Accelerating Innovation
Presentation by Yigal Erlich
Seoul
April 2012
Introduction
Yigal Erlich
• Former Chief Scientist of the state of Israel
• Established the Technological Incubators Indus...
15 Years of Israeli Venture Capital Activity
at a Glance
• More than 5,000 startups established
• NASDAQ: 100 Israeli high...
Source: IVC Research Center
Foreign & Other
VC Investments in Startup companies
10 Years Total: $15b
From Israeli Funds: $...
Source: IVC Research Center
VC Investments by Stage
as % of Yearly Total 2002-2011
2011 compared to 2008
Seed/Early: 31% v...
Yozma Venture Capital (1)
Mission:
• To create a venture capital market in Israel
Policy:
• Establish a $100M Government i...
Yozma Venture Capital (2)
Investment method in Funds:
 Investment of $8M in each drop-down fund (minority
position)
 A 5...
Yozma Venture Capital (3)
Results:
•Establishment of 10 drop down funds together with strategic
partners ( 8 in the first ...
Yozma Drop-Down Funds
© Yozma Proprietary
FUND CAPITAL MANAGED ($MM)
Original size 10 years later
•Eurofund 20 90
•Gemini ...
Government Support
 Ministry of Industry - Chief Scientist support of industrial R&D
 $400m annually - grants, MAGNET, I...
Building Blocks of Israel’s
Innovative Technology Sector
Academia,
Universities,
Engineers,
Postgraduates
Skilled Educated...
Professional VC funds
 Capable to raise funds
 Choosing the right
investments
 Managing the investments
 Building valu...
• Board level
• Assist/support management with strategic partners
& customers
• Assist/support in recruitment of senior ma...
Thank You
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  • The average time to exit - ~7 years 10.5 B – invested in 10 years9.5b created 34b = multiple of ~3.7
  • The average time to exit - ~7 years 10.5 B – invested in 10 years9.5b created 34b = multiple of ~3.7
  • The average time to exit - ~7 years 10.5 B – invested in 10 years9.5b created 34b = multiple of ~3.7
  • K 1. yigal erlich

    1. 1. Accelerating Innovation Presentation by Yigal Erlich Seoul April 2012
    2. 2. Introduction Yigal Erlich • Former Chief Scientist of the state of Israel • Established the Technological Incubators Industry in Israel • Founder & Manager of Israel’s anchor VC, Yozma • Seed investor & active board member in technological startups such as Biosense (acquired by J&J for $430M), Conduit (current value: $1.3B) and Radiancy (traded in Nasdaq with market cap of $200M)
    3. 3. 15 Years of Israeli Venture Capital Activity at a Glance • More than 5,000 startups established • NASDAQ: 100 Israeli high-tech companies are listed • Main contributor to the economy, GDP, export and employment growth • Human capital emerged as Israel’s main resource • M&A: $28 billion, IPO: $6 billion • $14 billion raised by Israeli VC funds
    4. 4. Source: IVC Research Center Foreign & Other VC Investments in Startup companies 10 Years Total: $15b From Israeli Funds: $6b From Foreign and Other: $9b
    5. 5. Source: IVC Research Center VC Investments by Stage as % of Yearly Total 2002-2011 2011 compared to 2008 Seed/Early: 31% vs 41%, decrease of 32% Mid/Late Stage: 69% vs 59%, increase of 17%
    6. 6. Yozma Venture Capital (1) Mission: • To create a venture capital market in Israel Policy: • Establish a $100M Government investment company. • Create professionally managed Funds. • Entice VC investments in Israeli early stage companies: (i) create and invest in new VC funds together with experienced partners (ii) make direct investments in startup companies together with professional investors. © Yozma Proprietary
    7. 7. Yozma Venture Capital (2) Investment method in Funds:  Investment of $8M in each drop-down fund (minority position)  A 5 year option to buy out Yozma’s share at predetermined conditions.  Yozma’s CEO / VP will be a voting member on each Fund’s investment committee.  Same terms for all VC Funds
    8. 8. Yozma Venture Capital (3) Results: •Establishment of 10 drop down funds together with strategic partners ( 8 in the first two years). •15 Direct investments •8 out of the 10 drop-down funds have exercised their option and bought out the Government •9 out of the 15 companies Yozma Venture Capital has invested in directly, went public or have been acquired •The Israel Venture Capital industry has been established © Yozma Proprietary
    9. 9. Yozma Drop-Down Funds © Yozma Proprietary FUND CAPITAL MANAGED ($MM) Original size 10 years later •Eurofund 20 90 •Gemini 25 550 •Inventech 20 40 •JPV 20 675 •Medica 20 130 •Nitzanim-Concord 20 280 •Polaris 20 945 •Star 20 900 •VERTEX 20 250 •Walden 25 175 210 4,035
    10. 10. Government Support  Ministry of Industry - Chief Scientist support of industrial R&D  $400m annually - grants, MAGNET, Incubators, other programs  R&D cooperation with countries and large companies  employees – grants for up skilling and training programs  Favorable tax regime and grants for investors and companies  tax exemption for foreign investors in VC funds  tax benefits and grants for export-oriented industries, R&D centers  Science and education, reverse brain drain  programs supporting excellence – Talpiot, research projects and centers  establishing 35 academic Excellence Centers, $400m annual budget  Civilian commercial benefits of defense R&D  exposure to cutting edge multidiscipline large technology projects  special intelligence technology units: 8200, 8100, Air Force  developed military industry – RAFAEL, IAI, Elbit Systems
    11. 11. Building Blocks of Israel’s Innovative Technology Sector Academia, Universities, Engineers, Postgraduates Skilled Educated Man Power, Immigration, Reverse Brain Drain Executives, Veterans from Global Firms Innovative & Entrepreneurial Culture, serial Entrepreneurs Venture Capital, Exit Avenues: M&As, IPOs Modern Infrastructure, Government Support Academic Science and Research Centers, Researchers Defense R&D Multinationals: R&D Centers, Strategic Investors Technological Incubators Technology Clusters, Startups, Large Companies Technology Infrastructur e Human Capital
    12. 12. Professional VC funds  Capable to raise funds  Choosing the right investments  Managing the investments  Building value for exit Government vs. VC role Government Involvement  Market failure conditions  Government as a catalyst  Predetermined exit conditions  No government control  Indirect investments (funds)  Risk sharing
    13. 13. • Board level • Assist/support management with strategic partners & customers • Assist/support in recruitment of senior management • Build/Approve Business Plan • Help raise additional capital (Equity/Debt) • Entice EXIT • Step-in at crises. The Role of VC in early stage companies
    14. 14. Thank You

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