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[PREMONEY 2014] Rhodium >> Oded Hermoni, "The Global VC: Israel"


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"The Global VC: Israel"

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[PREMONEY 2014] Rhodium >> Oded Hermoni, "The Global VC: Israel"

  1. 1. Oded Hermoni @odedhermoni The Chase After the Israeli Unicorn Oded Hermoni Rhodium Ventures
  2. 2. Oded Hermoni @odedhermoni Oded Hermoni • Active Venture Partner @Rhodium • Screening committee-TIE Angels, board member, advisor, angel investor in several start ups and advisor to US VCs on Israeli investments • Co-Chair IEFF (Israeli Executives & founders in Silicon Valley)- 800 members • Past: Headed the Israeli VC Association (IVA), Israel High Tech Industry (IATI), VP Investments and BD Capital point group, Maytag High tech ventures • Founder of TopIdea (Acquired by Zap Group, 2006) • Tech Editor and Journalist (TheMarker, Haaretz, RedHerring)
  3. 3. Oded Hermoni @odedhermoni About Rhodium • Investment arm of the Recanati family • Recanti - Legacy of 78 years of investments in the Israeli industry (IDB, Clal, Elron, Iscar, Given Imaging, Quigo, Objet/Stratasys, Mobile Eye) • Rhodium - Founded by Daniel Recanati, invests in early stage start ups in Israel, NYC, SV and focused on B2C and B2B2C. • Management – Daniel Recanati, Yaron Kniajer and Oded Hermoni • Investments includes Outbrain,, HopStop (Apple), Yotpo, Zooz, Yildmo, Chosen, GreenSQL, among others • Screen 1600 deals a year (over 1000 in Israel)
  4. 4. Oded Hermoni @odedhermoni A tiny country…with lots of innovation Israel is the 100th smallest country / Population of 8M, 10.2% of workforce in High Tech and the highest density of start ups in the world
  5. 5. Oded Hermoni @odedhermoni
  6. 6. Oded Hermoni @odedhermoni When you think about Israel, you might think about this…
  7. 7. Oded Hermoni @odedhermoni While, when I think about Israel, I think about something else…
  8. 8. Oded Hermoni @odedhermoni Some cool facts you might not know about Israel…
  9. 9. Oded Hermoni @odedhermoni • Milk-Israeli cows produce more milk per cow than almost any country in the world • Trees- Israel is one of only two countries that began the 21st Century with a net gain in the number of trees • Museums- Israel has the highest number of museums per head in the world • Solar-More than nine out of 10 Israeli homes use solar power to heat water • Sushi-Tel Aviv has the largest no. of Sushi restaurants per capita • Academics- Israeli academics produce more scientific papers per capita than anywhere else in the world
  10. 10. Oded Hermoni @odedhermoni And others which affect your daily life • Communication: first cellular phone - Motorolla, Text Message - comverse , Instant message - ICQ, Viber, Tango • Hardware: Kinect- Primesemse, DiskOnKey, Intel’s Centrino • Security: First PC Anti Virus (and PC Virus), Firewall - Checkpoint • Search: Google’s automatic search completion • Medical :“ReWalk”- walk again device, Given Imaging swallowable imaging capsules • Navigation :Waze • Content discovery – Outbrain
  11. 11. Oded Hermoni @odedhermoni Startup Nation with World-Class Innovation Category Ranking R&D Spending #1 Scientific Research #1 Public Spending on Education #1 Business Innovation #1 Cyber-security #1 Entrepreneurship #2 Economic Resilience During Crises #4 “The country’s main strengths remain its world-class capacity for innovation...which rests on highly innovative businesses that benefit from the presence of the world’s best research institutions geared toward the needs of the business sector. Israel’s excellent innovation capacity, which is supported by the government’s public procurement policies, is reflected in the country’s high number of patents…. Its favorable financial environment, particularly evident in the ease of access to venture capital…has contributed to making Israel an innovation powerhouse.“ (World Economic Forum 2012-2013) Source: IMD World Competitiveness Ranking 2013
  12. 12. Oded Hermoni @odedhermoni The Israeli High Tech Eco-System
  14. 14. Oded Hermoni @odedhermoni Leading Academy Israel has five major universities- 3 ranked on the top 100 global academic list 2013 • Israel ranked 3rd for its scientific infrastructure, and 4th for its technological infrastructure (IMD 2013). • Complimented by an unusually high availability of scientists and engineers (ranked 8th in the 2013-2014 WEF Global Competitiveness Yearbook) • Ranked 5th in the world for patent filings per capita (2013-2014 WEF Global Competitiveness Yearbook) • Over the past decade, Israel, with a population of just 7.9 million, has produced eight Nobel laureates
  15. 15. Oded Hermoni @odedhermoni • Elite Technical units are a key (and cost effective) training ground • The Army promotes stating one’s mind, questioning authority- limited “hierarchy” • Technology/intelligence units have the latest tech and “toys” • Best and brightest work as teams, take risks, and lead • Israeli “Chutzpah” + constant external threats lead to agile development and product building • Bond with friends and partners for life The Military secret sauce
  16. 16. Oded Hermoni @odedhermoni 290of the world’s largest companies have chosen Israel for R&D
  17. 17. Oded Hermoni @odedhermoni Investment Landscape
  18. 18. Oded Hermoni @odedhermoni 29.7 6.1 2.1 6.3 AUD27.3 AUD4.7 AUD1.9 AUD4.1 AUD29.4 AUD3.1 AUD2.3 AUD1.8 $0 $8 $15 $23 $30 $38 US Europe & UK Israel China $B Annual VC Investment by Geography ($B) 2011 2012 2013 Source: Giza Venture Capital The Israeli VC Environment more venture capital per capita than any country — 2.5 times the U.S., 30 times Europe, 80 times India, and 300 times China
  19. 19. Oded Hermoni @odedhermoni US comparison- Israel Ranked 4th ANNUAL VC INVESTMENT BY STATE ($B)
  20. 20. Oded Hermoni @odedhermoni 268 343 604 677 378 367 418 578 579 585 695 596 648 617 714 920 1,000 1,050 0 275 550 825 1,100 1,375 1997 1999 2001 2003 2005 2007 2009 2011 2013* #ofCompanies New Tech Companies Formed in Israel Source: IVC and Vintage Investment Partners *Vintage projection. 2013 figure is projected given lag in reporting Record Company Formation – 2 per day
  21. 21. Oded Hermoni @odedhermoni 10 Year glance: 7,027 companies 2,882 closed /4,145 net
  22. 22. Oded Hermoni @odedhermoni 8 million people and 7,000 start ups… • 2nd only to SV in no. of Start ups per SQF • More than 7,000 Start Ups • $14.4B raised by Israel VC’s • $26B invested 1997- 2013 • M&A $73B, IPO $7B • NASDAQ – 70 companies Source: IVC Research center
  23. 23. Oded Hermoni @odedhermoni Trends • Foreign investors dominate the investment scene – 82% of the investments (compared to 50% in 2005) • Early stage investments increasing- 47% 80% upround from Seed • A crunch expected (reduced capital available by Israeli funds) • IPO’s and M&A’s – dramatic increase • Serial entrepreneurs are looking to build big companies • Internet investment increase • Increase in multi national R&D Centers
  24. 24. Oded Hermoni @odedhermoni The Israeli VC Environment Funding Ecosystem Angels & Incubators Up to $20M Micro-VC Funds $20-50M ‘Big’ Local Funds >$100M Mega-VC Funds >$300M No Israeli Funds Source: Giza Venture Capital and Vintage Investment Partners Incubation Seed Series C+ Series A Series B Accel, Battery, Bessemer, Canaan, Index, Lightspeed, Norwest, USVP, Venrock, Corporate VCs Aleph, Carmel, Cedar, Gemini, Genesis, Giza, Greylock, JVP, Magma, Marker, OrbiMed, Pitango, Sequoia Glilot, Inimiti, lool Ventures, TriVentures, YL Ventures 24 Angels, Elevator, Office of the Chief Scientist, OurCrowd, UpWest Labs
  25. 25. Oded Hermoni @odedhermoni VC investments by sectors Source: IVC Research center
  26. 26. Oded Hermoni @odedhermoni Established Local and international VC community INTERNATIONAL LOCAL
  27. 27. Oded Hermoni @odedhermoni Capital raised by Israeli VCs-6 cycles 95% comes from non-Israeli LP’s
  28. 28. Oded Hermoni @odedhermoni Performance
  29. 29. Oded Hermoni @odedhermoni The Israeli VC Environment M&A of VC-Backed Companies - Dramatic Increase in # and Size Source: IVC Research center
  30. 30. Oded Hermoni @odedhermoni Unicorns – Are not that rare in Tel Aviv 2013/2014 IPO’S AND EXITS over $500M: • Imperva $1.23B • Viber $900M • Wix $778M • Varonis $635M • Waze $1.15B • Objet (merged with Stratasys) $5B • Kite Pharma $1.14B Expected IPO’s (Based on the press*) • MobileEye $2.5-3B • OutBrain $1B • Next up: 164 companies with over $25M rev
  31. 31. Oded Hermoni @odedhermoni A history of proven global exits… $1 billion $80 million $345 million $120 million $630 million $340 million $900 million $268 million $679 million $517 million $340 million $313 million MERGER $650 million
  32. 32. Oded Hermoni @odedhermoni Most active acquirers
  33. 33. Oded Hermoni @odedhermoni IPOs Returning – Recent Israeli VC- Backed NASDAQ IPOs • Israel has 70 companies listed on NASDAQ- more than all Europe combined • 50% of the Israeli companies listed on the AMEX, NASDAQ and NYSE stock exchanges closed out 2013 with gains of 30% or higher. The value 9 companies more than doubled and 3 tripled
  34. 34. Oded Hermoni @odedhermoni The Israeli VC Environment Top VC-Backed Exits By Sector Consumer Web / Mobile Apps Enterprise Software Comms. Software Semis Adtech $1,085M $475M $1,554M $466M $1,435M Source: IVC Research center
  35. 35. Oded Hermoni @odedhermoni Notable exits and potentially next unicorns… •Source: IVC Research Center Source: IVC RESEARCH CENTER, Vintage and Oded Hermoni
  36. 36. Oded Hermoni @odedhermoni Israeli VC M&A Performance comparing to US
  37. 37. Oded Hermoni @odedhermoni Dramatic improvement in exit/investment ratio Capital efficiency is the name of the game… Trusteer raised $10m – sold for $650M/IBM (2013) Waze raised $67m- Sold to Google for $1B (2013) XtremIO raised $25M- sold for $430M to EMC (2012) Viber raised $30M – sold to Rakutan for $900M (2014) Intucell raised $6.5M – Sold to Cisco for $475M (2013) Source: IVC Research center
  38. 38. Oded Hermoni @odedhermoni Why Israel and Why now?
  39. 39. Oded Hermoni @odedhermoni • HIGHER CHANCE OF SUCCESS: Many of Israel’s entrepreneurs are second-timers who have already built successful companies and learned from failures • ECOSYSTEM HAS MATURED: a developed network of seasoned entrepreneurs, investors, institutions and local and global VC firms looking for big exits • PRO INVESTORS TERMS:Israeli A round = SV Seed (valuation and size) • Available Talents: Cost-30% less than in the Valley • GLOBAL FROM DAY ONE: A small domestic market means that Israeli start-ups are focused on global growth from the beginning
  40. 40. Oded Hermoni @odedhermoni
  41. 41. Oded Hermoni @odedhermoni Best practices- working with Israelis • Polyphonic culture (relationship- oriented) and task oriented CONTRAST to Monochromic (rule-oriented) • No bullshit, no politics, just clearly set out goals and get them done • Good with Improvising/thinking out side the box – Famous for “Chutzpa” • every Israeli has a very strong opinion on EVERYTHING. • Help each other out • Prefer to cut corners • Direct - Say exactly what they think • LOVE to argue. Hate Hierarchy • Love challenges and dislike wasted talent
  42. 42. Oded Hermoni @odedhermoni Understanding Israelis An Israeli employee has an American boss. The boss is furious at something the Israeli did, so he calls him and says with a stern voice: "I think we may have a slight problem here”. Here's how the Israeli interprets it: • "I think" = The boss is not sure there's a problem. He only thinks there's a problem. • "We" = It's not my problem. It's our problem. So it's not my fault. • "May" = We may have a problem, meaning it's not certain there is a problem. • "A slight problem" = A minor thing, not a big problem.
  43. 43. Oded Hermoni @odedhermoni Thank you Oded Hermoni Email: Website: Twitter: @odedhermoni
  44. 44. Oded Hermoni @odedhermoni Breakdown of investments per stage - smaller rounds than SV
  45. 45. Oded Hermoni @odedhermoni The Israeli VC Environment M&A of VC-Backed Companies - Dramatic Increase in # and Size 1075 650 475 466 435 434 391 370 360 360 335 321 300 295 268 266 240 237 230 200 200 $0 $300 $600 $900 $1,200 Waze Trusteer Intucell XtremIO Cyoptics Anobit PrimeSense Wilocity Check Provigent Amobee SuperDimension Dotomi Cotendo dbMotion Wintegra Aeroscout Attenti (Dmatek) ScaleIO Cyvera •Apple (2013) EMC (2012) Apple (2011) Broadcom (2011) Singapore Telecom (2012) Covidien (2012) ValueClick (2011) Akamai (2011) PMC (2010) Stanley Black & Decker (2012) 3M (2010) Avago (2013) Allscripts (2012) Exit Value $M Cisco (2013) Google (2013) AOL (2013) EMC (2013) IBM (2013) Palo Alto Networks (2014) 45 Qualcomm (2014) Intuit (2014) Most of the large size M&A – I the past 3 years 2013- $4.6B VC backed M&A deals