Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
The Yozma Program Success Factors & Policy
Presented by:
Yigal Erlich
the Yozma Group
Tel Aviv, Israel
THE ISRAELI OPPORTUNITY
The Right Ingredients
Wealth of Human Capital
Israel
USA
Japan
Germany

Mass Immigration

•

140
8...
Why Foreign Investors Choose to Invest in Israel

•Entrepreneurial Spirit
•Human Resources
•Reputable Academic Institutes
...
Deal Flow Sources
Repatriate
Israelis
Defense

Corporations

Deal Flow
Sources

Spin-offs
R&D centers

Universities
New
Im...
Israeli Venture Capital Before 1993
•Lack of investment capital for start-ups ($20 Million)
•Lack of professional venture ...
Government Support for the High-Tech Industry- Pros and Cons

•
•
•
•

Chief Scientist
Tech. Incubators
Gov’t Guarantees
V...
Venture Capital –
an Engine for Growth for High-Tech Companies

•
•
•
•
•

Equity-based finance  VC
Need to go internatio...
Government’s Entry Into Business – Preconditions

•
•
•
•
•
•
•

Government as a Catalyst
Lowered Risk
Market Failure Cond...
(Yozma Venture Capital (1
Mission: To create the venture capital market in Israel
Method: To entice the private sector and...
( Yozma Venture Capital (2
Basic principles:
•

Investment of $8M in each drop-down fund
(minority position)

•

A 5 year ...
( Yozma Drop-Down Funds (1

FUND

PARTNERS

•Eurofund
•Gemini
•Inventech
•JPV
•Medica
•Nitzanim-Concord
•Polaris
•Star
•VE...
( Yozma Drop-Down Funds (2
FUND

CAPITAL MANAGED ($MM)
Original size

•Eurofund
•Gemini
•Inventech
•JPV
•Medica
•Nitzanim-...
The Government as a Catalyst

Government
Intervention
Market
Failure

$100M
I

nvestm
ent

Establishment
of Yozma

1993
19...
Countries Following the Yozma Example
Czechoslovakia
Taiwan

Australia

Denmark

New Zealand

Korea
South Africa

© Yozma ...
Venture Capital Raised

4000

3rd Wave

3500
3000
1st Wave:

2000

Establishment

1500

$M

2500

of Yozma

2nd Wave:
Yozm...
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

...
Capital Raised by Technological Sector –
2001 and 2000
9%

Internet

Life Sciences

30%
16%

8%

Other Technology

13%

6%...
Israel's high Tech Cluster of the 90s
00
Number of SUs:
Number of VC Companies:
Accumulated No of IPOs (hi tech):
Accumula...
Capital Raised in US Public Offerings
of Israeli Companies (94’-01’)

3500
3000
2500

$M

Venture Backed

2000

All
1500
1...
M&As of Israeli Technology Companies
and Foreign Strategic Partners:
1996

$0.6B

1997

$0.8B

1998

$1.8B

1999

$2.9B

2...
Israeli VC Activity in 2001

•

Total Amount Invested ($m) : 812

•

No. of Deals : 656

•

No. of Companies : 438

•

Ave...
Israel VC Industry - Trends & Challenges
• Co-opetition
• Volatile Capital Markets
• Decrease in International Investments...
Thank You

© Yozma Proprietary
VC firms development over the years

1993-5

1996-8

1999-01

Average Leading VC Size ($M)

20

80

100-200

No. of Ventur...
Share of Capital Invested by Israeli VCs
(Financing rounds in which at Least One Israeli VC Participated)

Other Entities
...
First and Follow-on Investments by Quarter
100%
90%
80%

46%

42%

36%

32%
44%

44%

42%

34%

46%

48%

70%
72%

60%

73...
Venture Capitalists – the Truth Revealed (part 1)

SEED

Hard & Fascinating

First & Second Rounds

Proof of Concept/Proto...
Venture Capitalists – the Truth Revealed (part 2)

• Hate Risk
• Management more than Technology
• High return on investme...
Korea Venture Fund

Korean Government

© Yozma Proprietary
Upcoming SlideShare
Loading in …5
×

YOZMA -- by Yigal Erlich

757 views

Published on

The programme that started the Venture Capital Industry in Israel

  • Be the first to comment

YOZMA -- by Yigal Erlich

  1. 1. The Yozma Program Success Factors & Policy Presented by: Yigal Erlich the Yozma Group Tel Aviv, Israel
  2. 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. 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. 4. Deal Flow Sources Repatriate Israelis Defense Corporations Deal Flow Sources Spin-offs R&D centers Universities New Immigrants © Yozma Proprietary
  5. 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. 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. 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. 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. 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. 10. ( Yozma Venture Capital (2 Basic principles: • Investment of $8M in each drop-down fund (minority position) • A 5 year option to Yozma’s partners to buy out the Government’s share at predetermined conditions Results: • 8 out of the 15 companies Yozma Venture Capital has invested in directly, went public or have been acquired • • 9 out of the 10 drop-down funds have exercised their option and bought out the Government The Israel Venture Capital industry has been © Yozma Proprietary established
  11. 11. ( Yozma Drop-Down Funds (1 FUND PARTNERS •Eurofund •Gemini •Inventech •JPV •Medica •Nitzanim-Concord •Polaris •Star •VERTEX •Walden Daimler-Benz, DEG (Germany) Advent (USA) Van Leer Group (NL) Oxton (US/Far East) MVP (USA) AVX, Kyocera (Japan) CMS (USA) TVM (Germany) & Singapore Tech Vertex International Funds (Singapore) Walden (US) © Yozma Proprietary
  12. 12. ( Yozma Drop-Down Funds (2 FUND CAPITAL MANAGED ($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. 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. 14. Countries Following the Yozma Example Czechoslovakia Taiwan Australia Denmark New Zealand Korea South Africa © Yozma Proprietary
  15. 15. Venture Capital Raised 4000 3rd Wave 3500 3000 1st Wave: 2000 Establishment 1500 $M 2500 of Yozma 2nd Wave: Yozma Funds Raise Continuation Funds 1000 500 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: IVC Research Center
  16. 16. Total Amount Raised by Israeli High-Tech Companies ($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. 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. 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. 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. 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 $0.6B Source: IVC Research Center
  21. 21. Israeli VC Activity in 2001 • Total Amount Invested ($m) : 812 • No. of Deals : 656 • No. of Companies : 438 • Average Amount Invested ($m) : 1.2 Source: IVC Research Center
  22. 22. Israel VC Industry - Trends & Challenges • Co-opetition • Volatile Capital Markets • Decrease in International Investments • Maintaining Existing Portfolios • Difficulties in Raising Capital • Focus on Future Technologies • Government Involvement
  23. 23. Thank You © Yozma Proprietary
  24. 24. VC firms development over the years 1993-5 1996-8 1999-01 Average Leading VC Size ($M) 20 80 100-200 No. of Venture Firms 15 40 60
  25. 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. 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. 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. 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. 29. Korea Venture Fund Korean Government © Yozma Proprietary

×