1. Accelerating Innovation
Presentation by Yigal Erlich
Seoul
April 2012

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. • 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. Thank You