1. outline financing innovation policy the instruments some results israel & bulgaria compared...

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Israel as a Role Model for Global Innovation Prof. Dr. Liora Katzenstein Founder and President ISEMI College for Entrepreneurship Education Sofia, 30 October 2014 1

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Israel as a Role Model for Global Innovation

Prof. Dr. Liora KatzensteinFounder and President

ISEMI College for Entrepreneurship Education Sofia, 30 October 2014

1

Outline

• Financing Innovation Policy• The Instruments • Some Results• Israel & Bulgaria Compared• Conclusions for Bulgaria

2

Innovation Support Institutions1. Office of the Chief Scientist

• Office of the Chief Scientist (OCS) at the Ministry of Industry and Trade

- Created in early 1970s to encourage R&D based export-oriented industries

- If R&D project results in a commercially successful product sales royalty is payable until 100%-150% of the US-dollar value of the R&D grant has been repaid

3

Innovation Support Institutions 2. Israeli Export Institute

• Works with approximately 1,000 high tech start-ups per year

• Offers information on every relevant topic– special focus on marketing and management

• Initiates contacts with foreign investors and potential joint venture partners

• Rents space in worldwide exhibitions, encouraging & assisting start-ups to participate

4

Innovation Support Institutions 3. BIRD Foundation

• Industrial cooperation between Israeli & US companies, est. 1997

• Most active of various international arrangements to finance joint R&D• Works closely with Chief Scientist, to evaluate tech merits of each project

• Contributes, over 2-3 years, up to 50% of the approved cost of R&D• Should a project fail for any valid reason no return of BIRD grant is due• Should commercial revenues result BIRD receives a max 150%

• Typical scenario for BIRD - Joint venture involving:– Israeli company with innovative technological abilities– American company which develops, manufactures, installs, and supports

• Has an ongoing demand for new products for an established customer base in the U.S.

5

Innovation Support Institutions 4. The Technological Incubators

• Purpose & Operations• An answer to the influx of technologically trained former Russian immigrants• Under the aegis of the Chief Scientist• Infrastructure supported 100% by Government (US K300) • Structure dedicated to seed investments• A separate company, in which the investor is a partner for each project• Entrepreneurs expected to complete development & financing in 2 years

Obligation to return loans based on future success

• Provides the following services– Assistance in determining the tech and market feasibility– Assistance in obtaining the financial resources needed– Assistance in forming and organizing an R&D team– Professional and administrative guidance & supervision– General and Administrative services

6http://www.incubators.org.il/

Innovation Support Institutions 5. Yozma – Governmental VC fund

• $100M allocated in 1991 by the Government to Yozma a fund of funds

• Co-invested $US 8M in VC funds along with $US 12M brought by private investors

• Private investors have the right to buy the government out after 6 years for nominal investment

• 10 Yozma funds created

• Privatized in 1998• Catalyst for establishment of Israeli VC industry

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Investment in Innovation – TrendsFrom VC to Private Equity

• Between 1990 – 2009, mostly Venture Capital funds (VC)

• Over the years, VC funds were getting larger, until 2008– Ability to invest in companies requiring significant input of funds– Better able to lead such investments– Prefer larger deals and more mature companies affect those needing seed

or start-up financing

• Take positions on Boards of the companies in which they invest

• Increased association with US investment banks– Access to considerable research resources– opportunity to springboard their start-ups into world markets

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Total Capital Raised By Israeli High-Tech Companies

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Total Capital Raised by Israeli VC Funds by Vintage Year ($b) 2003-2013 €

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Private Equity Deals by Quarter ($m)

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M&As and IPOs of Israeli High-Tech Companies, $b (2002-11)

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Entrepreneurship in IsraelSupporting Factors

• The Specific Israeli/Jewish Background

• The Israeli improvisation

• East- European immigration

• Individualistic character

• Abundant venture capital

• Generous government support schemes

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Entrepreneurship in IsraelLimiting Factors

• Cost of capital, especially seed capital

• Banks do not understand entrepreneurship

• Problems with “Intrapreneurship”

• Lack of team work ability (Despite army experience)

• Treating competition with contempt

• Product, not service, focus

• Lack of punctuality, exactness & discipline

• Lack of strategic focus15

Israel and Bulgaria ComparedSimilarities

• Recently established democratic and free market nations (1990’s).

• Share aspiration for technological leadership

• Aspire for Global Presence

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Israel and Bulgaria ComparedDifferences (A)

• Availability of local markets– Available for Bulgaria in East Europe – Not available in Israel

• Exit Orientation– Israelis IPO-oriented– Bulgaria not IPO-oriented

• Availability of capital– Israel made available over the last 2 decades– Bulgaria not available over many years

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Israel and Bulgaria ComparedDifferences (B)

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• Risk Aversion– Israelis are by nature not risk averse– Bulgarians are more risk averse

• Government Orientation– Israeli government encourages and supports risk

taking in a multitude of ways.– Bulgarian government is making efforts to adopt

innovation policies.

Elements for competitiveness for both nations

• “The Global Individual with Local Roots”

– Professional– Ethical– Visible– Cross-Cultural

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Conclusions for Bulgaria

• Given the inherent limitations and facts provided…

– Training & Education, mostly risk taking– Move from basic industry and services to

sophisticated products– Cross-cultural Communication

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Thank you for listening!

[email protected]

Please ask any question you like!