Accelerating Innovation

Presentation by Yigal Erlich

Seoul April 2012

Introduction
Yigal Erlich

Former Chief Scientist of the state of Israel Established the Technological Incubators Industry in Israel Founder & Manager of Israels 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)
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15 Years of Israeli Venture Capital Activity at a Glance

$14 billion raised by Israeli VC funds M&A: $28 billion, IPO: $6 billion 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 Israels main resource

VC Investments in Startup companies

10 Years Total: $15b
From Israeli Funds: $6b From Foreign and Other: $9b

Foreign & Other

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%

Source: IVC Research Center

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
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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 Yozmas share at predetermined conditions.

Yozmas CEO / VP will be a voting member on each Funds investment committee.

Same terms for all VC Funds

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

Yozma Drop-Down Funds

FUND
Eurofund Gemini Inventech JPV Medica Nitzanim-Concord Polaris Star VERTEX Walden

CAPITAL MANAGED ($MM)

Original size 20 25 20 20 20 20 20 20 20 25 210 10 years later 90 550 40 675 130 280 945 900 250 175 4,035

Yozma Proprietary
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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
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Building Blocks of Israels Innovative Technology Sector

Academia, Universities, Engineers, Postgraduates Skilled Educated Man Power, Immigration, Reverse Brain Drain

Venture Capital, Exit Avenues: M&As, IPOs

Academic Science and Research Centers, Researchers

Defense R&D

Human Capital

Executives, Veterans from Global Firms

Technology Clusters, Startups, Large Companies

Technology Infrastructur e

Multinationals: R&D Centers, Strategic Investors

Innovative & Entrepreneurial Culture, serial Entrepreneurs

Modern Infrastructure, Government Support

Technological Incubators
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Government vs. VC role

Government Involvement
Market failure conditions Government as a catalyst Predetermined exit conditions No government control Indirect investments (funds) Risk sharing

Professional VC funds
Capable to raise funds Choosing the right investments Managing the investments Building value for exit

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The Role of VC in early stage companies 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.
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Thank You

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