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The Government Seed Fund

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The Government Seed Fund

  1. 1. The Government Seed Fund January 2006
  2. 2. Background <ul><li>The Burst of the high-tech Bubble + Security Situation = Fewer Investments Particularly in Start-Ups </li></ul><ul><li>The Need: Sharing Investor Risk to Encourage Investments and Increase the Number of Start-Up Companies </li></ul>
  3. 3. The seed program <ul><li>An additional and separate vehicle to support new start-up companies. </li></ul><ul><li>The Government’s matching investment shares the risk with the investor. </li></ul><ul><li>The investor also enjoys the equivalent of a stock option at the opening price </li></ul>
  4. 4. Seed Program (cont.) <ul><li>Funding Source: </li></ul><ul><li>VC Fund or Corporation Active in VC or Tech Company Investing in Like Industries </li></ul><ul><li>Has the ability and manpower to guide the management of the new company </li></ul><ul><li>Has sufficient available funds </li></ul>
  5. 5. Seed Program(cont.) <ul><li>Start-Up Company: </li></ul><ul><li>R&D Company in Existence for not more than 6 Months OR Whose Total Expenditures have not Exceeded 1 million NIS (companies in Bio-technology till the pre-clinical stage) </li></ul><ul><li>First Round – excluding financing for feasibility study. </li></ul>
  6. 6. Investment Model <ul><li>Essentially Like VC Investment in the Private Sector. </li></ul><ul><li>Ensure that Government and Investor Interests Overlap. </li></ul><ul><li>Determine a System that will Yield a Return to the Government for a Successful Investment. </li></ul><ul><li>Ensure that the Government will be able to Sell its Holdings to a Third Party. </li></ul>
  7. 7. The Government’s Investment <ul><li>Up to 5 Million NIS per Company per 2 Year Period that will Finance up to 50% of the Approved Work Program. </li></ul><ul><li>The Expenditures Supported will be Those Related to R&D. </li></ul>
  8. 8. The Government’s Investment <ul><li>The seed fund and the investor will put up matching funds. </li></ul><ul><li>Preferred shares will be issued as follows: </li></ul><ul><ul><li>Preferred shares ‘A’ – Investor </li></ul></ul><ul><ul><li>Preferred shares ‘A1’ – Seed Fund (nonvoting + no right to appoint directors) </li></ul></ul><ul><ul><li>Ordinary shares – Entrepreneurs and workers </li></ul></ul>
  9. 9. The Government’s Investment(cont.) <ul><li>Preferred Shares “A1”: </li></ul><ul><li>Liquidation Preference (incl. Merger, Purchase of Shares and Properties). </li></ul><ul><li>Dividend Preference </li></ul><ul><li>Rights of Conversion to Preferred Shares “A” or ordinary shares. </li></ul><ul><li>Full Ratchet Protection Against Dilution of Shares. </li></ul>
  10. 10. The Investor’s Option <ul><li>The Investor will be given an Option to Purchase the Government Shares Anytime Within the First 7 Years. </li></ul><ul><li>Within the first 3 Years the purchase is at cost plus “regular” interest. </li></ul><ul><li>For Years 4 till 7 at cost plus “higher” interest. </li></ul>
  11. 11. Privatization <ul><li>The Sale of the Government’s Holdings in the Start-Up Companies does not Entitle any of the investors the right of first refusal if a 60 days notice of sale was given and the investors did not express interest in purchasing the seed fund shares </li></ul>
  12. 12. R&D Law <ul><li>With reference to transfer of know-how and manufacturing rights, the company will be bound, as are all those enjoying government support by R&D LAW </li></ul>
  13. 13. The approval procedure <ul><li>The Investor – can apply to be approved even without a specific company he wants to invest in. </li></ul><ul><li>The Company - can’t get approval without an approved investor investing in it. </li></ul>
  14. 14. Board Members <ul><li>Mr. Eli Opper – Chief Scientist, Moital </li></ul><ul><li>Mr. Chemi Peres- Managing Director, Pitango </li></ul><ul><li>Mr. Shlomo Shalev- Senior VP Investments, Ampal </li></ul><ul><li>Mr. Rafi Nevo – CEO, Treatec </li></ul><ul><li>Ms. Chana Gad – General Accountant, Moital </li></ul><ul><li>Mr. Avi Feldman – Vice Legal Advisor, Moital </li></ul><ul><li>Mr. Ran Kiviti – Manager Tmura Fund, Moital </li></ul>
  15. 15. FOR FURTHER INFORMATION <ul><li>Please contact </li></ul><ul><li>Mr. Itamar Dar </li></ul><ul><li>Seed Fund manager </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Tel: 02-6662457 </li></ul><ul><li>Web: www.moital.gov.il/madan </li></ul>

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