUBATORS” IN ISRAEL
  • The official program objectives
    • To support the initiation of high-tech industry by supporting novice entrepreneurs
    • at the earliest stages of technological entrepreneurship
    • To encourage new export oriented industry
    • To create new employment opportunities for technologically skilled persons
  • The program methodology
    • To provide a supportive and protective environment to individual inventors and entrepreneurs, for the development of technological innovations into business ventures.
  • Establishment of an incubator How and Who...
    • Government:
    • Initiates, provides
    • incentives and sets
    • eligibility criteria.
    • Candidate must offer:
    • -Facility suitable for R&D
    • -Capabilities to assist in
    • financial and business
    • management
    • Public organizations:
    • Municipal/regional
    • authorities, research
    • institutes/universities,
    • industrial organizations
    • and investors groups
  • The program structural lay-out
  • An incubator is...
    • Independent legal entity
    • Non-profit organization
    • Has: -A professional experienced manager
        • - Board of directors from industry, business
        • sector, research institutes
        • - Suitable facilities for R&D activity
    • In each incubator: 10 - 15 projects
  • Incubator offers the entrepreneur ... (1/2)
    • Facilities appropriate for R&D (low rent)
    • Financing of 85% - 100% of R&D expenses
    • Assistance in obtaining the complementary financing (15%)
    • Central administrative services (secretarial, accounting, legal, acquisition)
  • Incubator offers the the entrepreneur ... (2/2)
    • Assistance in management, logistics and business development
    • Assistance in commercialization
    • A use of a structural and professional infrastructure
    • Inter-tenant synergism
  • Project selection criteria
    • Product oriented
    • Rooted in technological R&D
    • Innovation and uniqueness
    • For export mainly
    • Feasible with available resources
    • Individual initiative
  • Project proposal...
  • Government financial support
    • To incubator : 100% of approved budget - up to $180,000 annually
    • To project : - 85% of approved budget - up to $150,000 annually - 2 years maximum
  • Special attention to regional development Incubators in peripheral regions: 100% government participation in R&D costs to three projects per year but only for the the first year of each project
    • Registered as an independent company
    • Staff size: 3 - 5
    • Support duration- up to 2 years
    • 85% - by the Government -up to $300,000
    • 15% - by private investors - about $50,000
    • 100% budget per 2 years - about $350,000
    • Covered expenses include: salaries, materials, equipment, subcontracting, consulting, patent applications, marketing, overheads .
    Project organization and financing
  • Preliminary ownership distribution of a project company
  • Government incubators budget: $ 223m in 10 years
  • Current status as of mid 2000
    • 24 Technological incubators
    • 200 Projects operating currently
    • 9 Projects in average in each of the incubators
    • 619 Projects have been already out of the incubators
  • Current status of projects as of mid 2000
    • 24 Technological incubators
    • 200 Projects operating currently
    • 9 Projects in average in each of the incubators
    • 619 Projects have been already out of the incubators
  • Incubators’ projects fields of activity
  • Summary of projects graduation and evolution pattern as of mid 2000
  • Collaboration with private investors
    • Private investors are already partners in 16 out of the 24 Incubators
    • The private investments are made to the Incubators’ budget in return for the Incubators shares in the projects
    • The Incubators are considered an “interesting” investment targets
  • Segmentation of private 2000 investments as of mid Total private investments $ 406 m Continuing graduate projects 376 During the incubation period 15 Complimentary financing 15
    • Significant financial support to the projects
    • Support is limited to technological R&D with
    • practical commercial potential
    • Limited Incubation term
    • Complementing the activity of VC funds
    The characteristic features of the program (1/2)
  • The characteristic features of the program (2/2)
    • Depends to a large extent on involvement of representatives of the public from the public and the private sectors: From the industry, financial and scientific communities
    • Intends to nurture the innovation potential of individuals in the population at large
    • Bottom - up approach to the technology field of the projects- no specialization
    • Presence in all areas of the country
  • Success stories (1/2)
    • $
    • Company Investment Sales Fund raised
    • Visionix 20M 7.5M 12M (Frankfurt Stock E.)
    • Compugen 26.7 10.5 -
    • 3T Ltd. 5.7 3.0 -
    • Nanomotion 16 4.0 -
    • Medicalith Merged with ESC Ltd. Raised 100M (NASDAQ)
    • Phono-Or Ltd 5.3 Sales agreement of 100M
  • Success stories (2/2)
    • Company product
    • Visionix Ltd Optical surface characterization system
    • Compugen Ltd. Biological data computation
    • 3T Ltd. True temp. pyrometere
    • Nanomotion Ltd Direct dive ceramic linear motors
    • Medicalith Ltd. Dermatological illumintors
    • Phono-.Or Ltd Optical microphones
  • A mature program but open to renewing amendments...
    • Additional incentives to private investors for participating in incubators
    • Increased budget per project
    • New elements of competition: For entering an incubator and for project acceptance
    • More emphasis on support to regional incubators
  • Web site http://incubators.org.il
  • Acknowledgement Consortium IFISE and Arie SADOVSKI wish to acknowledge the support that was provided to the a/m project and to the preparation of the 2nd part of the presentation in advice and materials by Rina PRIDOR Program Director OCS -Technological Incubators Ministry of Industry and Trade